Six Sigma and Business Analytics: Value Driver Analytics

What is value driver analytics? It is, in basic terms, an assessment and investigation of the usefulness of your business’s value drivers. Ask yourself, where is your business headed? Most businesses tend to know where they’re going and what they want to achieve. However, it can often be difficult to strategize to best your utilize drivers. Once you have identified what your key value drivers are, you can then implement them effectively to benefit your business. With Six Sigma, you can be certain that you are on the right path towards adding value. This article will provide all you need to know about value driver analytics and how they can help you.

Why Do Value Driver Analytics Matter? 

Knowing and using your drivers effectively is essential to good Six Sigma practices. Value driver analytics are important because they enable you to focus on specific drivers within your business. You can then use these drivers to form strategies for how to improve value within your business. Before you can do this, you need to test hypotheses for how you think your business operations will play out. Using Design of Experiments, you can create testing parameters to help with this. Black Belts and Green Belts are useful with DoE work due to their extensive experience with analytical and practical Six Sigma work. Similarly, Six Sigma tools like DMAIC and AHP will also allow you to make predictions about how your value drivers will affect your business. It’s critical that these predictions be as accurate as possible. False data can be a major waste of time, leading to loss of revenue, efficiency, and value.

How to Use Value Drivers

Once you have identified your value drivers, we recommend applying analytics twice a year, per every six months. This enables you to glean enough data to shed light on whether or not your business is yielding the results you want. You could use cost as a value driver, assuming cost has an influence on profit and sales. To determine whether this is true, it’s best to apply hypothesis testing to answer this question. If it is correct, this allows you the freedom to continue with your current strategy, with no need to adjust your course. If the results don’t pan out as you expect, however, you will have to alter your strategy to create higher value.

Key Value Drivers

There are many key value drivers that you should look out for. Namely, these include operational drivers, financial drivers, and sustainability drivers. Operational value drivers comprise all the variables that affect cash generation. Using key value drivers effectively will boost your growth and efficiency, which in turn will positively affect revenue and costs. Financial value drivers, on the other hand, can minimize your cost of capital, which creates value by allowing for a greater cash flow. Using financial value drivers can help you increase value in the long term, but sustainability value drivers work by maintaining optimum process functions. They do this by finding ways to isolate and utilize synergies to create value for the company, either through regulatory changes, implementing green practices, or minimizing non-sustainable operations.