Accenture lean six_sigma 65pages

Foreword by Michael L. George
The Lean Six
Sigma Guide
to Doing More
with Less
Executive Summary
Cut Costs, Reduce Waste and
Lower Your Overhead
Mark O. George

A preview of the new book
Executive Summary
The Lean Six Sigma Guide
to Doing More with Less
For novices and veterans alike, how to get the highest
returns from Lean Six Sigma programs
Mark O. George
This excerpt from the full book, The Lean Six Sigma
Guide to Doing More with Less, is printed with
permission from John Wiley and Sons.
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Lean Six Sigma Guide to Doing More with Less
A note to readers
These days, virtually every business executive I talk with is
concerned about reducing operating costs without
compromising quality and customer service. Newly frugal
consumers and budget-conscious business customers are
certainly paying more attention to price – but they still have
high standards for certain product features or levels of
service.
As someone who has spent the past decade architecting
and supporting dozens of Lean Six Sigma engagements for
companies in a broad range of industries, I’ve seen first-hand
how these methodologies can reduce waste and
costs while simultaneously improving speed, quality, and
flexibility – all of which can enable competitive advantage.
The insights derived from these collaborations with clients
are what inspired me and my Accenture colleagues to write
“The Lean Six Sigma Guide to Doing More With Less.”
The book aims to help anyone, no matter what level of
experience with Lean Six Sigma, take advantage of these
powerful approaches.
Don’t just take my word for it. Here’s what a few of our
clients say:
• Al Stroucken, the CEO of Owens-Illinois, notes that
Lean Six Sigma gives his staff “tools and a
framework in which to solve problems and address
complicated issues. In the end, individuals feel they
can make a difference and are empowered to take
on new challenges. Teamwork and problem solving
become part of our culture and the company
benefits financially and organizationally.”
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Executive Summary
• Frito Lay deployed Lean Six Sigma starting in early
2007. Tony Mattei, who oversees the program, says
the company is realizing a seven-fold return on
annual investment in the program, using many of the
concepts and tools covered in the book.
• At Société Générale, the venerable bank based in
France, Satheesh Mahadevan, director of
processes, says Lean Six Sigma has “set up a
process improvement culture” and is helping the firm
move into a “global business transformation
program.”
• Ted Doheny, president and COO of Joy Mining
Machinery, says “transformational changes are
occurring by doing more with less by investing and
working smarter.” Doheny points out that the
benefits extend not only to shareholders but also to
customers (through higher value products) and
employees (through an improved work environment).
I want to thank these and other clients for their enthusiasm,
their observations, and their willingness to experiment and
push Lean Six Sigma to new levels. Our new book, which
is summarized in this paper, would not have been possible
without their support.
Sincerely,
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Mark George
Dallas, Texas
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Table of contents for full book, The Lean Six
Sigma Guide to Doing More with Less
Foreword
Preface
Acknowledgements
Chapter 1: Why Use Lean Six Sigma to Reduce Cost? page 1
Transactional Example: Lean Six Sigma
Transforming Our Government
The Alloy of High Performance: Why Choose
Lean Six Sigma to Reduce Cost?
Lean Six Sigma versus Traditional Cost-Cutting
4
Tactics
Emerging Stronger than Ever
Spotlight #1: How to Use This Book
Overview of Part I: Process Cost Reduction--a
Focus on the Tools of Waste Elimination
Overview of Part II: Enterprise Cost Reduction --
a Focus on Value, Speed, Agility, and
Competitive Advantage
Overview of Part III: Accelerating Deployment
Returns -- Getting More, Faster, from a Lean
Six Sigma Deployment
PART I—Process Cost Reduction — A Focus on Waste
Elimination
Introduction to Part I
Chapter 2: Find Cost Reduction Opportunities in Waste page 25
The Seven Common Faces of Waste: TIMWOOD
Using the Full LSS Toolkit to Drive Cost Reduction
Spotlight #2: Special Tips for Nonmanufacturing
Processes
Key Success Factors in Reducing Costs in
Services and Retail
Spotlight #3: Design a Successful Lean Six Sigma
Project or Pilot
Which Methodology Is Right for Your Project?
Identifying the Players and Their Roles
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Executive Summary
Chapter 3: Use the Voice of the Customer to Identify page 53
Cost-Cutting Opportunities
Customer Types and Their Needs
Collecting Data on Customer Needs
Getting Specific about Customer Needs
Avoiding Misinterpretations
Conclusion
Chapter 4: Make Processes Transparent to Expose page 67
Waste
How to Define the Boundaries through SIPOC
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Diagrams
Using Value Stream Maps to Achieve
Transparency
Conclusion
Chapter 5: Measure Process Efficiency: Finding the page 85
Levers of Waste Reduction
Process Cycle Efficiency (PCE): The Key Metric of
Process Time and Process Cost
Little's Law: Understanding the Levers for Improving
Process Speed
The WIP Cap Method: How Limiting WIP Can Increase
Process Speed and Reduce Costs
Using PCE and Little's Law to Drive Cost Reduction
Chapter 6: Improve Your Analysis Skills: How page 99
Understanding Variation, Root Causes, and Factor
Relationships Can Help You Cut Costs While Improving
Quality
Analysis Skill #1: Learning to "Read" Variation
Analysis Skill #2: Digging Out Root Causes
Analysis Skill #3: Establishing Relationships Between
Factors
Conclusion
Chapter 7: Make Rapid Improvements Through page 119
Kaizens
Quick Overview: The Kaizen Approach
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When Should You Use Kaizens in Cost Reduction
6
Projects
Seven Keys to Kaizen Success
Conclusion
PART II—Raising the Stakes— Reducing Costs at an
Enterprise Level
Chapter 8: Think Transformation, Not Just page 135
Improvement
Attain a Proper Understanding of the Extent of the
Opportunity
Consciously Choose a Path to Capture the Opportunity
Plan for a Transformation Journey
Leadership Challenges in Leading a Transformation
Conclusion
Spotlight #4: Transformation at Owens-Illinois
Chapter 9: Unlock the Secrets to Speed and Flexibility page 161
Alignment and Analytics
A Model of Speed and Agility
The Death Trap of Economic Order Quantity (EOQ)
Alternatives to EOQ
The Equations in Action
Conclusion
Chapter 10: Reduce the Cost of Complexity page 179
The Hidden Cost of Added Offerings on Processes
Assessing Complexity in Your Business: A Holistic
View
Highlights of the Complexity Analysis Process
Complexity Reduction as the Gateway to
Transformation
Conclusion
Chapter 11: Look Outside Your Four Walls to Lower page 199
Costs Inside
What Is an Extended Enterprise?
Working on the Supplier End of the Extended Enterprise
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Executive Summary
What to Do When You're the Supplier: Extending Your
Enterprise Downstream
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Conclusion
PART III—Speeding up Deployment Returns:
Strategies for Getting More, Faster from a Lean Six Sigma
Deployment
Chapter 12: Create a Pipeline of Cost Improvement page 217
Projects the Secret to Protecting the Heart of Your
Business
Developing Rigor in Project Identification and
Selection
From First-Time to All the Time: Shifting from a
One-Time Even to an Ongoing System of
Pipeline Management
Conclusion: Maintaining a Dynamic Pipeline
Spotlight #5: Link Projects to Value Drivers
Option 1: Value Driver Trees
Option 2: Financial Analysis Decision Tree
Option 3: Economic Profit
Option 4: EP Sensitivity Analyses
Value Driver Example
Chapter 13: Smooth the Path Through Change page 249
Change the Path through Change
Leading versus Managing the Change
Upgrading Your Communication Plan
Process Ownership and Cost Accountability
Conclusion: Restoring Faith, Hope, and Belief
Chapter 14: Establishing a Center of Excellence page 263
What Is a CoE and What Does It Do?
Focus #1: Performance Management
Focus #2: Replication: Copy and Paste Your Cost
Savings
How Can a CoE Fit into an Organization
Weaving the CoE into Strategic Planning
Conclusion
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Chapter 15: Gaining New Perspectives on page 283
Deployment Cost and Speed Opportunities
Looking for Focus and Flexibility in Deployment
Focusing Deployments on Business Issues
Flexibility in Building Skills
Conclusion
Chapter 16: Reenergizing a Legacy Program page 301
Why Deployments Lose Steam
Building a Steam Engine: Performance
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Management
Process Ownership: The Partner of Performance
Management
How to Reenergize a Deployment
Conclusion page 320
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Executive Summary
Are You Confident in Your Cost-Cutting Scheme?
The recent global economic collapse spared no industry,
government, or geography. As companies rebalanced
capacity to match lower demand, many have undertaken
severe measures by consolidating, closing operations, and
making across-the-board layoffs.
Corporate responses to the economic crisis reflect a
troubling underlying issue: Much of the cost-cutting has
come in the form of poorly planned, ad hoc measures.
Without careful analysis and understanding of the drivers of
cost, the outcomes can be hit and miss. Some may do
more harm than good by eroding customer loyalty, market
share and brand perception through lower service levels,
inattention to customer priorities and poor execution.
If you’re skeptical of such warnings, consider that these
mistakes might not show up as disasters, because even ad
hoc cost-cutting likely yields some small savings. Yet
