Revisioning the Legacy of Six Sigma through the Lens of Culture

Delivering the punchline before telling the joke is a terrible strategy for standup comedians. But as an approach to writing, it has its merits.

Here is the point of this article: Jack Welch went all in on Six Sigma and it changed the culture of General Electric. It also changed the way business was done in hundreds of major companies. But that wasn't then end of it. It went on to change business norms around the entire world. Even companies that never did Six Sigma are benefiting in ways they are not aware of.

Don't worry, I am not going to try to sell you on doing Six Sigma. Despite my background in it, I am more interested in culture and culture change these days. That is why I am arguing that the changes wrought by Six Sigma to individual and collective company culture are as, if not more, important than the financial benefits companies might have derived when their programs were more active.

If my conclusions are of interest, what follows is the logic for how I got there.

A friend of mine forwarded me this article and asked me for my perspective: Whatever Happened to Six Sigma? A large portion of the article focuses on the precipitous fall of General Electric. I was thankful the author didn't conflate the decreasing popularity of Six Sigma with GE's demise.

So what has become of Six Sigma? As a kind of management system...with Black, Green, and Yellow Belts and certifications and project review committees and CEOs reporting Six Sigma project savings to investors? The article correctly points out that Six Sigma, as a management system, has run its course.

But in other ways, Six Sigma hasn't gone anywhere. Buried in the article was the fact that a university, which charges $4500 for a 160-hour, non-accredited Six Sigma training program, trains five to six thousand students a year, and has never seen a drop off in program enrollment. Why? Because there are many places where the Six Sigma tools are still absolutely essential.

If you are running a manufacturing operation, you can't possibly be successful without using control charts, running regression analyses to ferret out the relationship between potential causal variables and defects, mapping processes, and reducing waste. Similarly, the Six Sigma & Lean tools are equally as relevant in service businesses where a process (not a product) is the customer offering (Call Centers in particular represent a huge untapped opportunity for the application of Lean/Six Sigma tools. Don't get me started.)

But here is the quote from the article that really piqued my interest and got me thinking about the larger impact of Six Sigma: "Six Sigma’s decline was also a symptom of a broader change in the corporate world, where innovation became more valued than efficiency, and technical precision was no longer a differentiator."

I was reflecting about that shift towards towards innovation and, in particular, how quickly it came about, and I started wondering whether the business community might be viewing Six Sigma's legacy in the wrong light.

??Why Aren't People Talking about the Shift in Culture?

Companies that decided to introduce Six Sigma in the mid-90s through the mid-Aughts wanted to improve quality, increase productivity, and serve customers better. And if any of those weren't reason enough, the hundreds of millions in bottom line benefits that GE was banking every year probably persuaded any still on the edge of the pool to dive in.

Once they got in the water, I think most leaders quickly realized that, at the heart of it, Six Sigma was really a culture change effort. This was a way to imbue their companies, top to bottom, with a continuous improvement mindset and the tools to deliver on it. Many realized that if these structured, data-based, and statistically-grounded approaches became the norm, they would fuel improvements for years to come.

I believe Welch saw it this way. He promoted leaders "who got it," so this continuous improvement mindset became deeply woven into the fabric of leadership at all levels of GE. And I think he got there. For other companies that took the Six Sigma plunge in earnest, it changed their cultures as well. I saw it and felt it in the companies I worked with. Many others did too.

Of course, the last decade at GE is a warning that culture change by itself is no panacea. Still, there is no denying that a cultural change took place there.

But here is the thing no one is talking about: Six Sigma was the first time such a comprehensive, relatively homogenous, culture change effort synchronously cut through such a large swath of the corporate world

Of course, Six Sigma was not the first culture change initiative undertaken in corporations. Companies have been trying to tweak their cultures forever. At different times, some CEOs wanted their companies to become more focused on customer requirements, others wanted their people to be more service oriented or more innovative or more nimble. Wanting is, of course, one thing. The sad truth is that only one in three change management efforts succeed.

Six Sigma, as a culture change, was unique. It was first time that a culture change effort combined all these elements: it 1) trained people in all functions and at all levels in a particular philosophy and methodology, 2) showed leaders how to effectively lead their units with this approach (in other words, it had elements of an actual management system), 3) garnered recognition and rewards for the individuals and teams who demonstrated a facility with the approach/tools or who came up with great insights backed by data into what was really happening, and 4) generated undeniable ROI in almost every company that pursued it seriously.

As an aside, if you are one of the (two out of three) CEOs in the McKinsey study previously mentioned who was unable to change your culture, you would be remiss to not to not take a long hard look at how companies implemented Six Sigma that resulted in structured problem solving backed by data becoming the norm.

But here is the thing no one is talking about: Six Sigma was the first time such a comprehensive, relatively homogenous, culture change effort synchronously cut through such a large swath of the corporate world.

