Six Sigma Comes to IT Targeting Perfection

Reader ROI

• How the Six Sigma process methodology applies to IT
• What Six Sigma can and can't do for you
• Best practices for rolling it out

Six Sigma is a defect reduction methodology that forces organisations to focus on the quality of the customer experience. And it can most definitely be applied to IT.

The IT organisation at Raytheon Aircraft saved $US500,000 from a single project in 2002.

The nine CIOs at Textron saved a total of $US5 million in six months.

One team of engineers at Fidelity Wide Processing expects to deliver $US6 million to $US8 million in cost reductions this year.

Some of the largest IT organisations are looking trim and vigorous these days. Others, like Telstra locally, are not yet the lean, mean fighting machine they hope to be - but are working hard at it (see "Right Answers to Dumb Questions", CIO November 2003). It's no miracle cure or diet of the month. It's a particular piece of process methodology called Six Sigma.

Six Sigma is a defect reduction methodology that transforms organisations by forcing them to focus on the quality of the customer experience. The term sigma refers to deviations from an ideal level of operation, where each level of sigma, starting from one, allows for fewer defects. Sigma six, the operational equivalent of nirvana, allows a mere 3.4 defects per million outputs. If you're in manufacturing, that means 999,996.6 flaw-free widgets. If you're in IT, that means fewer servers, faster call response times and better project delivery.

Six Sigma got its start in manufacturing at Motorola in the 1980s, and later spread to nuts-and-bolts powerhouses like AlliedSignal, General Electric and Honeywell International. But now CIOs at companies of all disciplines are adopting Six Sigma for its fact-based, quantifiable insistence on continuous improvement and its ability to doggedly root out and improve defects in processes.

"Six Sigma isn't just a manufacturing thing. It can be applied to the financial services industry very effectively," says Doug Sutton, president of Fidelity Wide Processing, where the methodology is delivering cost reductions and quality improvements in the range of 20 per cent to 50 per cent across the board. "A lot of our potential customers are asking if we use it. They want to know if we're focused on business process improvement, and the answer is yes."

On the numbers side, Six Sigma provides CIOs with an objective, measurable way to justify technology investments; on the karma side, it serves as a judgement-free common language between IT and other project stakeholders within the company.

"IT always gets caught up in insatiable demands and lost ROI. Six Sigma solves both those problems," says Charles Costa, executive vice president and CIO at Chase Financial Services, which assigns a Six Sigma team to most IT projects worth more than $US1 million. "Six Sigma gives us a very precise way to demonstrate the real value of technology, and it helps us improve the way we deliver that value."

Six Sigma has a lot of normally staid CIOs excited for a good reason: Quality is back on the corporate radar in a big way. "We've cut so far into IT in the past couple of years that we're starting to see some quality problems," says Val Sribar, a Meta Group senior vice president. "If you're smart about where you apply [Six Sigma], if you apply it to your core disciplines, it makes a lot of sense right now."

Still, wary and weary CIOs, especially those who have endured both the 1990s flavour-of-the-month management mania and the apparently endless post-bubble budget crises, are justified in wondering if Six Sigma is right for them.

Six Sigma users insist it works for all types of companies and in all functions, but they do admit there are a few times when the methodology won't take. If your resources have truly been cut beyond the point of pain, now isn't the time - not because you don't need Six Sigma's benefits (you probably do, more than ever) but because burned-out staffers and stressed-out managers aren't likely to be able to give the regimen its due.

While very small IT shops can benefit from Six Sigma's approach to error reduction, they'll have to wait to see quantifiable benefits. "There's still applicability, but it will take a small shop a long time to know whether they've reduced their defects to three in a million, just because it's going to take longer to get to that first million," observes Matt Light, a research director at Gartner.

And finally, every single IT professional experienced with Six Sigma emphasises that it absolutely, positively requires top-down buy-in. Six Sigma is an executive-directed transformation tool, and if senior management isn't interested or willing to personally sponsor the strategy, it's going to fail - point blank.

"To have a successful Six Sigma initiative in your company, senior management has to understand its role: to pick teams, decide what measurements are going to matter, establish some form of accountability and visibility, and set up a mechanism to establish and track results," says Alan Larson, author of Demystifying Six Sigma: A Company-Wide Approach to Continuous Improvement who worked at Motorola in the 1980s and was part of the team that introduced Six Sigma to Honeywell.

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How Six Sigma Works in IT

Despite its origin in manufacturing, Six Sigma isn't about widgets; the focus is on processes. When applied to IT operations, Six Sigma aims to measure and improve both internal processes, such as network speed and reliability, and line-of-business processes in which IT has a role, such as how well an online ordering system is working.

"IT is a big user of processes: testing and hardware implementation and software development," says Doug Debrecht, vice president and CIO at Raytheon Aircraft, where the entire IT workforce has had some form of Six Sigma training. "Six Sigma has given us a good toolset that we can use consistently and repeatedly to analyse how we have things set up and running."