organizations often miss 10 to 50 times the potential
savings by succumbing to traditional cost-cutting tactics or
copying the latest improvement fad. Moreover, these
tactics typically fail to build in flexibility and speed, which
are critical capabilities in today’s dynamic markets.
Organizations are under intense pressure to become much
more efficient, accomplishing more with the same or fewer
resources. The erosion of operating margins, the declines
in revenues, the need to generate new streams of growth –
all converge on the imperative for operational excellence.
Accenture believes that operational excellence is a
valuable competitive differentiator for an organization,
because it is both a source of competitive strength as well
as a source of cost and cash benefits. Properly architected
and managed, operational excellence can achieve
significant and measurable performance improvements by
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focusing on the levers that improve flexibility and speed to
market, quality and reliability, and customer value.
In addition, Accenture’s ongoing business research has
found that the pursuit of high performance is not only a
worthy enterprise, but practical and necessary. Our
research on past economic downturns has found that high-performing
businesses put a premium on operational
excellence and pull ahead of their competition at the end of
a recession.
High-performing companies excel in part because they
execute day-to-day business processes better than their
competitors. Creating and defending operational
advantage is both more important and more difficult to
achieve than ever. It requires mastering repetitive
processes that deliver value to customers, the organization
itself and shareholders.
Lean Six Sigma, a discipline proven over several decades,
offers the most effective way to build these capabilities.
Lean Six Sigma combines two of the most powerful
improvement engines available: Lean provides
mechanisms for quickly and dramatically reducing lead
times and waste in any process, anywhere in an
organization. Six Sigma provides the tools and
organizational guidelines that establish a data-based
foundation for sustained improvement in customer-critical
targets. Together, Lean Six Sigma drives value through a
classic equation: operating income growth (by addressing
efficiency) + revenue growth (by addressing what matters
to customers, in a repeatable manner) = shareholder value.
This paper summarizes our upcoming book, “The Lean Six
Sigma Guide to Doing More with Less.” The book
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Executive Summary
describes a holistic approach to applying Lean Six Sigma
at multiple levels and in multiple ways across an
organization. A holistic approach addresses each aspect
of effective operational cost reduction:
• Alignment of the effort to company strategy and its
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level of urgency
• Identification of the greatest levers of operational
improvement and the key drivers of economic profit
• Speed to results
• Practical and pragmatic implementation, using
techniques that can address a wide array of
opportunities and environments
• Balance with internal and external forces, to ensure
they don’t adversely affect net overall business
performance
• Sustainability of the cost reductions realized
We recognize that Lean Six Sigma is not a new
phenomenon. But despite thousands of deployments
launched in the past decade, many companies make
missteps in deployment design and launch. As a result,
they fail to achieve rapid, substantive, and sustainable
returns. “The Lean Six Sigma Guide to Doing More with
Less” presents tools, insights, and case studies from a
variety of manufacturing and service industries as well as
the public sector, and guidelines with which to extract the
highest returns from a Lean Six Sigma investment. The
book is useful for a single project or an enterprise-wide
transformation program.
Among the key insights covered in the book are these:
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Waste is inherent in all processes. Many organizations
continue to waste time, effort, and budgets over-engineering
their processes, without realizing the cost
consequences. They focus on tasks that do not add value
for the customer or the business.
Selection of projects matters more than the choice of
tools. Roughly 80% of the problems with failed
improvement initiatives stem from poor selection of projects
and ineffective management of the organization’s project
portfolio.
Start with the customer in mind. Customer dissatisfaction
and high-cost processes go hand in hand. Without a true
understanding of customers’ priorities, a new product or
entry into a new market is bound to fail. Lean Six Sigma
takes a “voice of the customer” mindset in order to
minimize any cost that does not add value from the
customer’s perspective.
Deployments can be effective at the business unit level
without senior management engagement, as long as
there is full engagement from process owners and
managers. However, for transformation, senior leaders
must be engaged throughout.
The book has been organized to address readers with
varying levels of familiarity with Lean Six Sigma. Part One
introduces the methodology to novices or those who need
to immediately improve local or departmental operating
cost structures.
Other readers may already be familiar with Lean Six Sigma
but need to extract greater impact from the methodology
across the entire business. These readers may be senior
executives or Lean Six Sigma experts who want to take
their initiative to the next level. Parts Two and Three
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Executive Summary
discuss Lean Six Sigma’s deployment strategies for cost
reduction at the enterprise level.
This paper, then, summarizes highlights from each section
of the book.
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Executive Summary
Part One:
Reducing Process Cost by
Eliminating Waste
Part One of the book speaks to managers or P&L owners
looking for cost reduction alternatives to improve financial
performance within a functional area, department or single
facility. It provides an overview of the tools of cost
reduction.
How enterprise speed drives financial
performance
The tight correlation between speed and cost—both at a
process level and at an enterprise level—is a powerful
concept. Moving up the speed curve has provided
competitive advantage to companies in a broad range of
manufacturing and service industries.
Consider the one-year turnaround of a hydraulic hose
company that supplies a wide array of hoses and fittings to
the automotive industry. The company was barely
profitable, generated a negative economic profit, had a
customer order lead time double the industry average and
released low-quality parts to customers.
Through a focused Lean Six Sigma program, within a year
the firm’s operating margin had more than doubled,
economic profit rose from -2% to 21%, and customer order
lead time dropped from 14 days to 3 days.
Such remarkable results came from focusing not just on
cost reduction but also on enterprise speed—reducing
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waste across functional units. For example, one customer,
a truck-maker, required a proliferation of items in low
quantities. When the hose company completed some
complexity analytics, it discovered that process
improvement was not the highest opportunity area. Instead,
it focused on long manufacturing lead times. Management
decided to drop the truck-maker as a client, eliminate the
related complexity, and concentrate on the remaining
clients with higher volumes and fewer part numbers. This
allowed the company to reduce the number of defective
brake and steering components shipped to other
customers, through an all-out assault on quality and defect
prevention. With product quality under control, the
company then could focus on speed and flexibility. A series
of operations assessments identified the cause of long
process lead times and developed a mitigation plan that
included the synchronized deployment of Lean tools.
This holistic approach—combining complexity reduction,
quality improvement and the elimination of process
waste—delivered remarkable improvements. The chart
below shows the drop in cost of goods sold as lead times
dropped. Initially, process improvement projects resulted in
reduced cost of poor quality and direct labor cost, yielding a
relatively small incremental impact to overall business
performance. But when the company continued to strive for
greater speed and reached a 3-day cycle time, operating
performance enabled a structural advantage.
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Higher speed, lower costs
Executive Summary
Expected
Observed
Every activity in a process that adds cycle time and does
not add value, adds cost. By eliminating the cause of long
cycle time, we also eliminate the associated cost. Cycle
time, thus, can be viewed as a global metric of corporate
efficiency and a guide to quickly reducing cost. Lean Six
Sigma helps cut fat, not muscle—that is, reduce costs
without destroying the ability to address customer priorities.
The seven faces of waste – and how to wipe
them out
It all starts with waste. While companies often seek
incremental improvements in their value-adding steps, far
greater savings can be found by looking first at the waste in
their processes – waste being anything customers don’t
value. Most business processes contain substantial waste,
which generates costs at many levels.
Our work with clients has identified the seven most
common types of waste. Some tend to be immediately
visible, while others can be more difficult to detect,
requiring value stream mapping and analysis to unearth:
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89%
88%
87%
86%
85%
84%
83%
82%
81%
80%
79%
Lead time (days)
Cost of Goods Sold
15 14 13 12 11 10 9 8 7 6 5 4 3 2

