Creating a Business Strategy With Six Sigma DMAIC
Six Sigma offers great tools and methodologies under its wing to offer one of the most resourceful ways to make business functions and organizations more effective. Six Sigma revolves around process improvement, understanding what causes faults and defects, and how we can improve and control the effectiveness of the changes made.
One of the most widely used and extremely popular methodologies of Six Sigma is DMAIC (Define, Measure, Analyze, Improve, and Control). The DMAIC methodology single-handedly covers the entire process without leaving a gap for any missing information. Let’s understand the DMAIC process in a brief and how it enables one to create a business strategy.
DMAIC and Business Strategy
Phase One: Define
“Define” is concerned with defining the problem(s). This process is crucial as it sets the blueprint for a strategy and directly affects the result you wish to achieve. The project leader, along with the champion, defines the current status of a process, how it affects the company, how the customers view it, and what benefit there is from making the said changes, and so on.
One of the most important outcomes of this phase is to get the Big Ys, i.e., the major outcomes you expect out of the strategy. Then the next step is to finalize the major ones that are critical to the organization and the customer requirements.
The Define phase also involves the creation of a project charter that has target KPIs (Key Performance Indicators) and goals. These set the course of the strategy and clearly define the results or outcomes you are trying to achieve through your business strategy. We use the same methodology to create a corporate strategy, and leadership can establish or reconfirm each target for the company in order of relevance or importance.
The define phase leverages the use of many tools to improve and create a sound strategy that can be used to define a company’s current position better. Some of these tools are SWOT (strength, weakness, opportunity, threats) analysis, etc.
Process roadmaps, the 5W2H model, Michael Porter’s value chain model, the McKinsey 7-S model, and more. Any or a combination of tools can be used to create a project charter that best explains your business strategy and what the process is expected to achieve.
Phase Two: Measure
The best way to measure a company’s performance is to gauge it quantitatively. Constantly measuring business improvement is of key importance in the Measure phase of the DMAIC process. This phase also enables us to make sure that the strategy is on track and is on the decided course of operation.
During this phase, there is a heavy reliance on data collection and projections as they can provide a precise view of how the organization is going and how the process affects the overall functioning. You can also include experience or intuition in the process, but it should be backed up with data that validates the need for the said changes. Thus, leaving a lot of cues to have a thorough and custom-made business strategy for the organization and the process in pursuit.
The Measure phase takes in all the aspects that surround a process or organization. Be it financial performance or internal growth, that includes going through balance sheets, ROIs, cash flow statements, etc.
Performance in other strategic areas is of paramount importance when creating a business strategy. Safety, continuous improvement, employee turnover, etc. are some of the internal measures that affect the big Y. This helps managers create a strategy that addresses all the issues, and provides holistic efficiency and unhindered performance.
Many tools can be used to gauge these performance inputs, like benchmarking studies that provide both internal and external data in comparison to a baseline, enabling organizations to understand the performance within and amongst the competition.
Phase Three: Analyze
This certainly has to be one of the most crucial phases of the DMAIC model. In the Analyze phase, a thorough analysis of the business and market enables the management and leadership to determine the best strategy for their business.
We use the assessment backed by the data in the Measure phase, which gives us a detailed overview of the SWOT analysis, and other data in the limelight. This enables a business to validate the need and create a root cause analysis of the performance, gaps in business strategy, product cycle, efficiency, number of effects, and much more.
This phase allows leadership to critically analyze and see what is working, what is not, and what can be improved. This lays a solid foundation for the next phase, and the overall streamlining of the business strategy is visible. This also helps in understanding the X’s, or the independent variables that directly affect the big Y, or the goal. In the Xs, all things play a big part, such as customer response, the economy, political interference, market growth, etc.
This phase calls for experienced and talented personnel who have a good sense of knowledge and a great deal of experience in judging the essentials. As the results are not always easy to understand and can lead to other core areas, sticking to the main agenda defined in the Define phase must not be sidelined. Thus, executives need to wilfully slice through the information and crunch the results to identify the areas where the organization needs improvement.
Phase Four: Improve
The Improve phase takes center stage as a strategy that needs to be continuously improved and kept updated, especially with the changing client demands, economic and technical factors, etc. The strategy needs to be continuously improved as customer needs, industry trends, and economic and technical factors change. After analyzing how the Y’s are affected by the X’s, management can leverage this to modify or move ahead with their business strategy.
After completing the Define, Measure, and Analyze phase, you get a clear picture of the areas that need focus and improvement. Also, management and its expertise come into play in getting a better understanding of the competition, industry trends, and pooling ideas to create a precise and thorough business strategy. The project champion drives the newly created strategy and its goals ahead, as the leader of the improvement process.
This phase requires precision and an eye for detail as it often deals with the trial of new products or services. Thus, having proper risk measurements, customer-focused surveys, and real-life testing becomes crucial. Risk assessment is truly one of the most important steps in the Improve phase.
Many tools can be leveraged to assess risks, such as risk matrixes, financial sensitivity analysis, revenue forecasting, etc. This allows the leadership to fully understand the impact on the organization and make changes in the business strategy accordingly.
The improvement phase consists of adding details and a plan of action to the strategy. This is achieved via a corporate vision, stretch targets, and goals discussed in the Define phase. Apart from setting high-level KPIs (Key Performance Indicators or X’s), leadership also sets realistic milestones to achieve the desired goals.
These KPIs would then be used by the business unit leaders to develop performance indicators that would trickle down to create performance targets.
These targets are then used by Black Belts, Green Belts to find Six Sigma projects, which then help organizations achieve their desired goals through efficiency and growth.
Phase Five: Control
A strategy is never complete without close and constant monitoring and management. This not only provides real-time effects, and inputs to tweak the strategy and make sure it follows the path decided by the leadership.
“If you can’t measure it you can’t improve it” – Peter Drucker
This quote equally asserts its importance to business strategy just as it applies to business improvement. The control plan is created by the management during this phase, and KPIs, production, and processes are closely tracked. Many tools are used to achieve this, such as balanced scorecards and business dashboards to summarize the strategy execution and how its steps are being controlled.
In this phase, leadership decides the frequency of meetings, making sure that everyone is up-to-date with any changes and the course of the business strategy. Also, one of the major parts of the control phase is to devise a contingency or response plan in case of any unforeseen circumstances, such as price wars, strikes, new competition, new technology, etc.
The DMAIC model is a step-by-step model that illustrates a disciplined and thorough method to improve and enhance a business, its processes, and also create a scalable business strategy. The DMAIC model, with its different phases, makes it easy for the organization to keep the direction of the business strategy in check.
The DMAIC model provides complete flexibility and control to the organization, thus ensuring that the strategy is well-tuned with the organization’s interests and goals. The DMAIC framework, with its comprehensive approaches, integrates many strategies, tools, and models to enable an organization to create and implement the best-suited strategy and achieve success and growth!
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