Six Sigma Leadership Overview

Blue Cross Blue Shield

Six Sigma Leadership Overview

Objectives:– Develop a “leadership level” understanding of Six

Sigma

– Understand the critical success factors for organizations with Six Sigma initiatives

– Understand the importance of Organizational Change Management as a parallel initiative

– Develop a leadership “to do list” for supporting and accelerating Six Sigma within Blue Cross Blue Shield of Minnesota

Everything You learned……

in 8th grade science is all you need to know to also understand Six Sigma:

1. Begin with a problem definition

2. Create a hypothesis to solve the problem.

3. Gather data about the problem to understand contributing factors

4. Define solutions that control the factors

5. Create an experiment and measure the results

6. Validate the hypothesis

Newton’s first law of physics

“An object at rest tends to stay at rest and an object in motion tends to stay in motion with the same speed and direction unless acted upon by an unbalanced force.”

Analytics/insights = “unbalanced force”

The packaging and the application of the analytics is Six Sigma

Theory “O”

Management Theory where all decisions are based on opinion.

Tools such as “brainstorming” and “affinity analysis” support Theory “O”

Supported by “organizational wisdom”.

Six Sigma supports a shift in creating and implementing solutions to solve problems.

From To

Opinion based Improvement Fact and data based Improvement

No defined improvement framework Clearly defined improvement framework

Lack of process and results measures Clearly defined process and results measures

Little solution collaboration Fully enabled Six Sigma improvement teams

Solution success dependent on ideas Solution success dependent on proven tools

Business Impact is the ROI – Analytics Value Flow

BUSINESS IMPACT

BUSINESS CHANGES VIA SIX SIGMA

BUSINESS ANALYSISWAREHOUSINGSales Data

Customer Service Data

External Source Data

Financial Data

Extranet/Internet Data

Activity Data

DATA

Customer Intelligence

Product Intelligence

Competitive Intelligence

Operational Intelligence

Management Intelligence

Channel Partner Intelligence

INFORMATION

Customer Intimacy & Loyalty

New Value Opportunities

Prod/Promotion Opportunities

New Business Opportunities

Organizational Alignment

Channel Partner Improvements

KNOWLEDGE

Top Line Growth

Supply Chain Efficiency

Reduced Cost

Channel Partner Growth

Competitive Advantage

Employee Retention

Marketing ROI

OBJECTIVE

The Value Continuum

Some Six Sigma Observations

Six Sigma works best when focused on improving a process towards a “customer defined” target (CTQ)

– GE’s definition of Six Sigma:

“Meeting Customer’s Needs Profitably”

Six Sigma is NOT a cost cutting/cost saving methodology. This is a result, but it is not the goal.

– This is a key mistake of leadership when introducing the initiative.

– Cost Cutting = Job loss, why should I participate?

– Positioning Six Sigma as cost cutting vs. process improvement will sub-optimize the effectiveness of the initiative.

Some Six Sigma Observations

Six Sigma should be an enterprise initiative and a “way of doing business” NOT an isolated organizational function.

– This is not an HR “training” initiative

– The Six Sigma initiative should report to the highest level and be held accountable for organizational improvement.

Examples: – 3M’s Six Sigma executive reports directly to

McNerny– Apogee’s Six Sigma Executive reports directly to

Russel Huffer

Some Six Sigma Observations

Freud’s definition of insanity:

“Continuing to do the same thing over and over but expecting different results”

Overcoming inertia is impossible without an agreed to framework.

Six Sigma provides a framework to overcome organizational inertia by applying data.