Six Sigma analysis tends to begin with the formulation of a problem statement. One Six Sigma team at Raytheon, for example, was charged with analysing why the division had what Debrecht admits was "an ungodly number" of servers - 350. "We needed to figure out a way to consolidate and be smarter in how we deployed our servers," he says. The Six Sigma team determined the root cause of the problem - that each application got its own server, regardless of its size or bandwidth requirements - and then worked out the specifics to allow applications to share servers logically and securely. The result: A 40 per cent consolidation in servers, with the attendant time and labour savings added back to the bottom line.

The methodology breaks down problem evaluation into five distinct steps: define, measure, analyse, improve and control. Practitioners call this rubric DMAIC for short, pronounced "de-MAY-ick". (Another approach, Design for Six Sigma, aims to remove defects from a process during the design phase. It's generally used only by organisations that have mastered the DMAIC methodology.)

At each of the DMAIC steps, organisations apply appropriate tools and measures from a wide variety of choices. Some, such as histograms, Pareto charts and Scatter diagrams, may already be familiar to IT. Others, which boast names such as Voice of the Customer or House of Quality, probably aren't, though CIOs report that these customer-centric tools are often the ones they find most enlightening.

Textron used the DMAIC process and the Voice of the Customer tool, among others, to tackle data-centre sprawl. "We found we had over 80 data centres inside our company," says Ken Bohlen, Textron's executive vice president and chief innovation officer. "We used Voice of the Customer to canvass our customer base and ask some very specific questions," such as what critical information was stored where. By making customer needs the top priority, Textron has been able to consolidate or shut down 40 of the data centres, which were supporting legacy or underused applications. Bohlen says his long-term goal is to get down to five data centres.

While Six Sigma often helps organisations refine and streamline operations, the methodology can also be used to leverage existing systems for customer benefit. Chase Financial Services formed a Six Sigma team to take a look at the costs accrued by customer service representatives. The team recommended technology changes to the company's interactive voice-response system to allow customers to more easily find their own answers to routine questions, which in turn allowed service representatives to redirect their efforts into selling additional products.

Pioneer CIOs and industry watchers point to some best practices for reaping success from Six Sigma in IT.

• Pick the right people. Workers trained in Six Sigma techniques act like internal SWAT teams, coming together to tackle a given process, then breaking apart and re-forming, often in a different configuration, to undertake the next challenge. Depending on what level of Six Sigma training employees have undergone, they're known as green belts, brown belts or black belts, with black belts most often deployed to lead a team or tackle projects on their own. It's important to tap motivated employees for training, which produces a high-performance team and at the same time signals that Six Sigma is part of an upward career path. "If you grab the C- and D-level players because you can spare them, you're sending the wrong message," says Textron's Bohlen. "We started with the best and brightest, and showed that [Six Sigma training] accelerated their careers. Now I have a waiting list of people wanting to get black belt training." Be careful about training people but not giving them a project right away to work on, warns Chase Financial Services' Costa. "We have found it very beneficial for people to take a project with them into training or to start something right after," he says.

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• Don't substitute Six Sigma for thinking. For IT staffers particularly, the urge is strong to first use tools they know (that is, technology) before dipping into untried methodologies. Resist that urge, counsels Fidelity Wide Processing's Sutton. "If you just throw technology at a business problem, all you wind up with is a bad process with new technology. If you wring out the process first, then you can really use technology to move it to a higher level." As a case in point, Fidelity Wide Processing used Six Sigma tenets to re-engineer its inbound, paper-based, customer data processing operation. Only after gaining 32 per cent improvement by streamlining the process did Sutton's department start to consider new technologies. The company is currently expanding its use of advanced character recognition technology to speed processing of customer data.

• Don't be afraid to tinker. While the philosophy behind Six Sigma is, or should be, sacrosanct - focus on the customer, reduce defects, streamline and improve processes, evaluate continuously - you needn't treat the tactics and tools as if they're set in stone. Many big companies, including Honeywell and Textron, have their own internal "brands" of Six Sigma that have been tailored to their line of business and oftentimes combined with Lean, another manufacturing technique designed to weed out non-value-adding subprocesses. Other organisations fine-tune the DMAIC model as needed. Chase Financial, for example, added a step called "implement". At the toolset level, Raytheon's Debrecht says his teams have wide latitude when it comes to suggesting which measures are appropriate for which projects. "We use brainstorming, value mapping, fishbone diagrams and something we call the 'five whys' to help us get to the root cause of an issue," he says. Textron's Bohlen gives that approach a thumbs-up. "Six Sigma is a system of tools," he says. "There's no prescribed set. You have to determine what you want to bring to your workforce before you choose your tools." One word of warning: A cautious CIO might be tempted to try a little bit of Six Sigma here and there to see if it works. That's a mistake, says Costa. "We tried too hard to go part-time on some of this stuff, so projects were taking too long. Now we try to focus black belts full-time on a project, and in most cases we're seeing between $US1 million and $US3 million in benefits," he says.