Transportation – the movement of process inputs, work-in-
process, or outputs. Transportation waste typically stems
from the layout of facilities, but it can also result from poor
flow between process steps. An internal request that has to
find its way from department to department and from
individual to individual may get lost for days in the maze of
cubicles and buildings, all which require outlays of cash
and working capital. Lean Six Sigma eliminates
transportation wastes through the redesign of processes
into cellular layouts and streamlined flows that reduce
batch sizes.
Inventory – mismatches throughout the supply chain, often
resulting from imbalanced demand and supply. The
mismatch stems from poor understanding of customer
needs, irrational forecasting, attempts to manage
production control from enterprise resource planning
software, and other root causes. “Partial products” show up
even in transactional processes, such as slow collections of
outstanding sales. Only a thorough understanding of the
sources of variability in the supply chain will lead to the
right mix of reduced inventory levels.
Motion – inefficient movement of people. Follow a worker
day to day and you will likely trace a different path each
time, filled with wild goose chases, strange body positions,
and poor posture. Carpal tunnel syndrome alone caused a
generation of typists and assemblers to undergo expensive
surgery, pain, lost time and reduced productivity. Lean Six
Sigma counters with cellular flow that includes standard
walking paths, optimized operating procedures and
ergonomic body positioning.
Waiting – with costs accumulating at every interruption in
process flow. A mortgage application typically spends 99%
of its time waiting to be processed at various desks. Lean
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Executive Summary
Six Sigma can identify the constraining steps through value
stream mapping and by comparing process capabilities to
customer demand rates.
Overproduction – creating and ordering more than is
necessary. In transactional processes, overproduction may
go undetected and significantly raise indirect spend,
through such items as expediting fees, special orders that
fail to leverage economies of scale, and early payments.
Managers at one company were often paying legal fees to
consult external lawyers at $350 per request; a Lean Six
Sigma analysis showed that in-house attorneys possessed
standard solutions for most requests that were essentially
free.
Over-processing – delivering more of something than the
customer wants or will pay for. To avoid over-processing,
develop an understanding of customer needs along the
entire value stream, from concept to production to delivery.
If possible, focus on the original design and R&D functions,
in order to build in quality and ease of manufacturability
and spend fewer resources on the development effort.
Defects – errors in the products intended for customers.
Because you pay to make defects, not just fix them, focus
on high-cost areas of scrap, rework and repair instead of
trying to raise quality in value-add process steps. The
telephone sales function at one company ran a Lean Six
Sigma project to increase sales and lower costs. Managers
believed that sales performance hinged on years of
experience of the sales person and amount of time on the
phone with a customer. A statistical test revealed
otherwise: The main factors driving higher sales were
following standard scripts, asking for a close from the
customer and use of flexible pricing.
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The best strategy to address the seven forms of waste:
Focus on a process rather than on machines, headcounts,
or balance sheet accounts. Employees get so acclimated to
the massive efforts it takes to accomplish their tasks that
they can't actually see the waste. In most cases, only a
Lean Six Sigma project allows people to see the process
from end to end, and then to take accountability for the
entire value stream.
Let the voice of the customer be your guide
Many processes, goods, or services are more expensive
than they need to be. They either provide a feature the
customer doesn’t value, or provide something of value in a
way that’s too costly or time-consuming. Either way, when
deciding how to change a process or product, you need to
know exactly what customers value and how much.
Otherwise, initiatives to eliminate waste or otherwise
reduce costs can undermine valuable parts of the
customer’s experience and damage the brand.
To understand customer priorities, start with both passive
sources of information such as industry expert reports and
internal complaint data, and active sources such as focus
groups, interviews and surveys. Two examples:
An electronics company observed how customers removed
the product from its packaging, used product instructions,
and started using the product. These observations led to
the conclusion that the company was over-engineering the
packaging and some elements of the product. Simplifying
these elements reduced costs by $1.3 million.
A pharmaceuticals manufacturer ran a focus group with
medical professionals to inform its marketing strategy. One
group identified “trust” as a key attribute they wanted in