Six Sigma Framework

B U S I N E S S O B J E C T I V E SB U S I N E S S O B J E C T I V E S

Project Charter

SupplyChain

ManagementFinancial

ManagementDemand

GenerationClaims

ProcessingRenewals

Change Management

Database

Infrastructure

Roles & Responsibility

Cor

e an

d C

omm

on

Com

pone

nts

Cor

e an

d C

omm

on

Com

pone

nts

Process Results

P R O

J E C T M

AN

AG

EMEN

T P R O

C E S S

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

Business Objectives

Lower Expense to Revenue Ratio

Increase Revenue

Increase Cash

Increase Share of Wallet

Increase Customer Satisfaction and Loyalty

Reduce Cost

Increase Market Share

Six Sigma Framework

B U S I N E S S O B J E C T I V E SB U S I N E S S O B J E C T I V E S

Project Charter

SupplyChain

ManagementFinancial

ManagementDemand

GenerationClaims

ProcessingRenewals

Change Management

Database

Infrastructure

Roles & Responsibility

Cor

e an

d C

omm

on

Com

pone

nts

Cor

e an

d C

omm

on

Com

pone

nts

Process Results

P R O

J E C T M

AN

AG

EMEN

T P R O

C E S S

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

DEFINE

CONTROL

MEASURE

ANALYZE

IMPROVE

Business Objectives

Lower Expense to Revenue Ratio

Increase Revenue

Increase Cash

Increase Share of Wallet

Increase Customer Satisfaction and Loyalty

Reduce Cost

Increase Market Share

Six Sigma Core Focus

DEFINE

Tollgate

Define the problem

MEASURE

Tollgate

ANALYZE

Tollgate

IMPROVE

Tollgate

Design “should be” activities to improve the situation

CONTROL

Tollgate

Implementcontinuous feedbackand control of the activity

Six Sigma Framework

Measure the

process

Understandthe Variance

1

8

6

4

2

0

Target

Six Sigma process and tools - it’s all about

managing variance...

Process is the key, IT is an enablerProcess is the key, IT is an enabler

Defining the challenge

DEFINE

Tollgate

Define the challenge

Project Charter:– Key vehicle to communicate and establish the following:

- What is the problem or opportunity we are trying to solve?- What is the hypothesis for improvement/outcome?- What is the core process/activities that this effects?- What is the time line we will complete our work?- What is the critical “Y”, (Business outcome)?- What are the critical “X”s?- Who is the business champion?- Who is the project leader?- Who is on the team?- What are their Roles and Responsibilities- SMART Objective.

Six Sigma Framework

Understanding Critical “X”s and Critical “Y”

Renewal Rate(Critical “Y”)

Ren

ew

al C

ycle

Tim

e(C

riti

cal “X

”)

Critical “Y” must be a RESULT measure not a process measure.

Critical “X” must be a Process measure not a result measure.

Six Sigma Framework

A process and project methodology “Meeting Customer Needs, profitably” The Six Sigma Measurement:

– 3.4 Defects per Million Opportunities

Renewal Cycle Time

CTQ = 3 Months

1 mths 2 mth 3 mths 4 mths 5 mths

Renewal Cycle Time

1 mths 2 mth 3 mths 4 mths 5 mths

What is Six Sigma?

Process Variation

Controlling the “X”s = Critical To Quality

1. Worst: Process out of control andmissing CTQ

2. Not bad: Process in control, missing CTQ

3.. Process out of control, but hitting CTQs

3. Process in control and hitting CTQs

Process Variation

Controlling the “X”s = Critical To Quality

1. Worst: Process out of control andmissing CTQ

2. Not bad: Process in control, missing CTQ

3.. Process out of control, but hitting CTQs

3. Process in control and hitting CTQs

Measure current state

Measure:– How do we measure:

1. Create a data collection plan which should answer:- What data do we need- How much data do we need- Does the data exist today- If the data does not exist, is there a tool/system that can collect the data

2. Collect existing data3. Execute data collection tools for missing data.

MEASURE

Tollgate

Measurecurrent state

Six Sigma Framework

Analyze the data – Establish Correlations

Analyze the data collected for meaningful correlations– Individually the analysis may not tell us much, but together they might:

ANALYZE

Tollgate

0

1

2

3

4

5

0 - 20 21 - 40 41 - 60 61 - 80 81 - 100

Renewal Rates

0 – 20 21 – 40 41 – 60 61 – 80 81 - 100

1

0

9

8

7

6

5

4

3

2

1

Iowa

Indiana

OhioWisconsin

Minnesota

Nebraska

MichiganIllinois

% Share of Wallet

Ren

ewal

Rat

es

Weeks

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

5

4.5

4

3.5

3

2.5

Pro

-act

ive

Inte

ract

ion

s Michigan

Six Sigma Framework

Design “should be” activities

Now that there has been correlations established – How do you determine what to do?

