It’s really gone from a quality program to a productivity program to a customer satisfaction program to changing the fundamental DNA of the company.
In his 1999 letter to shareholders, Jack Welch proudly explained the program’s impact on the company.
During the initial 2 years, he noted, GE had invested some $500 million in training its work force. It had also dedicated some of its best talent, literally thousands of employees, full time to Six Sigma projects.
Nearly every professional worker at GE had become a Green Belt, with 3 weeks of training and one Six Sigma project under his or her belt. Another 5000 full-time Black Belts and Master Black Belts were starting and supervising Six Sigma projects. A number of those Master Black Belts and Black Belts had already been promoted into key leadership posts.
As for the financial returns from Six Sigma, they were better than expected. Savings in 1998 due to Six Sigma projects amounted to $750 million, over and above GE’s investment. Billions more would be saved due to increased volume and market share.
In 1998, GE introduced its first major products designed for Six Sigma. These products were “designed” by customers and incorporated every feature the customer deemed critical to quality. The first such product was Light Speed, a CT scanner that revolutionized medical diagnostics. Thanks to LightSpeed, a chest scan that once took 3 minutes to perform now took only 17 seconds.
SIX SIGMA AT WORK
Here are some other examples of how Six Sigma has worked at GE:
Example 1
GE’s lighting business had a billing system that didn’t mesh very well electronically with the purchasing system of Wal-Mart, one of GE’s most important customers. This caused disruptions, delays in payments, and wasted time for Wal-Mart.
A GE Black Belt team secured a $30,000 budget and went to work. Within 4 months, defects dropped by 98 percent.
Example 2
Employees at GE’s Capital Mortgage Corporation were handling 300,000 telephone calls a year from customers. When necessary, they relied on voice mail. Although GE personnel always returned these calls, sometimes it was too late: Customers had already taken their business elsewhere.
A team led by a Master Black Belt got involved. It discovered that one of the corporation’s 42 branches was able to answer its phone calls the first time around. The team figured out how and spread the word across the other 41 branches, leading to millions of dollars of additional business.
CUSTOMERS FEEL VARIANCE
However, by 1999, Welch and his senior colleagues were aware of a major problem. Although the company was saving significant sums through Six Sigma, customers weren’t sensing these improvements. Why? The answer lies in a concept called variance.
Consider a hypothetical example, presented in the chart on page 113.
It appears there have been substantial improvements in customer service: The mean delivery time has been cut from 17 to 12 days. But there are wide variances in the delivery times. Yes, customers sometimes received the product in 4 days but other times didn’t receive it for 20 days. And although the average performance has been improved, lots of deliveries still take up to 20 days.
Welch focused on these still-frustrated customers:
These customers hear the sounds of celebration coming from within GE walls and ask, “What’s the big event? What did we miss?” The customer only feels the variance that we have not yet removed.
The challenge he laid out to his top managers was to turn the company’s outlook “outside in.” This meant two things: (a) measuring the parameters of customer needs and processes and (b) working toward zero variability.
He explained this new priority in the 1999 annual report:
Customer Dashboard: Customer XYZ
Dashboard Dial: Order to Delivery Time
Order by Order Delivery Times
Today, Six Sigma is focused squarely where it must be—on helping our customers win. . . . The objective is not to deliver flawless products and services that we think the customer wants when we promise them—but rather, what customers really want when they want them.
And a year later, he presented another Six Sigma status report to GE shareholders, this time against the backdrop of e-business:
We have the hard part, hundreds of factories and warehouses, world-leading products and technology. We have a century-old brand identity and a reputation known and admired around the globe, all attributes that new e-business entrants are desperate to get. And we have one other enormous advantage—Six Sigma quality—the greatest fulfillment engine ever devised.
WELCH RULES
- Customers must be brought into the process. Make sure that your customers feel the results of your quality program as quickly as possible.
- Don’t assume that the customer is as happy as you are. Monitor customer reaction to the initiative on a continuing basis.
- Keep the customer as the main focus. Make sure your employees are aware that the point is to satisfy customers.