Lean Six Sigma is the combination of two world-class approaches to organizational performance improvement. This chapter will give you more details about why and how the two methods of Lean and Six Sigma became blended into one. We also show you which companies have led the way in this important integration. Finally, we’ll focus on the concept of value, or Value Creation, which is the overriding principle of Lean Six Sigma.

Think of business as a constant drive to accomplish the mission of the organization better, faster, and cheaper. To make products better, faster, and cheaper. To deliver services better, faster, and cheaper. And to operate processes better, faster, and cheaper. As an organization evolves, it improves the synergy between these three elements of success.

However, sometimes these elements of business success work at odds. Making the process better means slowing it down; speeding the process up through technology makes it more expensive, at least in the shorter run. Cutting costs results in a reduction of quality and sometimes speed. The key is to leverage Lean Six Sigma in a way that enables you to get better, faster, and cheaper all at the same time, as shown in the diagram that follows.

Really, the connected goals of better, faster, and cheaper all exist to overcome some shortfall preventing optimum operation, like any shortfall that exists in the human body. Everyone has some areas of compromised functioning in their bodies—some part of the spine, some aspect of the organs, some system that is not functioning optimally.

Organizations are no different, as they do not function in an optimal manner. In fact, organizations tend to get more complex, disorganized, and inefficient over time. The only reason they don’t, and instead get more efficient over time, is because those who run them are constantly improving what they do and how they do it.

Notice the diagram that follows, which brings the aspects of doing business faster and better more closely together under one roof. This is the essence of Lean Six Sigma: understanding the different approaches of Lean and Six Sigma, and knowing how to apply them to make processes faster and better.

Generally speaking, Six Sigma has been used to reduce defects and errors, thereby making processes function better. But in the process, Six Sigma also removes waste and streamlines processes. Same with Lean. While it is used primarily to decrease waste, it often reduces defects, too. In fact, one of the eight types of waste (mentioned in Chapter 2) in Lean is rework. And you can’t reduce rework without reducing defects.

Therefore, the most sensible way to view the twin methodologies of Lean and Six Sigma is to make them one approach. The goal of such a marriage is, of course, to derive more value together than apart. With an integrated Lean Six Sigma approach, the focus is always on optimizing process performance (better and faster) to satisfy the needs of customers, and to generate the best possible returns for the organization.

We just examined how you can view Lean Six Sigma from a business perspective. Yet all of business ultimately comes down to the efficiency with which you transform inputs into outputs. At the process level, you have to transform your inputs into your outputs very fast and, in the best case, flawlessly. To do this, it helps to also have a statistical understanding of business performance, and of Lean Six Sigma.

From this standpoint, Lean Six Sigma combines the drive to move the mean of performance with the need to reduce variation around the mean. Historically, especially when it comes to time-related metrics, Lean is employed for making mean-related improvements, while Six Sigma is employed to make variation-related improvements. Using the two methods as one enables you to accomplish both statistical agendas simultaneously.

But we have to be equally careful here to not form the impression that Lean is for one thing (move the mean), and Six Sigma is for another (variation reduction around the mean). While some think loosely in these terms, the key is to be fully conscious of both performance dimensions as you surgically operate on your processes and CTs. In other words, Lean Six Sigma enables you to improve the velocity of your process while also improving its accuracy and precision.

Therefore, a tire company might use the thinking and practices of Lean to increase its daily production rate, but then it might incorporate Six Sigma practices to keep that rate steady. But it might also, or instead of Six Sigma, use Lean Flow practices to minimize variation, or Pull practices, or Mistake Proofing for that matter. Further, it might use Six Sigma to ensure that virtually all the tires are free of defects.

Ideally, you integrate Lean and Six Sigma thinking together in everything you do.

Let’s take a look at a mortgage application process where the critical metric is how long it takes from application receipt to approval/rejection by the lender. That loan-approval time has been averaging 24 hours, with 90 percent of the loans processed within 48 hours (as shown in the figure that follows). Since the lender promises a decision within 48 hours in their advertising, the 10 percent that take longer are considered defects.

The process is not meeting the promise of “within 48 hours” for 10 percent of the customers. A traditional approach to solving this problem of late decisions is to reduce the average time it takes. We can be wildly successful and cut the average in half, from 24 hours to 12 hours. Problem solved, right? Not so fast—we need to look at variation as well. Even though the average has been drastically reduced, we still have the same percentage of late decisions, as shown in the next figure. Overall time was reduced, but we still have the same number of customers unhappy due to defects—and we still don’t know why.

Lean Six Sigma gives us the tools to measure, analyze, and improve both the average and the variation. Both are usually important, and neither should be ignored. The next figure shows the progress you can make with Lean Six Sigma. The reduction in variation has eliminated the “late decisions” and, with that, average time dropped to 18 hours from 24 hours, well within the specification limit.

This is the preferred solution, given the company’s promise of “48 hours” to its customers. Of course, there’s always room for more improvement. With more work, the process average and variation could be lowered to “all applications within 24 hours.” If that’s of strategic advantage to the lender, Lean Six Sigma provides the means to make the needed process changes (refer to the next figure).