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Executive Summary
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sales representatives. More probing through interviews and
surveys identied specic trust-related behaviors that could
be instilled through training: “respect doctors’ time,”
“understand their patient mix” and “don’t try to sell them a
product they can’t use in their practice.” Another focus
group evaluated the eectiveness of a promotional
program. The combined group eorts led the company to
modify training and pare back annual spending on one
brand from $27 million to less than $1 million.
After collecting customer data, interpreting the data
typically involves developing statements about specic,
measurable customer requirements. Several methods can
help to dene customer needs with precision. One method
called Key Buying Factor Analysis, illustrated in the gure
below, compares customer perceptions of your and your
competitors’ delivery on various elements of the oering.
10.0
9.0
8.0
7.0
6.0
5.0
On-time Delivery
Key Buying Factor Analysis
Correct Invoice
Inventory Turns
New Product Development
Price
Special Order Lead Time
Relationship Management
Proximity To Consumer
Brand Image
Product Offering Breadth
Warranty Returns
% Complete Order
Importance ratings
(10 = very; 1 = not at all)
Critical-to-Quality (CTQ) Characteristic
4.0
CTQ Importance Company Compet 1 Compet 2 Compet 3
The gure shows customers’ rating of the importance of
various purchase factors. It’s clear that the company in

question fares better on everything that matters little to
customers and poorly on the things that customers do
value. The analysis thus signals where the firm should
spend to upgrade performance.
Can you believe what your data is telling you? A tool called
Measure System Analysis serves to scrub the data. One
bank was concerned about an increase in the amount of
documentation being reported as defective by a major
customer. Although separate audits of the bank and
customer documentation processes found no problem, a
Measurement System Analysis discovered that the
operational definitions of a “defect” varied slightly, because
the bank’s audit process had been revised without
consulting the customer.
Listening to the voice of the customer, and applying that
knowledge to the relevant processes, will ensure that cost
reduction measures don’t inadvertently make products or
services less attractive to customers.
What’s really happening in a process? Find out
with a value stream map
Two questions spur most Lean Six Sigma initiatives: Why
does this process take so long? Why does it cost so much?
Documenting in detail what actually happens in a process
often uncovers new information and identifies the true
nature of waste. Putting all of the work steps – emails,
online forms, conversations and so on – into a visual map
helps everyone involved see the process from start to
finish. The map often bears little semblance to official
manuals or management’s conception of the process, as it
reveals duplicated effort and useless delays built in as
standard procedures.
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Executive Summary
Process transparency starts by building a SIPOC (supplier-input-
process-output-customer) diagram to capture the
basic components of a process, as shown below.
SIPOC diagram
Boundary
(End of
process)
Boundary
(Trigger that
starts the process)
The diagram includes four to five high-level steps that
identify the full scope of work, without getting caught up in
detail. Identify the outputs of the process, key customers
(users, purchasers, regulators) of that output, what’s
important to those customers, and key inputs (raw
materials, instructions, a previous step) and suppliers.
Once the boundaries and basic elements of the process
are clear, the next step is to develop a picture of the
process details that captures information useful to help
identify and select improvement actions. Think of these
value stream maps as flow charts with data. They depict
both the sequence of actions in a process and data on
material flow, information flow, inventories, processing
times, setup times and delays.
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SUPPLI
E
R
CUST
O
ME R
I
NP
UT
OUT
P
UT
PROCESS
Requirements, specifications,
information, feedback