Here are some tools to help you decide:1. From – To Analysis2. Cause and Effect Analysis3. Value Analysis4. Swim Lane Mapping5. Kano Model

IMPROVE

Tollgate

Six Sigma Framework

Design “should be” activities

Ensuring consistency: Kano Model

IMPROVE

Tollgate

Customer

Branch

Marketing

Cust Care

Time line 1-2 days 4-5 days 1-2 Weeks 1-2 days

Must Be

More is better

Delighters

For each activity step, (especially those that interact with the customer), use the KANO model to determine the activity requirements for success

+

+-

-

Satisfaction

Performance

Six Sigma Framework

Six Sigma Project Hopper

Observation: Many organizations “bite off” improvements around the edges without continuity of improvement.

– Developing a project hopper

Demand Management

Supply and Invoicing

Order Management

Account Coverage

Account Activity and Op Analysis

Problem Resolution

Account Planning

Sales Opportunity Asses

Presenting Negotiating and Closing

Sample and Literature Fulfillment

Solution Proposals

Opportunity Assessment

Initial Sales Call

Inquiry Handling

Pre Call Planning

Product Launch

Marketing w/ Data

Marketing Campaigns

Solution, Offering Definition

Value Proposition

Brand Building

Voice Of Customer

Customer Data CollectionCustomer Profiling

Market Segmentation

3.17

3.67

4.17

4.67

2.22 2.42 2.62 2.82 3.02 3.22 3.42 3.62

Satisfaction

Imp

ort

an

ce

POS Data Gathering

Primary Focus Issues

Secondary Focus Issues

Importance and Satisfaction Analysis

Six Sigma Project Hopper

Observation: Many organizations don’t choose projects with substantial benefit. Score the potential projects based on benefit, organizational readiness, and cost

1 2 3 4 5 6 7 8

Importance Weighting 9 10 6 3 7 8 5 4

Key Requirements

Potential

Benefit ($)

for Activity

(Sales

Dollars)

Customer

Impact

Productivity

Impact

Depth of

Best

Practice

Tools

Solutions

Available to

Support

Activity

Resources

Required

(all costs)

Time to

Implement

Depth &

Complexity of

Change

Management

Required

# Potential Projects Total

1 Project 1 3 3 9 0 3 0 3 9183

2 Project 2 9 9 3 0 9 3 0 0276

3 Project 3 3 3 9 0 3 0 3 9183

4 Project 4 3 9 3 0 9 3 3 0237

5 Project 5 3 9 3 3 9 3 3 0246

6 Project 6 3 9 0 3 3 3 3 1190

INVESTMENTREADINESSBENEFITS

Prioritization C&E

Six Sigma Project Hopper

Project Hopper

Demand Management

Supply and Invoicing

Order Management

Account Coverage

Account Activity and Op Analysis

Problem Resolution

Account Planning

Sales Opportunity Asses

Presenting Negotiating and Closing

Sample and Literature Fulfillment

Solution Proposals

Opportunity Assessment

Initial Sales Call

Inquiry Handling

Pre Call Planning

Product Launch

Marketing w/ Data

Marketing Campaigns

Solution, Offering Definition

Value Proposition

Brand Building

Voice Of Customer

Customer Data CollectionCustomer Profiling

Market Segmentation

3.17

3.67

4.17

4.67

2.22 2.42 2.62 2.82 3.02 3.22 3.42 3.62

Satisfaction

Imp

ort

ance

POS Data Gathering

Primary Focus Issues

Secondary Focus Issues

1 2 3 4 5 6 7 8

Importance Weighting 9 10 6 3 7 8 5 4

Key Requirements

Potential

Benefit ($)

for Activity

(Sales

Dollars)

Customer

Impact

Productivity

Impact

Depth of

Best

Practice

Tools

Solutions

Available to

Support

Activity

Resources

Required

(all costs)

Time to

Implement

Depth &

Complexity of

Change

Management

Required

# Potential Projects Total

1 Project 1 3 3 9 0 3 0 3 9183

2 Project 2 9 9 3 0 9 3 0 0276

3 Project 3 3 3 9 0 3 0 3 9183

4 Project 4 3 9 3 0 9 3 3 0237

5 Project 5 3 9 3 3 9 3 3 0246

6 Project 6 3 9 0 3 3 3 3 1190

INVESTMENTREADINESSBENEFITS

Prioritization C&E 1 2 3 4 5 6 7 8

Importance Weighting 9 10 6 3 7 8 5 4

Key Requirements

Potential

Benefit ($)

for Activity

(Sales

Dollars)