There are many principles, practices, and tools in the Lean Six Sigma toolbox. We have the big concept of waste reduction, which has its roots in Lean. We have Pull, Flow, Workload Balancing, Rapid Changeover, and other Lean concepts and practices. On the Six Sigma side, we have the all-important practices of Defect Reduction, Problem Solving, CT Flow Up/Down, Entitlement, and variation—to name a few. We also have a full smorgasbord of tools, many dozens, in the Lean Six Sigma repertoire.

Still, if you need a simple way of understanding the core of Lean Six Sigma, or you have to explain its essence to your co-workers, bosses, or subordinates, you might want to use the concept of Value Creation. In a nutshell, Value Creation is the act of transforming a set of inputs into a set of outputs that bring in revenue greater than the costs incurred.

For instance, a hospital surgical team performs a function using various instruments, people, procedures, raw material, and so on. A guy needs his kidney removed to save his life, so all the many inputs are brought together in a certain way to perform the operation. For this, the patient (and hopefully his insurance company) is willing to pay a price.

Therefore, if the patient’s life is saved, and the hospital makes money doing it, then the conditions for business existence have been satisfied. After all, business is nothing more than the mutual exchange of value. I provide you with a shirt you need; you give me $20 for that shirt; you are happy because you feel you got your money’s worth; I am happy because I have made a profit rather than a loss.

Classically, the goal of Lean and all its tools is often summed up as “striving for perfection,” while Six Sigma’s goal of no more than 3.4 defects per million opportunities is a mature extension of the drive for “never-ending improvement.” Of course the two phrases are virtually synonymous. When you break them down into their most common denominator, you realize that Value is the underlying cord that ties them together.

So maybe your Lean Six Sigma elevator speech is this: Lean Six Sigma is the best-known and proven set of skills we have today for continually improving the way we transform the inputs of a process (or business as a whole) into the outputs customers want. And since all business relationships between a company and its customers are based on the mutual exchange of value, we use Lean Six Sigma to ensure that we derive the most possible value from everything we do.

You can trace the life path of both methodologies back to their roots in scientific management—the basic premise of which was to quantify and optimize the way an organization creates value, or does what it does. It’s interesting that certain key developments on the Lean (or productivity) side of that history happened in parallel with certain key developments on the Six Sigma (or quality) side.

In the 1920s, Henry Ford and others were mechanizing the parts and parcels of production. They were measuring time and motion, and were dividing and sequencing labor in a way that enabled them to produce more products in less time at a lower cost. This was the industrial engineering framework that guided the work of these early pioneers.

Meanwhile, Walter Shewhart was devising the concepts and practices of statistical quality control (SQC) at Western Electric and Bell Labs. After all, what good is it to produce 100 cars a day if 10 or 20 of them are defective? Through Shewhart’s SQC techniques, an assembly line could make a certain number of products per unit of time not just consistently, but consistently well. Just ask Ford how important this was; at the time, he was providing a repair toolbox with every purchase of a Model T.

Earlier in this chapter, we discussed the focus of Lean on time (making business faster) and the focus of Six Sigma on defects (making business better). We also looked at the statistical purpose of Lean to move the mean of performance, while Six Sigma’s main purpose is to reduce variation around the mean.

Well, this is where it all got started—while Ford was frantically making all of his identical black cars, and while Shewhart was figuring out how to install systems for measuring, characterizing, and ensuring the quality of what was made. Since then, for nearly 100 years, the twin sciences of productivity and quality improvement developed mostly along separate lines, although all world-class companies are competent in both skill sets.

Through the lineage of the Toyota Production System (TPS), through the work of Edwards Deming and the global quality movement, the two improvement thrusts came that much closer together. As we fast-forward to the present day, we have passed through the point at which the best thinking and tools of productivity have become widely known and practiced as Lean. Similarly, the best practices of quality improvement have become known, packaged, and applied under the moniker of Six Sigma.

The logic and reality is simple. Lean Six Sigma puts all the best approaches to increasing productivity and improving quality into one system. Lean is the best method for reducing waste, decreasing cycle times, and, in general, improving productivity; Six Sigma is the best method for preventing defects, reducing variation, and generally improving quality. And there you have it: whether it’s called Lean Six Sigma or something else, it was inevitable that some methodology would become established as the best one for simultaneously improving productivity and quality.

Among futurists and technologists there is an evolutionary principle called hybridization , which basically says that certain functions of products and systems become melded together over time. For instance, once the pencil and the eraser existed and functioned as separate instruments. Then some brilliant person at the right time found a way to blend the functions together into one instrument.

You know the principle of hybridization has played itself out when you see a new product and think to yourself, Oh yeah, I could have thought of that. Invention always seems obvious after it happens!

While Lean Six Sigma is not a hybridized product like a cell phone with a camera or a checking account in which you can also trade stocks, it is a hybridized solution. And it is a hybridized solution that has come of age, meaning it is applied in companies that formerly would have applied each of its core elements (Lean and Six Sigma) separately.

There are now enough people in organizations who are proficient in both skill sets (Lean and Six Sigma). At the same time, consulting and training firms (or solution providers) have integrated the road maps and tools of each method, designed Lean Six Sigma curricula, and perfected the processes and supports required to deploy it throughout large, global companies.

