Simplify, Perfect, Innovate
A Mantra for Continuous Improvement
11-TULSASPI-9A
Mark J. Kiemele, Ph.D.President and Co-FounderAir Academy Associates
Office: 719-531-0777Cell: 719-337-0357
Key Themes
Relationship Between Lean and Six Sigma
Innovation as a Catalyst
The Evolution of Innovation
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The Evolution of Innovation
Why Continuous Improvement in Good
Times and Bad
Key Factors that influence Performance
Performance Improvement Evolution
Interchangeable
Parts
Eli Whitney
AssemblyLine
Model
Variety
Jidoka
S. Toyoda
Mass / Batch
Alfred P. Sloan
Waste
Elimination
Mass Production
Henry Ford
Just – In – Time
K. Toyoda
Toyota
Production
System
Standard
Costing
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Design forElimination
System
Synchronization
Time & Motion
Division of Labor
F. Taylor
Henry Ford
Supermarket
Systems
Total Quality
E. Deming,
et al
SQC
ShewhartWestern Electric
DOE
Taguchi et al
T. Ohno
Six Sigma
Motorola
Employee
Partnership
Drucker
Lean SixSigma
Graphical View of Variation andPerformance Capability
The Sigma rating/capability of a process performance measure is the result of comparing theVoice of the Process with the Voice of the Customer, and it is defined as follows:
The number of Sigmas between the center of a process performance measure’s distributionand the nearest specification limit
3 Process Centered• Process is WIDER
than thespecifications,causing waste and
LowerSpecification
Limit
UpperSpecification
Limit
Determined byDetermined by
3 Process
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causing waste andcost of poor qualityDetermined by
the customer
-6
Determined bythe customer
+5 +6+4+1 +2 +3-2 -1-4 -3-5
WASTE
-6 0
6 Process Centered• Process FITS well
within thespecifications, soeven if the processshifts, the values fallwell withintolerances
6 Process
+4+5+6+1 +2+3-2 -1-4 -3-6 -5 0
WASTE
Capability* RTYDPMO*
2 308,537 69.1%
Yield is the probability that whatever we
are producing (manufactured part, PO,
shipped part, etc.) will pass through the
entire process without rework and
without defects.
Sigma Capability is a measure of quality. It
compares the Voice of the Process with the
Voice of the Customer and is correlated to the
defect rate. It is computed from DPMO.
Sigma Ratings Measure Process Capability
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Six Sigma is a standard of Excellence.It means less than 4 Defects per Million Opportunities.
ProcessCapability
Defects per MillionOpportunities
Rolled ThroughputYield
2 308,537 69.1%3 66,807 93.3%4 6,210 99.4%5 233 99.97%6 3.4 99.99966%
* Assumes a 1.5 sigma shift in average if the performance measure is normally distributed
Variation Reduction in Golf
Here’s a recent question sent to Athlon Sports:
“If a pro golfer played an entire year’s scheduleand shot even par at every tournament, how much
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and shot even par at every tournament, how muchmoney would he earn for the entire year? Let’ssay in 2010?”
Variation Reduction in Golf
According to PGA statistics, Jason Dufner, whom I had neverheard of before this year’s PGA Tournament, averaged veryclose to the average par on the courses on the tour, namely71.02 strokes per round. He ranked 84th in earnings, bringingin $1,121,695. Since his average strokes per round is almostright on target (the true course average par), his data is usedas the benchmark.
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The PGA Tour analysts then investigated what a hypotheticalgolfer would have earned had he shot even par for everyround in an entire season? Such a player would have ranked30th in earnings and brought home $2,456,064, more thandouble what Jason Dufner made.
Once again, hitting the target on average is nice, but hitting itconsistently is even better.
Of course, consistency in golf is what it is all about, and thisdata supports that premise.
Relationship Between Simplify, Perfect, andInnovate
OVERALL YIELD vs SIGMA(Distribution Shifted ±1.5)
# of Parts(Steps)
±3 ±4 ±5 ±6
17
10204060
93.32%61.6350.0825.086.291.58
99.379%95.73393.9688.2977.9468.81
99.9767%99.83999.76899.53699.07498.614
99.99966%99.997699.996699.993299.986499.9796
N (Simplify)
NE
E (Perfect)
Lean
Perfect Six Sigma
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Source: Six Sigma RESEARCH INSTITUTEMotorola University Motorola, Inc.