Customer

Impact

Productivity

Impact

Depth of

Best

Practice

Tools

Solutions

Available to

Support

Activity

Resources

Required

(all costs)

Time to

Implement

Depth &

Complexity of

Change

Management

Required

# Potential Projects Total

1 Project 1 3 3 9 0 3 0 3 9183

2 Project 2 9 9 3 0 9 3 0 0276

3 Project 3 3 3 9 0 3 0 3 9183

4 Project 4 3 9 3 0 9 3 3 0237

5 Project 5 3 9 3 3 9 3 3 0246

6 Project 6 3 9 0 3 3 3 3 1190

INVESTMENTREADINESSBENEFITS

Prioritization C&E

Project AProject BProject CProject DProject E

6σ Sales Growth Initiative: Project Outline

Project Title

DivisionCritical Y

Project YIncrease sales penetration 15% of products at existing top accounts per sales territory.

• Sales growth of $4.84MM (first 12 months of program)• Incremental OI increase of $557,000

Corporate Y _X_ Growth __ Productivity / Cost __ Cash

Financial Benefit

Organization

Black Belt

Commercial Accounts

Bill Smith

Increase sales & marketing productivity and effectiveness through better knowledge & understanding of end users, the products they use and the interaction they have with their suppliers.

Increasing Account Penetration

Six Sigma Project Hopper

Recommendation:

– Each functional area/division should have a defined Six Sigma project hopper that gives the organizational “line of sight” to the improvement projects that will be executed and total hopper expected value, (Business Critical X – Cash, Growth or Cost)

Six Sigma Project Hopper

Critical Success Factors

Leadership:

– Lead by example: Leadership must think in terms of process improvement

– Operate under Six Sigma Principles:- Define, Measure, Analyze, Improve, Control,NOT- Guess, improve, guess, improve…..

It is not a people problem it is a process problem.

“I keep hiring workers, but people show up.” - Henry Ford

Critical Success Factors

Leadership:

– Training: Leadership must be trained and at least go through “Green Belt for Champions”.

Why?

– So leadership can speak the language and ask relevant questions:

- “What are the critical “X”s?- What did the KJ analysis show?- What was the result of mini-tab?- What is the entitlement of this process?

Critical Success Factors Organizational Emphasis and Structure:

– Master Black Belts are full time and report into process improvement areas

– Black Belts are from the business, and perform a “tour of duty” in cross functional areas

– Functional vs. Agnostic debate for Black Belts- Sales and Marketing

– Hold leadership accountable for execution and improvement based on their project hopper.

What are the common barriers using data in Six Sigma Projects?

Common Barriers:

– Do not trust the results of the analysis

– No cultural appetite for change

– No leadership willing to “do something different”

– Overcoming inertia (15 Miles to turn a supertanker)

ORGANIZATIONAL CHANGE PROCESS

DEFINE

Tollgate

Define the challenge

MEASURE

Tollgate

Measurecurrent state

ANALYZE

Tollgate

Analyze the data and establishcorrelations

IMPROVE

Tollgate

Design “should be” activities to improve the situation

CONTROL

Tollgate

Implementcontinuous feedbackand control of the activity

Critical Success Factors

Organizational Change Management

Q x A = EQ x A = E

The effectiveness of a project is driven by the quality of the initiative and

organizational acceptance.

The “multiplier” is organizational acceptance.

The importance of Organizational Change Management:

Q x A = EQ x A = E8 x 2 = 169 x 2 = 188 x 3 = 24

28

Organizational Change Management

Change Process

Leading Change

Creating a Shared Need

Shaping a Vision

Mobilizing Commitment

Current State Transition State ImprovedState

Making It A Strategic Function

Monitoring Progress

Changing Systems and Structures

Change Management Approach

Change Vision &

Leadership

Change Strategy & Planning

Culture Alignment

Change Risks & Mitigation

Organ

izatio

n and

ways

of work

ing Change Com

munication

Stakeholder Managem

ent Peop

le M

igra

tion

and

futu

re

capa

bilit

y

1 Change Vision & Leadership• Leadership articulates the end-state

Vision to focus the change effort. • Build buy-in and ownership to the

Vision among upper management.

2 Change Strategy & Planning• Define specific objectives

(measures) that support the end state Vision.

• Define Change Actions needed to achieve the Vision, across the areas in the change model.