In other words, implementing Lean Six Sigma is not like bringing your cell phone and notebook computer with you on a business trip so you can enjoy the benefits of both. Lean Six Sigma is like bringing along your handheld device so you can achieve the objectives of a phone and a computer with one integrated product.

Like all true hybrids, the functionality of the whole always exceeds the sum of its parts, and Lean Six Sigma fits this description. Additionally, because the demand is present and the availability is there, Lean Six Sigma can be deployed and executed in a cost-effective manner. This is why it has become commercialized as a world-class methodology for achieving business improvement.

We’d probably be remiss if we didn’t highlight some of the companies that pioneered the integration of Lean and Six Sigma, so we want to do this here. While we focus primarily on Maytag and AlliedSignal, there are many other pioneering Lean Six Sigma companies.

Therefore, this section is not a complete history of Lean Six Sigma. It’s a way of sharing the thinking and approach of two important companies that 1) were among the very first to integrate Lean and Six Sigma, and 2) did so for the same reasons.

The reason these and other companies have integrated Lean and Six Sigma into one overall approach is the same as what we have said in other chapters and sections of this book:

Around 1994, AlliedSignal adopted Six Sigma as a corporate initiative and enjoyed great financial benefit for doing so. Still, within a year the company realized it needed to improve process speed and accelerate lead times. Therefore, Allied introduced Lean in certain business units, and the initiative was soon adopted companywide under the banner “Lean Enterprise.”

At first, Six Sigma and Lean at Allied were deployed as separate initiatives, but later they were rolled together under one corporate VP reporting directly to then-CEO Larry Bossidy. The thinking was clear: the opportunity of deploying the two methods together, and achieving synergies, was too compelling to ignore.

To achieve Lean Six Sigma integration at the practitioner level, Allied added one week of Lean training to its Six Sigma Black Belt training. Similarly, the company added one week of Six Sigma training to its Lean Expert training. Both groups adopted the Six Sigma training and initial project approach of taking one week of training, then applying what they learned in the workplace to make real improvements.

In years following, it was not unusual to see various parts or areas of Allied running multiple Lean and Six Sigma improvements at the same time, coordinating both in tight concert. As well, the company rolled out a Lean Six Sigma “Green Belt” training program that contained equal elements from both methodologies. This powerful, integrated Green Belt approach allowed Allied to capitalize on many “quick-hit” opportunities with minimal investment and effort.

Did you know that the term “Lean Sigma” is a service mark of Whirlpool? Well, if you didn’t, now you do. So if someone ever asks you, “Hey, how come we don’t just call it Lean Sigma?” you can tell them, “Because Whirlpool owns the service mark on that; therefore we use the term Lean Six Sigma.”

Actually it’s not even that simple. Whirlpool bought Maytag in 2006, and it’s really Maytag that first used the term Lean Sigma on a pervasive basis. Actively on the path of Lean Sigma since 1998, Maytag introduced Lean Sigma Black Belts who are proficient in both methods.

Maytag also leveraged the Kaizen Event approach to create Lean Sigma Events. You guessed it … a Lean Sigma Event entails moving through the five phases of Six Sigma (DMAIC) in a compressed time frame of days and weeks rather than months, or for doing a more classic Kaizen Event made stronger with Six Sigma tools.

In just one quarter, Maytag is known for having completed about 800 Kaizen Events, resulting in as much as 20 to 30 percent cost reductions. That’s a lot of Lean Six Sigma, and a lot of money saved. By using Lean (Six) Sigma to reorganize workflow in one plant alone, Maytag cut production costs by 55 percent and saved more than $25 million.

As a Lean Six Sigma practitioner or leader, you’ll constantly solve performance problems and improve processes. In previous chapters, we pointed out that the methodology for Six Sigma is DMAIC, while the approach for Lean is the Kaizen Event. Historically, DMAIC is more sophisticated and takes longer to implement (four to six months), due mostly to its insistence on having good data. The DMAIC process also takes longer because it is employed when performance problems are complex, and their root causes are not known.

On the other hand, you employ a Kaizen Event when the root cause of a problem is known, or when cycle time reduction is your primary objective (as opposed to defect reduction). Also known as a Kaizen Blitz, the idea behind this approach is to gather in a war-room-like environment for a full week to plan and implement a series of changes very quickly. Because you don’t need as much measurement and analysis, you can run a Kaizen Event in a much shorter period of time than you can complete a full-blown DMAIC project.

By their different natures, there are advantages and disadvantages to each approach. DMAIC projects sometimes take longer than they need to, and Kaizen Events sometimes don’t bring the rigor of data-driven measurement and analysis to their solutions.

Therefore, the key is to use the right methodology for the right type of performance-improvement opportunity. And in true Lean Six Sigma fashion, you can integrate aspects of Kaizen Events into DMAIC projects, thereby accelerating them. Likewise, you can incorporate elements of DMAIC into your Kaizen Events, thereby increasing the scientific rigor by which you make decisions and implement your solutions.

The Least You Need to Know