6080100150200300400500600700800900
100012003000170003800070000
150000
1.580.400.10- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -- - -
68.8160.7553.6439.3828.7715.438.284.442.381.280.690.370.200.06- - -- - -- - -
98.61498.15697.7096.6195.4593.2691.1189.0286.9784.9783.0281.1179.2475.8850.15
1.910.01
99.979699.972899.96699.94999.93299.89899.86499.83099.79699.76299.72999.69599.66199.59398.98594.38487.88078.82060.000Use for
BenchmarkingSimplify
Definition of Innovation and Latest Trends
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Types of Innovation
Product Innovation
Service Innovation
Process Innovation
Business Model Innovation
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Business Model Innovation
Sales and Marketing Innovation
Organizational Innovation
Supply Chain Innovation
Financial Innovation
Incremental Innovation
Breakthrough or Disruptive Innovation
Key Words in any Definition of Innovation
People
Discover
Create
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Create
New
Value in terms of Performance, Time, Cost
For some segment of society
To Discover and Create
Studies of identicaltwins separated atbirth indicate that ourability to thinkcreatively comes 1/3
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creatively comes 1/3from genetics.
The other 2/3 of the innovation skillset comes from learning the rightskills and practicing them.Source: The Innovator’s DNA by Dyer, Gregersen, and Christensen
To Discover and Create
Five Major Discovery Skills that can be practiced by anyone:
1. Associating- Steve Jobs (Apple): “Creativity is connecting things.”
2. Questioning
ApplyingDiscovery
Skills
CreativeIntelligence
Innovation
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2. Questioning- Michael Dell (Dell): “Why does a computer cost five times as much as the sum of
its parts?”
3. Observing- Akio Toyoda (Toyota): “gemba—going to the spot and seeing for yourself”
4. Experimenting- Scott Cook (Intuit): “Our culture is open to lots of failures while harvesting the
learning. It’s what separates an innovation culture from a normal corporationculture.”
5. Networking- A.G. Lafley (Procter & Gamble): “We collaborate with the outside world
via our Connect + Develop website to not only publicize what we knowbut to also highlight what we need.”
Ranking the Discovery Skills of Innovators*
PercentileAssociating Questioning Observing Experimenting Networking
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Why is Innovation Evolving?
Globalization
New Technologies
Greater Transparency
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No longer correlation between market shareand profitability
Lines between industries and competition arebecoming blurred
Traditional approaches to strategy no longerwork due to market volatility
Volatility in the Internet Sector
1985 1990 1995 2000 2005
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Source: hbr.org/slideshows/turbulence
Each line represents a single firm's revenueranking in relation to their competitors. Linesappear, rise, fall, or disappear when companiesenter, adapt, fail to adapt, or die. Crossing linesare a sign of increased volatility.
Innovation Adaptation
Adaptation means becomingreally good at learning howto do new things.
Capabilities that foster rapid adaptation:*
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Capabilities that foster rapid adaptation:* The ability to read and act on signals of change
The ability to experiment rapidly and frequently—not onlywith products and services but also with business models,processes, and strategies
The ability to manage large networks of multiplestakeholders
The ability to motivate not only employees but also partners
* Source: Harvard Business Review, July-August 2011
Examples of Adaptation
TESCO: UK-based grocery retailer nowoffers media and financial services—have experimented often with theirbusiness models
BOSE: known for their soundsystems, now is an automotive
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systems, now is an automotivesupplier of suspension systemsusing their sound technology
IKEA: whenever they opened a new store inRussia, the nearby real estate values alwayswent up. Now mall development is theirbiggest profit maker in Russia
Examples of Adaptation
Toyota: kanban and kaizen are earlyexamples of adaptive systems
Google: Android operating
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eBay: complexnetwork of sellersand buyers
Google: Android operatingsystem brings togetherassets and capabilities ofmany entities
Samsung: huge success inblending Western bestpractices with anessentially Japanesebusiness system
Examples of Adaptation
Apple: adaptive ecosystem ofsuppliers, telecom partners,and independent developers tosupport the iPhone and iPad
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Nokia: would still be leadingthe smart phone market ifexperience and marketposition/scale were keyindicators of success
Stephen Elop (CEO, Nokia): “Our competitors aren’t takingour market share with devices. They are taking our marketshare with an entire ecosystem.”