My belief is that the results achieved, the homogeneity of the approach, and the synchronicity profoundly affected the business zeitgeist. And all of us are continuing to reap the benefits.

Three Ways We are Benefitting from the Cultural Shift Six Sigma Catalyzed

I am going to highlight three ways we continue to benefit from the changes that Six Sigma had a huge hand in bringing about: the Agile approach to software development, the adoption of complex new statistical tools, and the rapid application of those tools in revenue generation areas.

Agile. In early 2001, when Lean/Six Sigma was going full-tilt, the Manifesto for Agile software development which became fully codified as an approach around 2010 was published.

Software developers long-resisted the application of Lean/Six Sigma to their work because they felt manufacturing-based process improvement tools just didn't apply, and they were largely right. But the widely acknowledged problems with how software was being developed at the time meant that business-as-usual wasn't going to cut it.

"Agile stole freely from lean, and virtually all agilists acknowledge lean’s power. Agile and Lean Manufacturing are pals who share a lot of toys."

Agile was the development community's response/solution to the need for improvement. The Agile approach...rapid release of functional software, continuously improved using customer data and face-to-face communication...was so effective it tore through the dev community and is now found everywhere. It has been further expanded outside of software to the development of a diverse array of products and solutions.

There is little question the Agile approach was heavily influenced by Lean: "Agile stole freely from lean, and virtually all agilists acknowledge lean’s power. Agile and Lean Manufacturing are pals who share a lot of toys."

I am not saying Agile was pulled out of Lean like Dionysus out of the thigh of Zeus. But the application of the Lean principles, which had been around for decades, exploded after they were bundled into Six Sigma training in the mid 90s and were being applied in every corner of corporations. This was happening right as the Agile Manifesto was being written. Coincidence? Maybe, but I don't think so.

The Adoption of Complex New Statistical Tools. With the tide rolling out on Six Sigma's popularity, you would have thought leaders would have gleefully stood on shore shouting "Adios!" to all those mind-numbing statistics. In fact, just the opposite happened.

Gage R&R and Chi-Square analyses were replaced with Decision Trees, Bayesian Networks, Markov chains and matrices, Neural Networks and Machine Learning, statistics and tools whose complexity probably makes the simple linear regressions of the late 90s look like the halcyon days.

It is worth noting that these "new" tools rely on the same fundamental concepts as those boring old Six Sigma statistics: systematic data collection, clean data sets, and analysis using correlation and variance partitioning approaches...all with the objective to find meaningful patterns, relationships, and predictors that can be mined to drive improvements.

If data-driven, continuous improvement hadn't already become the modus operandi in the corporate world, then why did companies double down?

All those Geico ads on TV that make you want to dive across the room to hit the mute button on your remote? I can almost guarantee they are part of complex experimental design arrays that are producing impressive ROIs on their advertising spend.

Rapid Application of New Statistics to Revenue Generation. The focus of these more complex tools was decidedly different however. Instead of analytics being applied to internal processes, errors, waste, and inefficiency, the new analytical methods were/are largely being applied to areas like stratifying customers, modeling customer decision making, risk reduction, click-through rates, advertising effectiveness, customer success and retention, etc.

This is that shift in focus from efficiency to innovation described in that the article I mentioned at the beginning of this post.

For decades the joke in marketing circles was: "Half of our advertising spend is effective. We just don't know which half." Those days are gone.

Today, with all the A/B testing on websites and sophisticated cross-market Design of Experiments (DoEs) on all forms of advertising, marketing departments absolutely know what is working and what is not and are constantly experimenting to optimize response rates, acquisition, retention, order size, and customer success. All those Geico ads on TV that make you want to dive across the room to hit the mute button on your remote? I can almost guarantee they are part of complex experimental design arrays that are producing impressive ROIs on the advertising spend.

But it wasn't until Jack Welch went all-in on Six Sigma that continuous optimization, backed by analytical and statistical rigor became "the new normal."

Do you think that rapid and continued progress on offering innovation, customer acquisition, and revenue generation was an accident? Again, I don't. Those complex new tools were able to take hold and proliferate because the groundwork for data and statistics and continuous improvement had been laid by Six Sigma.

Going All-in: High Risk, High Reward

The first electric car was developed in the late 1800s. That is not a typo. But it wasn't until Elon Musk went all-in and was then forced to crack the battery problem that electric cars not only became a viable means of transportation, but a solution that has the potential to make a dent on the rate of global warming. No matter what happens to Tesla, I think history will look back and hold Elon in very high regard.

Like the concept of an electric car, statistical tools to improve quality had been around forever. But it wasn't until Jack Welch went all-in on Six Sigma that continuous optimization, backed by analytical and statistical rigor became "the new normal." And the seeds planted in the course of all those Six Sigma implementations will continue to bear fruit for years to come.

Mention Six Sigma here in Silicon Valley or in many business contexts and you get a lot of eye rolls.

I say: Mr. Welch, there is no way we could ever repay you.