• Don't get bogged down in numbers. Like any other measurement-based system, Six Sigma can be driven into the ground by too many numbers. "All that statistical analysis that the black belts use, all those data points don't add up unless you understand what you're measuring," says Gartner's Light. The "define" phase in DMAIC is, in his opinion, probably the most important part of the discipline, and it's the one that involves the fewest metrics. "Chartering the team and specifying who the customers are and defining what a good experience is and what's a defect, that's where the value is," he says. "You can use statistics in degrees," echoes Sutton. "People hear 'measure' and they say: 'Oh, we gotta have a control chart.' But there are certain areas where we have no control charts. What's important is the methodology and how you apply it."

How to Sell Six Sigma

For all their enthusiasm, CIOs acknowledge that the most difficult aspect of Six Sigma may well be trying to sell its benefits to the rank and file, many of whom have lived through too many rah-rah kick-offs in the conference room to embrace any more management initiatives.

Six Sigma can certainly turn into some executive's pet leadership strategy that's launched and forgotten three months down the line. But if it's done right, practitioners say, Six Sigma stimulates a fundamental change in the way an organisation conducts business and makes decisions.

So what's the best way to introduce that change? Maybe not at all. Fidelity Wide Processing's Sutton is a fan of the show-first-tell-later strategy. When Six Sigma was new to his organisation, he sometimes shunned the words Six Sigma or training or quality.

"We don't come in with touchy-feely training and have [sceptics] say: 'Oh yeah, right, Six Sigma'," Sutton says. "We say: 'Let's talk about your business problems. You need to drive improvements in your business, and we're going to show you how to do it.'"

And that, Sutton says, reels them in every time.

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SIDEBAR: All Together Now: CMM, CRM, ERP and Six Sigma

How Six Sigma fits with process-improvement and value methodologies

CIOS who haven't yet got the Six Sigma religion might find themselves slightly irritated by devotees' talk of measurement-based decision making, increased quality, improved processes and so on.

After all, Six Sigma doesn't hold the patent on those very common corporate goals - shall we all just pitch out our existing quality, valuation and process-improvement programs?

No need, say Six Sigma boosters. While Six Sigma is clearly an alternative to broad-based quality initiatives such as Total Quality Management, proponents say it works just fine with extant project management software, CRM, Balanced Scorecard and other operational and valuation methodologies - if (and it's a big if) those methods and measures are customer-centric.

"It's important to think of Six Sigma not as a replacement for other kinds of process improvement. You're not throwing those out. You're focusing more intently on the customer and the customer's experience of working with IT," says Matt Light, a research director at Gartner.

Chase Financial Services, for example, uses Carnegie Mellon's Capability Maturity Model (CMM) to improve the predictability and quality of its software development and integration processes. That program fits in perfectly with Six Sigma, says Chase Financial Services executive vice president and CIO Charles Costa.

Another up-and-coming service-oriented quality program, the IT Infrastructure Library, which originated with the British government, covers much of the same ground as Six Sigma but in theory could still be used in tandem with Six Sigma, says Light.

Any company's existing project management and portfolio management programs should complement Six Sigma's quality and customer goals - and indeed, many PM vendors have begun including Six Sigma tools in their software offerings.

As for CRM, ERP and other three-letter, multiyear customer initiatives, Sun Microsystems is one company that's wrung significant improvements from its customer relationship management system by applying Six Sigma principles. "We have already made huge performance and process advances in our CRM system," says Junaid Mohiuddin, program manager and black belt for worldwide CRM in Sun's Global Sales Operations. "When disciplined Sigma is applied to ERP rollouts or infrastructure improvements, you increase your chances of success by many factors."

SIDEBAR: Ready, Set, Six

How to introduce Six Sigma to your employees

Six Sigma is emphatically not an out-of-the-box, off-the-shelf solution. So how can you translate it for your organisation?

External training: Many executives, such as Textron Chief Innovation Officer Ken Bohlen, tap one or two key employees, send them to Six Sigma training (usually for the black belt or at least green belt level) and then set them to work on a couple of key projects. Other executives, such as Fidelity Wide Processing President Doug Sutton, start off by hiring one or more Six Sigma black belts and let them seed the methodology throughout the organisation.

Internal training: Large companies that have made a wholesale commitment to Six Sigma, like Raytheon Aircraft, have their own internal training centres. Other companies looking for training either send their employees out to consultants or bring them in-house.

Consultants: Consultants tend to fall into one of two categories. On one end of the consultant spectrum are large corporations, such as Honeywell International, Motorola and Siemens, that embraced Six Sigma themselves and then started consulting divisions to spread the word. On the other end are boutique management consultancies that specialise in Six Sigma, including Breakthrough Management Group, George Group, Niku, Six Sigma Academy and Six Sigma Qualtec.

Project Management tools: Finally, as Six Sigma gains ground for use in IT and other disciplines, some software providers are beginning to put Six Sigma tools and metrics in their project management, service management and statistical programs, including Corel, Microsoft, Primavera Systems and Proxima Technology.