By Steven H. Jones.  LSSBB

There is a tragic misconception about Lean Six Sigma and process improvement initiatives.  I have been vaguely aware how this misconception existed with non practioners, but was unaware of how far this misconception had penetrated the Lean and Six Sigma practioners world. 

Apparently, there are those who hold to the concept that the primary purpose of Lean Six Sigma is to reduce operational costs by reducing the headcount in an operation.  So much so that the very act of calling for a Lean Six Sigma project causes some to shudder.  This concept is so flawed that it is inconceivable to me that any valid practioner could adopt such a mentality.  None the less I have begun hearing it more and more from the mouths of those touting certification as Black Belts. 

Additionally one of the core tenets of Lean Six Sigma is that quality should not suffer to reduce operational steps and costs.  The human interaction element is core to the quality of any service operation.  By creating or fostering the notion the Lean Six Sigma primarily targets headcount reduction for cost savings only builds negative morale and perceptions about the methodology.  This negative perception results in limited acceptance, support and adoption of the methodology.

The fact of the matter is that an effectively run enterprise wide Lean Six Sigma practice will work in conjunction with the sales or client management teams to sell the capacity that successfully completed projects create.  This capacity is a new product that can be sold internally from the operation to sales.  It manifests from the redeployment of the surplus workforce capacity.  By redeploying the new work capacity the business is now empowered to grow with little or no cost.  This new capacity can now be sold at any price point as this capacity is sold at a 100% profit margin. 

Larry Bossidy is a former Honeywell Chairman of the Board and he was quoted saying the following about growth.  “You've got to have growth to live. The idea that you can cost-reduce to prosperity has been proven to be absolutely incorrect”

This statement speaks to the future of Lean Six Sigma.  It clearly identifies the future opportunity for process applications within an organization.  The next question is, “How?”  How do you apply Lean Six Sigma and develop business growth?   

“A bad ACFC is better than a good sales call, any day.”

                                    Jeffrey Immelt, GE CEO

ACFC (At-the-Customer For-the-Customer) is a term originated at General Electric.  It is a program started by their current CEO, Jeff Immelt.  This program lends GE Six Sigma process improvement resources to strategic customers. This application is not unique to GE. Other major companies such as 3M, Siemens and Xerox have developed and launched their own Lean Six Sigma ACFC programs with great success.

Unlike traditional DMAIC projects that focus on an organization’s internal processes, the ACFC focuses primarily inside a customer’s environment.  The project is based on improving a business process that affects both the supplier and receiver.  By co-sponsoring to resolve the common process, both organizations receive a quantifiable benefit. The bulk of the project benefit may flow to the customer or partner and not the vendor.  This then establishes or enhances the vendor-client relationship to grow into a business partnership.  The ultimate strategy for the Lean Six Sigma project benefit is to be re-directed into new or additional business from the vendor.  At worst the project will help maintain revenue that could have been completely lost.  An ACFC project can be a great tool to move your organization from a delivery vendor to a business partner.

This concept, while not new has spawned a new application of Lean Six Sigma called Lean Six Sigma for Growth.  The Lean Six Sigma for Growth approach utilizes existing Lean Six Sigma roadmaps of DMAIC (Define, Measure, Analyze, Improve, and Control) and Design for Six Sigma, DMEDI (Define, Measure, Explore, Develop and Implement.)

The Six Sigma for Growth approach begins with discovering business and revenue growth opportunities. Once these opportunities are identified they should be ranked and refined to prioritize the selection of growth projects. This discovery works as a funnel to identify project opportunities and convert them into service opportunities. By using a rigorous project selection methodology the vendor efforts can result in specific well scoped and chartered Six Sigma for Growth projects. This approach is derived from the work of Peter Drucker and others whose focus areas on innovation are useful to identifying growth opportunities.

It is vital that this discovery step is conducted systematically.  This discovery augments the effort in opportunity identification and project selection. Many companies that have deployed Lean Six Sigma practices still are challenged in feeding the project funnel with good quality project opportunities. 

Here is a case study on a specific ACFC Lean Six Sigma project that was identified as a growth opportunity and converted into a service opportunity.  It went on to deliver high initial benefit to the customer and long term annualized revenue to the supplier.  This is an excellent application of Lean Six Sigma to grow a business channel of revenue.