The figure below depicts the form of a basic value stream
map, and there are other map forms that can be tailored to
the situation.
Schematic of a traditional value stream map
Step 1
Planning
Production
Control
Demand
information
Boxes that depict each step will contain important process
data such as elapsed time and amount. Completed map in
hand, determine the value of each step, based on three
categories:
• Customer value-add – an activity essential to deliver
a service to the customer, a feature that the
customer is willing to pay for or a function that
enables on-time delivery or enhances price
competition.
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Supplier
Work
Customer
Step 2
Step 3 Step 4 Step 5 Step 6
Warehouse
Inputs
Ex: 6-mo. forecast,
weekly orders
Movement of materials Information flow

Executive Summary
• Business value-add – an activity that improves
effectiveness or efficiency in a process, or
addresses safety or regulatory requirements.
• Non-value-add – an activity not required to meet
customer needs or run the business. Think back to
the seven forms of waste.
Write the category designation on the process step, or flag
it using colored dots. The non-value-add steps should be
attacked first for elimination, to generate savings in time
and cost. Then, improve business-value-add tasks as much
as possible by removing waste from these steps. Finally,
optimize value-add steps by removing waste, reducing
variation, and fixing problems that cause defects.
For example, one maintenance operation had a cycle time
of ten days for the repair of parts. A team created the value
stream map, shown below, of the current repair process.
The team highlighted with starbursts those categories of
waste they would tackle first.
A repair process before …
Storage
Storage
Surface Treatment
Clean
Weld
Interlock
Inspection
Subsequent changes to the repair process succeeded in
reducing cycle time from ten days to one. And throughput
of the weld process rose more than 40% by reducing the
setup time.
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25
!#
$!# %#
Storage 1
Demand 49
Time Avail 1440
$# '#
Storage 1
Demand 49
Time Avail 1440
$#
# of Opr 0.5
Demand 49
Rej/Scrap 1
Time Avail 1350
Cycle 1440
VA Time 720
# of Opr 1
Demand 49
Rej/Scrap 0
Time Avail 1350
Cycle 480
VA Time 0
# of Opr 0.5
Demand 49
Rej/Scrap 3
Time Avail 1350
Cycle 1320
VA Time 600
# of Opr 0.5
Demand 49
Rej/Scrap 1
Time Avail 1350
Cycle 144
VA Time 36
# of Opr 1
Demand 49
Rej/Scrap -
Time Avail 1350
Cycle 1120
VA Time 0
Set Up
Time
NVA
Process
High
WIP
High
WIP

… and after improving the flow
Weld
Storage
Surface Treatment
Inspection
Pallet
Interlock
The value stream map depicts reality, warts and all. It
allows everyone on the team to understand what activities
are happening, in what order, and with what levels of
performance. You can’t fix what you don’t know is broken.
Finding the levers of process waste reduction
Slow processes are expensive processes. Moreover, as
we discuss in later sections of the book, process speed and
agility can directly enable true competitive advantage.
Here, we address the concept of how to minimize the
amount of work in process. This helps to reduce cost by
improving efficiency, and helps to enable process flexibility.
Fewer items in process at any given moment means
quicker response time to changes in market conditions,
demand profile, customer needs, or regulations.
The application of two process efficiency metrics, called
Process Cycle Efficiency and Process Lead Time, can
generate major time and cost saving opportunities. And
one important relationship, called Little’s Law, connects the
two.
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# of Opr 0.5
Demand 49
Rej/Scrap 0
Time Avail 1350
Cycle 275
VA Time 240
40
18
Storage 1
Demand 49
Time Avail 1440
6 6
6
# of Opr 0.5
Demand 49
Rej/Scrap 1
Time Avail 1350
Cycle 33
VA Time 24
# of Opr 1
Demand 49
Rej/Scrap -
Time Avail 1350
Cycle 84
VA Time 0
6
40
6 6 6 6
6
Next Process
# of Opr 0.5
Demand 49
Rej/Scrap 1
Time Avail 1350
Cycle 72
VA Time 18
1 pallet Kanban prior
to surface treatment
• Cleaning step eliminated
• Kanban of 3 trolleys of 6 pcs. to reduce WIP
• New trolley design reduces damage in transit
• Trolley replaces forklifts for improved safety
Set-up reduced 45%
on welding machine
Interim storage
eliminated; mat’l
goes directly to
next step

Executive Summary
Process Cycle Efficiency compares the value-add time in a
process to overall process time, both of which should be
calculated as part of building the value stream map. Here’s
the simple equation:
Process Cycle Efficiency (PCE) = 100 * Value-Add Time
(VA)/ Process Lead Time (PLT)
The IT help desk of a large firm provides a classic example.
When an employee calls the desk about a password reset
issue, the first-line responders are located offshore, and
because of the time difference and backlog of requests,
they do not call back until the following day. The average
total cycle time to close a case is 17.5 hours (1050
minutes), versus the 6.5 minutes of value-added activity it
takes a help desk staff member to actually reset the
password – a PCE of 0.6%.
That level of performance may sound low, but it’s typical for
most traditional processes that have not been the focus of
Lean Six Sigma improvement. The biggest opportunity for
improving PCE will be to reduce overall PLT. Why? Look at
the alternative: The help desk could develop a standard
that allows staff to reset passwords in half the time, or 3.25
minutes. In that scenario, PCE becomes 0.3%:
PCE = 100 * 3.25 / 1050 = 0.3%
Improving value-add time but leaving the waste in a
process just means you have even less value-add time
compared to non-value-add time. But what if you remove
non-value-add delays in the process, so the overall cycle
time drops by half? Now, PCE doubles:
PCE = 100 * 6.5/525 = 1.2%
The lesson: Cutting wasted time is the most effective way
to improve process efficiency. One path to doing that uses
Little’s Law, which estimates PLT.
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27

