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A Google™ search for “Six Sigma” (in quotation marks) yields 73 pages of results showing the popularity of this methodology. In evaluating tools for strategy formulation, one must consider what has been successful in other companies. Jack Welch, the former CEO of General Electric, openly endorsed Six Sigma and GE’s success with it inspired many other Fortune 500 companies such as 3M, Home Depot, and Ford to adopt the strategic methodology (Barakat, 2002).
Started at Motorola in the 1980s, Six Sigma, which translates into 3.4 defects per million opportunities, uses a variety of statistical models to measure the company’s performance on a slew of internal processes (Barakat, 2002). The reason that this management system is being included as a tool for strategy formulation is because of its implications for company strategists. To adopt the program, there is a significant cost to the corporation to hire or train quality experts, namely the green and black belts. The strategy of the corporation will be adjusted based on the statistical analyses of the company’s processes.
Since it became popular, Six Sigma philosophies have been adapted to other industries outside of manufacturing. For example, Fort Wayne, Indiana claims that it was Six Sigma management practices that have improved the response time of their public works department, which now patches 95% of all of the city’s potholes within 24 hours of being reported.
But as Jack Welch said – about 70% of Six Sigma is covered by just knowning one statement: “Variation is evil.” If it was only so simple!
How EDS Got its Groove Back (2001), appearing in FastCompany reviews how important corporate culture and the embracing of that culture by the employees is to the profitability of a company. The article chronicles how EDS, the information technology services company founded by Ross Perot was floundering before 1999. New business bookings were lagging. Clients were unhappy with the performance of critical information systems. A new CEO, Dick Brown, recruited out of Britain’s Cable & Wireless company changed EDS from within and put the company back on track with its billing and profitability objectives.
The reasons for EDS’s downfall, as discovered by Dick Brown were that 1) there was a great deal of internal competitiveness, 2) the 48 divisions with their own profit and loss responsibilities did not communicate with each other, 3) the divisions competed with each other and 4) there was no single corporate strategy to compete in the marketplace.
Brown initiated strategies to reunite the company and restore its competitiveness. He reinvented the brand by authorizing a commercial to air at the Super Bowl that portrayed EDS as a company that rided herd on complexity and “makes technology goes where clients want it to go”. The commercial was hugely successful. Furthermore, Brown recreated the company in that he demanded instant feedback on company projects and “unfiltered” communication. He demanded the development of a system whereby, with Web access, customers could rate EDS project performance at any time. This information was available to everyone within EDS. This system alerted EDS to any customer dissatisfaction. A merit system for employees based on delivering solutions to either internal personnel or customers was instituted. The result was the development of a new corporate culture that collaborated within the organization to support its customers.
Brown’s strategy has been successful. As of 2001, EDS increased revenue by 7.5 percent, announced a 17 percent increase in quarterly profits and booked $80 billion in backlogged signed contracts. The turnaround of the company is attributable Brown’s corporate strategy which evolved its employees to embrace a new corporate culture with new objectives.
Strategy should not be created as though it exists in a vacuum. It is all too often that strategists create and implement seemingly brilliant strategies that fail to include the most important element, the customer! “Customer strategy integration can drive a firm’s objectives…when we’re looking at customer strategy integration, we’re looking at “having customers on our side” by maintaining their trust and loyalty”. It is amazing that however much this concept may seem like common planning sense, there are so many companies that often just simply fail to plan. How does the cliché go, “It’s not that anyone every plans to fail, they just fail to plan!”
Source: Nykamp, M. (2002). Check Your Alignment: www.directmag.com
An article titled, Does every company need a customer strategy?, co-authored by Don Peppers and Martha Rogers, helps the manager understand that any one firm can not be all things to all customers. Not every enterprise considers a customer focus part of its core competency, but that does not decree that such enterprises can not benefit from a customer strategy. The fact remains that every customer generally wants three things from businesses:
The authors have simply identified the basic essentials that customers want. Completing a needs analysis of their target customers will help drive the operational strategy of the business.
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