Longitudinal Study on Recession Strategy*(Why We Need Continuous and Breakthrough Improvement)
• 4700 public companies from S&P’s Compustat database were analyzed
• During past 3 global recessions- 1980-1982- 1990-1991- 2000-2002
• Each company was studied
- 3 years prior to each recession
- during the recession with strategies employed compared to previous 3 years
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- during the recession with strategies employed compared to previous 3 years
- 3 years after each recession
• Each company’s recession strategy is rated on 3 variables
A: investment in operational efficiency (e.g., LSS)
B: head-count reduction
C: investment in new product and asset development (e.g., DFSS)
• Each company’s post-recession performance is measured by(1) sales and (2) profitability (EBITDA)
*Source: Roaring Out of Recession by Gulati, Nohria, and Wohlgezogen; Harvard Business Review,March 2010
Recession Strategy Variables
Each variable takes on 3 potential values (-, 0, +) according tothe bottom, middle, and upper thirds of the population.
A: Operational Efficiency- invested much less than the middle third tier of companies in operational
efficiency (i.e., are in the bottom third)0 is in the middle third of companies investing in this category+ invested much more than the middle third tier of companies (i.e., are in the top third)
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B: Head-Count Reduction- reduced head count much less than the middle tier of companies in this category
0 is in the middle third of companies with regard to head-count reduction+ reduced head count much more than the middle third tier of companies in this category
C: New Product and Asset Development- invested much less than the middle third tier of companies in this category
0 is in the middle third of companies investing in this category+ invested much more than the middle third tier of companies in this category
Recession Strategy with Results Need LSS
and DFSS)
Average Annual Percentages for 3 Years after the Recession
4
6
8
10
12
14
Sales
EBITDA
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0
2
Average Prevention Promotion Pragmatic Progressive
Recession Strategy with Results Need LSS
and DFSS)
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Integration w/Existing BusinessImprovement Initiatives
The Right Projects and Studiesand People to Lead Them
Effective Support Infrastructure
Factors That Impact the Effectiveness ofContinuous Improvement
Better
Integrated Training and Software
Executive Ownership andLeadership Alignment
Intellectual Capital
Continuous Realizing theBenefits of
Customer Value
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Faster
Lower Cost
Reward & Recognition
Financial and ImplementationAccountability
Enterprise-Wide KnowledgeSharing
Customer and SupplyChain Involvement
Change Management:Leveraging Cultural Strengths &Managing Its Weaknesses
ContinuousImprovement
Implementation
Benefits ofContinuous
Improvement
Top Line Growth
Bottom Line Growth
Cultural Change
Relationships Between Inputs and Outputs
Output Level:
Cu
sto
me
rV
alu
e
Inte
lle
ctu
al
Ca
pit
al
To
p-L
ine
Gro
wth
Bo
tto
m-L
ine
Gro
wth
Cu
ltu
reC
ha
ng
e
Executive Ownership * 0.177 0.217
Support Infrastructure * 0.164
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Support Infrastructure * 0.164
Integration with exist Initiatives * 0.117
Right People & Projects * 0.183 0.233 0.115
Integrated Training Materials & SW n/a
Financial Accountability * 0.080 0.133 0.341 0.094
Reward & Recognition n/a
Knowledge Sharing * 0.155
Customer & Supply Chain Int. * 0.122 0.194
Change Mgmt & Cultural Strength * 0.109 0.153 0.256 0.215 0.416
Plus Constant + 2.611 1.587 2.414 2.604 0.717
Inp
ut
Lev
el:
Impact of Longevity on Factor Influence
Group A Group B p -value
Input Factors (n =255) (n=260) (from t-test)
Executive Ownership 6.13 6.41 .186
Support Infrastructure 6.13 6.81 .001
Integration of Initiatives 5.54 6.25 .000
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Right People and Projects 5.80 6.12 .085
Integrated Training Materials 6.30 7.03 .000
Financial & Impl. Accountability 5.83 6.50 .002
Rewa rd & Recognition 5.40 5.50 .627
Knowledge Sharing 5.24 5.97 .000
Customer & Supplier Involvement 4.57 5.31 .000
Change Management 5.42 5.87 .025