ACFC for Growth Case Study: 

Business Problem: Major account acquired a $1M document management tool to empower divisional group’s development, tracking and storage of operational forms.  However the cost and cycle time for the creation of each division’s application front end had exceeded acceptable limits for the divisional units. Current production took 25 days at a cost of $25k each. The client desired a production cycle of 2 days at $2500 each.  Headcount = 3 FTE (Full Time Equivalents)

Subsequently, the client ceased ordering application front ends and threatened to pull out of the entire deployment.  Such action would result in significant legal action, revenue and productivity losses.

Project Goal: Reduce repetitive development time and cost by 90% for each deployment.

Project Initiation: The operations management prepared to release the workforce that had been secured to support this document management production cycle.  The client’s request volume reduction resulted in excess staff.  Sales and the practice management collaborated to resolve the problem with the operations team.  Sales proposed to the customer that if the operation could reduce the production cycle from 25 days and $25k to 2 days and $2k would they sign up for a minimum number of orders.  The client agreed, somewhat in disbelief of the vendor’s ability to achieve the desired outcome.  The volume agreed to was sufficient to exceed the existing revenue and profit objectives for the operation team.

Project Outcome: Sponsorship from the vendor’s process owner and the vendor’s process owner launched a cycle time reduction project led by one of the vendor’s Lean Six Sigma Black Belts. Project participation existed from both organizations process participants.  The results of the project exceeded the 90% objective.  Because of the increased volume of orders the existing team was maintained to handle the workload. Headcount = 3 FTE (Full Time Equivalents)

Project Benefits: The client recognized $600k savings on the deployment of the document management front ends.  The vendor secured over $160k in new revenue from the vendor for new front end orders and avoided $21k in termination costs. Additionally the vendor now had a low cost, high speed delivery system that could be replicated to other accounts.  Moreover, the customer was happy and confident the vendor would continue to provide value to their organization.

Traditionally operations may have taken a reactive approach and quickly moved to reducing headcount.  Additionally, this accomplishment was achieved with the cooperative efforts of the sales, practice, operations and client.  As in this case and others customers may not be aware of such beneficial opportunities. 

Lean Six Sigma Project delivery has even begun to evolve even further.  Some companies such as GE and Xerox have begun the deployment of Account Based Green/Black belts.  These practioners are assigned full time to specific strategic accounts with the focus of improving performance, increasing value at the customer by utilizing Lean and Six Sigma tools in abbreviated DMAIC/Kaizen roadmaps.  Their projects are limited to 45 day cycles.  Their objectives are to retain the existing business volume, grow the volume to higher levels and drive more and more account revenue.

The benefit of these type deployments and partnerships is obvious.  The account based black belt is able to dig deeper into the client’s business operation to have a better understanding of the challenges, needs and opportunities.  By accessing this level of information the vendor has the advantage of uncovering the vendor’s less obvious business needs.  This knowledge better enables the account based black belt to develop more impactful solutions with higher rates of return for the client.  Since the account based black belt is positioned by the vendor there is a greater opportunity to drive solutions from the vendor’s products or services.

In conclusion, all companies that remain in business will be faced with the traditional operational challenges of managing costs and increasing revenues.  Lean Six Sigma is a tool that can help not only reduce costs, but also increase revenue and simultaneously increase quality.  This can all be accomplished by utilizing rigorous discovery efforts and coordination between the customer product/service delivery teams to identify opportunities with customers. The objective is to provide a service that they do not currently receive and are willing to pay for.  By improving or creating processes to deliver these desired services Lean Six Sigma can be used as a solid tool for growth.

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Steven H. Jones is a Process Engineer who received his certification as a Lean Six Sigma Black Belt by the George Group while employed and Xerox Global Services. He started his career at the 3M Corporation, an early adopter of the Lean Six Sigma methodology in 1988 and has worked in quality improvement of Telecommunications and IT arenas since 1993. Since then he has provided quality improvement and process engineering services domestically and internationally to clients such as BP Canada, Convergys, Intercontinental Hotels, and Microsoft. He is currently a Senior Process Engineer with Siemens Business Services and a member of the International Society of Six Sigma Professionals.  Steven earned his B.A. in Communications from the University of Cincinnati and completing his Executive MBA at Xavier University of Ohio.  He can be reached at steven_jones@siemens.com.

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