Little’s Law Concept and Equation
Process Lead Time = Work-in-Process/Exit Rate
Work-in-Process (WIP) = the number of
“things” in the process – reports, orders,
components, batches, designs
Exit Rate (ER) = the number of things that
leave the process within a given time period
Consider the example of an e-commerce website that was
feeling overwhelmed by producing so many new
advertisements each week. From start to finish, the ad
process took about 120 days, including only 15 days of
value-add work. ( At any given moment, there were about
180 unique ads in development (WIP), with about 45 new
ads required each month, or 1.5 ads per day (ER): PLT =
180 ads/ 1.5 ads per day = 120 days
Cutting WIP turns out to be the fastest and least expensive
way to improve PLT, through a systematic approach to
rapid improvement. We call it the WIP Cap method
because it puts a cap on the amount of WIP. No new work
enters the process until something else has been
completed. WIP Cap proceeds in six steps:
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28
Process
Work-in-process (WIP)
Process Lead Time
Exit rate
# completed
in a given time period

Executive Summary
1. Determine the current PLT, directly or via Little’s Law,
where you need to know the ER and amount of WIP. The
e-commerce company has a PLT of 120 days.
2. Determine the current PCE. Once it completed a value
stream map, the e-commerce company knew value-add
time was 15 days. Therefore, PCE = 100* 15/120 = 12.5%
3. Identify a target PCE, at a reasonable level between the
current PCE and a world-class level. In the ad process, a
reasonable target would be 40%.
4. Calculate the PLT needed to achieve the target PCE, by
reversing the PCE equation. Thus: PLT = 100*Value Add /
PCE. For the e-commerce firm, the new target PCE is 40%,
so PLT = 100*24/40 = 60 days.
5. Calculate the WIP Cap. This is the maximum amount of
WIP that will let you achieve the target PCE. Find the
amount of WIP that will balance the exit rate, by flipping the
Little’s Law equation to solve for WIP rather than lead time:
WIP = PLT*ER. In the e-commerce example:
PLT = 60 = WIP/ER … and ER = 1.5 … so WIP =
PLT*ER = 60*1.5, or 90 ads
6. Gate the work to match the WIP Cap. That is, decide
which items to release into the process in which order and
in what amounts. From a practical standpoint, it’s easier to
step down to the target in several iterations. In the ad
creation process, the company stepped down from a 120-
day to a 90-day deadline of submission for new adds. After
a few months, they dropped to 75 days, then again to 60
days. The gradual drop gave people confidence they could
achieve each successive goal. PLT dropped by 50%—
improvements achieved solely by eliminating wait times
between value-add steps in the process—not by adding
staff, limiting clients or any other kind of costly change.
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29

30
30

Executive Summary
Part Two:
Reducing Costs at the Enterprise
Level
Part Two of the book explores the characteristics of
companies that have built true competitive advantage from
Lean Six Sigma. These firms focus on enterprise speed,
the hidden costs of complexity, the enterprise costs of
capital, and extending Lean Six Sigma to suppliers,
distributors and retailers.
Beyond incremental improvement, a recipe for
enterprise transformation
So far, we’ve been discussing tools and approaches that
yield incremental improvements. For most large,
established companies, however, there comes a time when
they need a step-change improvement in operating
performance. One might be trying to reposition itself as a
premium producer, another to seize market share through
ultra-low-cost-driven innovation. In short, they’re
transforming their business model.
At the threshold of transformation, most companies don’t
truly understand the gap between their performance and
that of the leaders in such metrics as lead time and
throughput. As a result, they under-commit in their goals.
Setting stretch goals across the board (80% improvement
in quality, 50% improvement in delivery) raises the bar for
creativity in achieving the targets.
Once they’ve made that commitment, managers typically
will have to excel on several fronts in order to pull off a
successful and sustainable transformation:
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Value creation and destruction. Rationalizing a product
portfolio to eliminate offerings that are destroying value can
help reduce the cost of operational complexity. But
rationalization alone is not sufficient, as companies need to
introduce innovative products to spur growth. Attaining the
proper balance between is essential.
Process excellence. View the organization from a
process perspective rather than a functional perspective.
Understand how people, equipment, and technology
interact, which processes deserve first priority for Lean Six
Sigma initiatives, and in what sequence.
Asset management and return on invested capital
(ROIC). A return-on-assets approach forces management
to address key questions. Do we need to continue to invest
in a particular asset that has low return, or should we
change a process or maybe close a facility? Invest in
infrastructure IT? Invest in people?
Evaluating ROIC, meanwhile, gives the organization a
common currency for prioritizing which actions to take. The
figure below shows the wide range of asset performance
within a company. Management could cut poorly
performing assets or plants from the network, or determine
to lift performance of those assets through a transformation
process.
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32

Linking Value to Opportunities
Executive Summary
Leadership with an entrepreneurial bent. Local leaders
in particular will have to shift away from a very
conservative, cost-center approach to an entrepreneurial,
PL type mindset that promotes growth and change. The
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33
+90%
High margins
and low capital base
1 2 3 4 5 6 7 8
Invested capital
Evaluate
links to
shareholder
value
(levers with
direct impact
highlighted
in reverse
text below)
Shareholder
value
Capital
employed
Acquisitions (MA)
Expansion
Improvement
Marketing Sales
Hedging
Fixed costs
Variable costs
Prudently use capital
on both tangible plant
efficiencies and profitable
reserve expansion
Alleviate and exploit market
risk through intelligent
management of fluctuations
Relentlessly drive costs
out of operations
through determined
improvement programs
Invested capital
Market
realization
Operating
costs
Economic Profit
Large capitalconsumers
w/ nominal returns Not making
their cost of capital
+70%
+50%
+30%
+10%
-10%
-30%

organization will have to adapt in a few ways. For instance,
more decisions will have to be delegated down, so they can
be made quickly. Processes that cut across different
functions should be overseen by people with sufficient
authority over the entire process.
The stakes and risks get higher in an enterprise
transformation. Success thus depends on having strong
leaders all pulling towards a common vision and focusing
on the vital few issues. Otherwise, individuals won’t be able
to make the tough calls and leadership discussions can
easily degrade into turf battles. For example, the
procurement department will likely resist changing how
they’ve functioned for many years — selecting suppliers
based on lowest cost — unless the head of that department
commits to corporate goals to reduce overall costs, which
will require partnering with at least some key suppliers.
Senior leaders must find the motivational reasons that will
energize different parts of the organization to advance the
cause.
Unlocking the secrets of speed and flexibility
We’ve seen that transformational improvement depends on
connecting and strategically organizing disparate projects
across multiple processes – indeed, along entire value
streams. Lacking this approach, most organizations will
realize only slow and incremental benefits, without attaining
competitive advantage. Management must align behaviors,
protocols and rewards across the business. This alignment
is especially critical for enterprise speed and flexibility.
To promote speed and flexibility, one must expand the
scope and focus of the transformation effort beyond
production or service delivery processes. It requires a
34
34

