It is important to know "How to select a good six sigma project". Since you will be spending a lot of resources on it you do not want to waste them.
different approaches to select a good six sigma project
There are in general 3 approaches you can use.
The blatantly obvious approach: you define your projects based on problems that clearly occur on a repetitive basis and have a negative impact on your quality, cost or delivery performance.
Brainstorming approach: you define your project based on individual’s experience and knowledge of areas that may have a negative impact on your quality, cost or delivery performance and hopefully tie to bottom-line business impact.
Structures approach: you define your project on organizational data and are providing a direct plan to effect core business metrics (KPI's) that have bottom-line impact.
All these approaches work, but the structures approach is the most desirable to select a good six sigma project since it is clearly connected to business priorities.
deriving the business case from Key Performance Indicator (KPI)
A data driven company uses business Key Performance Indicator (KPI) to monitor their global performance. Typical KPI's are on time delivery, scrap rate, customer complaints, .... These KPI's are a good starting point. When you detect a major gap between the target and the current situation, you probably have found a good business case.
The businesses case is a high level articulation of the area of concern. This case answers two primary questions:
- what is the business motivation for considering the project?
- what is our general area of focus for the improvement effort?
The business case summarize the current situation and communicates the need for the project in terms of meeting the business objectives. It is not yet intended to define a Six Sigma project. But it indicates the problem areas of the company and thus the areas where Six Sigma projects are needed. It can be used to communicate the significance of the project to others within the company.
A good business case has following elements:
During period of time for baseline performance, the primary business measure for a key business process was baseline performance. This gap of business objective target vs baseline from business objective represents cost impact of gap of cost impact
You can not include any speculation about the cause of the problem in the business case. You can also not include what actions you will take to solve the problem. Have a look at the following examples:
A POOR Business Case Statement
Product costs are too high due to the packaging process and will be reduced by searching for a new packing material.
It is clear that this business case is poorly written.
- since it contains no quantitative data, it does not fully answer the question "what is the business motivation for considering the project?". What does too high mean. It is worth to put resources on it to improving it or are there other priorities?
- The other questions it has to answer is " what is our general area of focus for the improvement effort?" In this case you could say that it is the packaging process, but with stating that we will have to search for a new packing material it narrows the area of focus to a very specific area. You could say that it provide the solution already. If you really know what the solutions should be, you should just implement it and don't run the project as a six sigma project.
Let's rewrite the business case.
A GOOD Business Case Statement
During 2019 the cost for the packaging of our outdoor products was on average 10$. This is a gap of 33% from the target of 7.5$ and represents a 250.000$ cost impact.
- now it is clear what the business motivation is for considering the project. There is a potential saving of 250.000$ per year if we get to the target.
- Also the general area of focus for the improvement effort is clear. We will have to look at the packaging of our outdoor products.
selecting a good six sigma project
The project selection has to fall within the business case and limits the scope further. It is possible that you can define multiple projects within the business case. A project should have a reasonable scope.
The project must have a significant importance for the organisation. This means A major improvement in process performance (delivery/quality/cost) and thus also a major financial impact. What a comapny will consider as major depends on the size and turn over of the company. This has to be agreed with management.
The bulk part of projects have a scope of around 6 months since support for project often decreases after 6 months. But depending on the type of problem, a scope of 3 to 12 months is not uncommon. Be aware of too large project scope.
How to select a good six sigma project with the help of a Pareto analysis
A pareto could help in breaking down the business case and therefore could help to select a good six sigma project. The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.
80% of value is achieved with the first 20% of effort
80% of software problems are caused by 20% of bugs
80% of customers only use 20% of software features
If we look to our example:
we could decide to create two project: one around the packing of swimming pools and one around the packing of garden tools. By using the parato principle we are able to focus our limited resources on the working areas with the most impact.
You have to perform a benefit analysis to evaluate the project financially. The benefit analys contains the details of the benefits in regard to cost impact that we are expecting to realize as a result of the project.
If you have to many projects defined you can use different methods such as the N/3 Technique, In Frame / Out of Frame or effort/benefit matrix to prioritze them.
Before we start our project there is still one thing we have to do. We have to define a project KPI. This KPI is a measurable value (metric) that signal how effectively improvements we implement during our project will be. The project KPI and corresponding target is a clear quantitative measures of success. It helps in clarifying the project goals with the team. Make sure you have not only agreed on the target but also on the baseline. If you want to reduce 30% cost, you have to state clearly compared to what: last year, last 12 months, last quarter...
Don't forget to Share and discuss the KPI with all involved actors. The management should support and approve the project in order to get access to the needed resources. They will also be able to remove barriers which endanger a successful ending of the project and make sure the project is sustainable over time.
You will need not only the support of the management but also from the people who are affected by the changes. Make sure the importance of the project and its goal is also clear to them. People are more likely willing to support a project that they understand and see as important.
Hopefully this blog helped you to answer the question "How to select a good six sigma project?".
To summarize: you best use a structural approach to define business cases. You have to make certain that there is a link with business KPI's. The business case defines what the motivation is for considering the project what the general area of focus for the improvement effort is. Use the pareto principle to define different projects which fall within the business case. Once you have a project perform a benefit analysis to make sure the efforts are in relation with the results. Finally select a project KPI and define a target and do not forget to inform all the involved actors!
If you pick the right project, you will find that it is much easier to apply the six sigma methodology. find out more at "how hard is six sigma".