3 Culture Alignment• Define the required

organization culture to support the end-state Vision.

• Develop ways to tie performance management to required culture and behaviors to performance.

4 Change Risks and Mitigation• Profile change risks and define

mitigating actions.• Manage change risks at program and

project levels.

5 Organization and ways of working• Define organization structure to

support the end-state.• Establish a roadmap to end-state, with

interim structures and timeframes.• Define roles and responsibilities, skills

and competencies, work group design, and organization integrating mechanisms.

6 Change Communication• Create and execute a

Communication Plan to deliver desired messages to all impacted groups.

7 People Migration and future capability

• Define/update job descriptions and HR policies and procedures to support the end-state process and system environment.

• Train employees on new knowledge and skills required to operate in the end-state environment.

8 Stakeholder Management• Identify and manage key stakeholder

groups and individuals to build support for the change.

Effective deployment andmanagement of the changethroughout the organization

is essential for project success.

Change Management Activities

Communications

Change Planning

OrganizationalDesign andTransition

Change Implications• Required change actions• Change owners• Links four levers of change

to project work groups

• Integrated ChangePlan(s)

• Implementation SiteReadiness

• Organizational ImpactAssessment

• Organizational Scope

• Communications Strategy• Audience Segmentation• Integrate Stakeholder

Management

• Process Specific Performance Metrics • Detailed Job Change Descriptions

• Organizational Transition

• Perf Metrics Framework• Target Organization

Model Re-aligned Roles & Responsibilities Competency Assessment

• Transition Monitoringand Support

Build Team(s) • Project Retention Strategy• Recognition and Reward Strategy• Team Effectiveness Baseline• HR Management Practices

StakeholderManagement

Project Preparation/Analysis Priorities Define Measure Analyze Improve Control Plan

•Communications Audit

• Stakeholder Analysis• Stakeholder Management

Strategy• Risk Assessment and

Prioritization

• Execute StakeholderManagement Plans

• Ongoing StakeholderAssessments

•Ongoing Assessment and Management

• Change Readinessworkshops (optional)

• Implement andSupport

Training • Training Population Analysis• Define Training Scope

• Develop Process-Based Training Materials• Develop Training

Evaluation Process

• Train the trainer• Training Delivery

•Communications Planning•On-going Communications

• Learning Strategy

• Post -implementationsupport

Six Sigma Project

Organizational Change Management

Change Tools Change Tools Change Tools Change Tools

Readiness Assessment

Stakeholder Analysis

GRIP Analysis

Readiness Assessment

Shared Need Discovery

Need Alignment

Influence Strategy

More of/Less of

TPC Analysis

Threat Analysis

Readiness Assessment

Stakeholder Analysis

Influent Strategy

Interdependency with Projects

Readiness Assessment: Provides valuable insight to organizational

transition from “Shared Need” to “Mobilizing Commitment”. A

comprehensive 18 point assessment that scores the organization from

vision to planning.

Stakeholder Analysis: The Stakeholder analysis “plots” the various stake

holder’s Organizational Change “maturity” and matches it to a Change

Action Plan for the stake holder

Shared Need Discovery Tool: Creates a visualization of the target

audience’s “need” score. The higher the score the more likely they will

accept the Vision. A low score will indicate potential misalignment to

the Vision and any change will be difficult

GRIP Analysis: Goals, Roles, Interpersonal relations and Processes are

scored. This helps “see” what the potential pitfalls of improving

activities might be.

Change Tools

Need Alignment Test: Provides further indication of the organization’s shared need status

Technical-Political-Cultural Analysis: Since successful change is an alignment of Strategy,

Process, People and Technology, this tool seeks to identify sources of resistance into the

four key alignment areas.

Influence Strategy: This tool develops the “influence” strategy that seeks to remedy the

areas of resistance discovered in the TPC Analysis.

More of/Less of Analysis: This tools helps groups of key constituents to become aligned to

the vision and begin to mobilize commitment to it.

Communication Plan: Developing an “Organizational Vision” requires a comprehensive

communication plan.

Threat vs. Opportunity Matrix: This tools provides insight to the critical elements that need

to exist in “Shaping a Need” activity

Change Tools

Leadership Call to Action Get trained

Be a Champion or Sponsor

Build a Project Hopper

Support organizational change.

Six Sigma Success is up to leadership.