Executive Summary
holistic, closed loop strategy whereby work planning and
scheduling operations make decisions based on the true
capability of production or service delivery channels, as
well as the total customer demand by each product or
service offering in the portfolio.
This would seem simple enough except for two
complicating factors. First, there are several elements that
determine dynamic production or service capability. And
second, most production lines or service delivery channels
are not dedicated to a single product or service, so the
product mix and demand by product becomes quite
important.
Over the years, we’ve determined that the three most
significant analytical concepts related to enterprise speed
and flexibility are Little’s Law, Workstation Turnover Time
(WTT) and Cycle Time Interval (CTI). Together, these
equations unify planning, scheduling, dynamic production
or service capability and customer demand by offering
type.
Little’s Law, discussed earlier, links process performance
directly to work scheduling and planning. It highlights the
importance of discerning total demand (number of “things”
in process) at any given time. And it shows the impact of
completion rate instability on process lead time.
The heart of enterprise flexibility lies in the concept of
minimum safe batch sizing. Reducing batch sizes can
minimize the time a production line locks on to a given
product. The lower the quantity of the product in process,
the lower the process wastes, and the more rapidly the
company can respond to changes in demand and product
mix.
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35

Many organizations implement an approach called
Economic Order Quantity to determine the production
schedule, despite the fact that EOQ only considers one
part or item at a time. If not part of an overall strategy that
includes Sales and Operations Planning (SOP), EOQ can
degrade enterprise flexibility by increasing batch sizes
beyond current levels of demand.
Fortunately, there is a more effective approach that
augments EOQ and SOP with Lean analytics.
Determining minimum safe batch sizes relies on the two
equations of WTT and CTI. We don’t have space here to
delve into the math of these equations, but the figures
below depict what they represent.
Workstation Turnover Time
Batch B
Batch C
WTT is how long it takes for the workstation to complete
one full production cycle of all products scheduled for that
station. Here there are two full cycles for three products (A,
B and C).
Cycle Time Interval
36
36
Batch A
Setup A Process A Setup B Process B
Setup C Process C
WTTZ
Batch A
Batch B
Setup A Process A Setup B Process B
Batch C
Setup C Process C
Batch A
Setup A Process A
Batch B
Setup B Process B
Batch C
Setup C Process C
CTI B
CTIC
CTI A

Executive Summary
CTI tracks an individual product or service rather than the
workstation. It is the time from the start of one production
run of the product to the next run of that same product.
Here we see cycle time intervals for the three products.
This pair of equations combines to provide the direct link
between actual process capability and the product demand
for each part or item in the portfolio. Taken together, they
form a closed loop system that accelerates enterprise
speed and flexibility as well as improves returns on
invested capital. WTT captures the relative capability of the
production process and its flexibility while CTI determines
the order frequency of each part or item in the portfolio
based on the rate of demand and its yield. Furthermore,
these equations help managers see how to improve speed
and flexibility by reducing set-up times, increasing
production rates (especially through maintenance
excellence) or improving product yield (through elimination
of defects).
Reining in the insidious costs of complexity
Innovation and a willingness to always say “yes” to the
customer has a downside: Although a differentiated
portfolio of products and services are effective in winning
new customers and driving new growth, portfolio
complexity can mire productivity and actually destroy
shareholder value. Growth without attention to its effect on
the assets needed to produce additional products can
quietly ruin company economics.
A telecommunications provider, for instance, may feel it
has to offer a wide array of packages to entice customers.
But the breadth of the assortment can cause major
complexity headaches. Operations must allow connectivity
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37

between vastly different systems; Finance must track the
pricing and discounts for more service combinations; Legal
must support different regulatory commitments; Customer
Service must create more scripts. Complexity grows when
users cross state lines, and becomes a nightmare to
unravel when the firm decides to phase out a particular
service.
Inappropriate cost allocation techniques often mask such
complexity costs. Managers assume that offerings
consume the utilization of assets (plants, equipment,
people, systems) equally, when in fact different products
may have very different levels of asset utilization. Take a
simple case of two toasters, one for bagels and another for
standard slices of bread. In manufacturing, the bagel
toaster needs a more expensive shell, and the molds are
harder to maintain. It doesn’t fit easily onto a retailer’s shelf.
It sells at lower volumes, which raises variation in demand
and requires less-than-pallet-load shipping techniques.
With cost piling on cost, soon the company faces a large
cost spread between the base product and the low-volume
“differentiated” product.
Addressing any single element of complexity can lead to
suboptimal results; step change requires an integrated,
holistic approach. Moreover, looking at traditional
management reports or talking only to senior executives
won’t help much, either. Instead, an effective process to
simplify complexity includes the following tasks:
• Site visits and interviews with people at all levels, to
see how they view their part of the business and its
relationship to other parts
• An economic profit analysis, which looks at the
relative value that products and services are
contributing to or removing from the business
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38

