Six Sigma & Innovation – Co-Exist vs. CompeteAn Inside Look

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Learning Bites

• Comparison of Six sigma & Innovation

• The need for successful business

• Integration of Six sigma & Innovation

• Six sigma & Innovation leads to business growth

• The success factor of both working together

Six Sigma vs. Innovation?

Six Sigma & Innovation seem to be at crossroads!

“Whether the relentless emphasis on efficiency had made 3M a less creativecompany?”

“At the company that hasalways prided itself ondrawing at least 1/3rd ofsales from products releasedin the past five years, todaythat fraction has slipped toonly 1/4th .”

Operating margins went from 17% in 2001 to 23% in2005.

In first full year, capital expenditures slashed 22%, from$980 million to $763 million, and 11% more to a troughof $677 million in 2003

Sales, capital expenditures dropped from 6.1% in 2001to just 3.7% in 2003

R & D funding constant from 2001 to2005, hovering over $1 billion a year

“Innovation is a numbers game: You have to go through 5,000 to 6,000 raw ideas to find onesuccessful business.““Six Sigma would ask: Why not eliminate all that waste and just come up with the right idea thefirst time?”

Six Sigma & Innovation @ Crossroads! :: Case in Point

Six Sigma vs. Innovation?

Innovation

Six Sigma

• Inject process efficiency& productivity

• Do things right

• Low Risk Tolerance

• Top-Down approach

• Inside-out Focus

• Brave undiscovered,uncertain territory

• Do the right thing

• High Risk Tolerance

• Bottom-up approach

• Outside-in approach

Key ProcessesMaturity /Consistency

CONSTITUTES

Workforce Capability

Process Capability

Performance

ENABLES

PREDICTS

Business Capability Model

Organizational Process / Performance Maturity Model

Organization performance irrespective of industry or size shows specific pattern ofmaturity with distinguishing characteristics

Pre Compliance1

Compliance2

BeyondCompliance3

Innovation4

IntegratedExcellence

5

OperationalExcellence4

Innovation – Types & Needs

• Provides significant operating margin growth• Differentiates from rest of the pack and signifieschange

• Typically a phenomenon when successful

• CEO’s ranked top of priority lists*• Drives efficiency / effectiveness in products &services

• Focuses on delivery model innovation / newmarket penetration / partnerships for promotion

• Not a day-to-day innovation

“CEO’s today face mounting pressure to innovate, yet finding ways to actuallyenable innovation remains a challenge for many”

Business

Model

Business

Model

Product/Service/Market

Product/Service/Market

OperationalOperational

* - Research Study by IBM

Six Sigma and Innovation working together – How?

Promote and ensure strong factual basis for implementing any creative ideas

Must incorporate creativity into the operational process excellence initiatives! – tocome up with improvement opportunities

Deploy a cross-functional approach to problem resolution & guide users throughsensing, understanding, deciding & acting in ways to create value

Take into account the “Business Voices” and balance them out to ensure optimalresults

LSSLean Six Sigma

SIfTSystematic Innovation

for Teams+

• Optimization• Sustainable Growth

What are we really looking for…

11 22

PRIORITY???

INNOVATION &CHANGE

EFFICIENCY &EFFECTIVENESS

SCENARIO 1:

YES NOEfficiency &Effectiveness

Innovation:

SCENARIO 2:

NO YESInnovation:

SCENARIO 3:

YES YESInnovation:

Undesirable &Unsustainable

E&E vs. I&C – A Fairplay?!

Unsustainable &Improbable

IDEAL

Efficiency &Effectiveness

Efficiency &Effectiveness

An Innovation vision based on factual customer and market insights

Leadership committed to perpetual innovation

Key Success Factors & In Summary…

Alignment across the extended enterprise

Organizational capabilities that make innovation habitual

While most companies in the industry have mastered the art of teaching and implementing sixsigma, integrating innovation into the scheme of things is the challenge.

Some key pointers to make the process easier…

Do you have a clear vision of where you want your company to be in two years? In fiveyears? In ten years?

How closely tied is this vision to the needs of your current and target customers? And is your

understanding of these needs based on actual assessments or assumed information?

Will this vision require innovations in your business model? In your products or services? In

your markets?

What will you need to do at the operational level to enable and drive these innovations?

To support innovation, what changes will be required to your management approach,

organizational structures, metrics and skills?

Key Questions to ask yourself…

“If you do what you’ve alwaysdone, you’ll get what youalways got!”

- W. Edwards Deming

Thank you very much!

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