Executive Summary
• Benchmarking ROIC and return on assets against
other companies in the same industry or with a
similar business model or product type
• Reallocating costs to individual product families and
then to individual product, to attain a better
understanding of the true costs
• Calculating PCE on the value streams or processes
that are part of the analysis
• Performing both a Prime Value Chain (PVC)
analysis and Complexity Value Stream (CVS)
analysis. PVC identifies which value streams are
responsible for the most enterprise value
destruction. A CVS map shows the interactions
across functions and value streams, and how
variation in processes impacts the organization’s
costs.
• Using the information garnered from the steps above
to identify opportunities, grouped by impact or
functional sets
• Evaluating risk, feasibility, and benefits for each
opportunity. Tackle the quick wins first (low risk, high
impact), then proceed to other projects with higher
risks or lower impacts.
To truly know whether the variety offered to customers is
paying for itself, look closely at how that variety impacts the
processes used to design, produce, deliver, sell, and
service. Culling the variety that customers don’t value
enough is one of the most effective steps to reducing costs
across the enterprise.
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39

Reaching upstream and downstream to your
extended enterprise
In many Lean Six Sigma deployments, there’s a point when
senior managers realize that further cost reduction will
come from looking upstream to suppliers and downstream
to distributors, dealers and retailers. Even companies with
world-class process excellence can be undercut by
mediocre performance in their “extended enterprise.”
Extending Lean Six Sigma beyond the walls of the
organization assumes a collaborative rather than
adversarial relationship with suppliers and dealers. It
requires a shared view of customer demand trends and a
common goal of reducing overall costs. But the benefits will
be well worth the effort, including shorter lead times, less
rework and returns, increased responsiveness to shifting
customer priorities and less working capital employed.
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40

Benefits of an extended view of the enterprise
Executive Summary
On the supplier end, look first at those companies with
whom you want a strategic sourcing or deep sourcing
relationship. Then rank the candidates based on how much
business you do with them and indications of their interest.
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41
Supplier Base Enterprise
Distributor/
Dealer Base
Disruptors/
Issues Benefits
Disruptors/
Issues Benefits
• Supplier failures
• Quality issues
• Transportation
disruptions
• Shipping/delivery
errors
• Weather and
labor issues
• Long lead times
• Insufficient
capacity
• Market shifts
• Economic
downturns
• Transportation
disruptions
• Staff changes
• Dealer failures
• Poor customer
service
• Product
misrepresentation
• Low growth
• Flexibility to
address changing
demand
• Responsive to
product changes
• Robust processes
less affected by
staffing changes
• Optimum dealer
network design to
deal with individual
dealer disruptions
or failures
• Increased sales
effectiveness
• Critical link to
understanding
“heart of the
customer” and
feeding into
supply chain
• Lower probability
of failure
• Flexibility from
multiple suppliers
• Individual supplier
increased agility and
flexibility
• Higher quality
and flexibility
• Analytically
determine safety
buffers w/o excess
inventory and its
associated costs
• Maximum
capacity
• Fast lead times

Other likely candidates are suppliers with a high defect rate
in their materials or components.
The nature of the projects will depend, of course, on the
specific situation. One heavy equipment manufacturer
identified projects both within its suppliers and joint projects
that crossed organizational boundaries. Projects included
reducing scrap, shortening lead time by eliminating non-value-
add activities, and reducing supplier inventory. Such
initiatives can be accomplished as joint improvement
projects, loans of Black Belts, exchanging work teams or
paying to train supplier staff in Lean Six Sigma techniques.
Looking downstream, the work will depend largely on how
many partnerships a company can reasonably handle and
how much influence it has with distributors and retailers. A
large company with a lot of influence over distributors could
offer training courses within those distributors. A smaller
firm with influence or a willing partner might invite the
customer to send a few staff to its own training courses.
And any firm could share training materials and course
curricula.
Helping downstream partners improve their own processes
and raise end-customer satisfaction yields a number of
benefits to the supplier. To start, the effort demonstrates a
deep commitment to joint success, which will create more
passion around your products inside the distributor or
dealer. In addition, the projects often generate better
insights into end-customer needs and competitor behavior.
One supplier of high-end home products, in the course of a
Lean Six Sigma project with a major retailer, learned that
the retailer was about to drop a key product because end-customers
were balking at the high price. This insight
allowed the manufacturer to make some product changes,
increase sales, and increase profit based on lower
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42

Executive Summary
manufacturing and raw material costs of the modified
product.
Good partnerships with suppliers and downstream players
don’t happen by chance. Companies that devote the same
attention to priorities, methods, education and metrics that
they’ve had to establish internally will get the maximum
payoff from their Lean Six Sigma investments.
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44
44

Executive Summary
Part Three:
Getting More, Faster
Part Three of the book addresses a common complaint
about legacy Lean Six Sigma programs: The projects take
too long, the returns are too small for the effort required,
and projects are under-resourced. This part of the book
explains how to inject rigor and discipline to enterprise
project portfolio management. Flexible, scalable, rapid
deployment models can drive high returns for a relatively
low commitment of resources.
A smarter way to select the pipeline of projects
When it comes to selecting a portfolio of Lean Six Sigma
projects, which of the following two cases resembles your
own organization’s approach?
One division of an office products company selects projects
“by committee,” said a senior executive there. People pick
low-risk pet projects without considering potential return.
“We measure our deployment based on the number of
events and projects, not on dollar values,” according to the
executive. Projects run at the plant site level, with no cross-plant
alignment or replication.
Over at a major pharmaceuticals firm, it’s a different story.
The firm’s initial goal was to identify projects it could assign
to the first wave of Black Belts being trained. But on our
advice, they conducted short, focused assessments at
eight sites, looking at factors such as strategic objectives,
process performance and alignment, and ROIC sensitivity
across the different functions. These assessments each
took only one to three weeks, so the company quickly
45
45

identified and validated more than 100 project
opportunities—enough to stock a long pipeline valued at
more than $100 million.
Selecting projects that will generate significant value
depends on understand your organizational needs, not just
seizing on problems near to hand that can be addressed
with Lean Six Sigma. In our experience, a rigorous process
should proceed in four steps:
1. Rapidly assess and validate. The goal is to identify
what levers will make the biggest impact on business
priorities. Establish a baseline around issues such as
strategic objectives, financials (buckets of inventory, what
levers can affect ROIC), product mix and primary workflow.
The assessment work should be done by a team of people
who collectively have extensive Lean Six Sigma experience
and specific industry knowledge of your industry – ideally, a
mix of internal staff and external advisors to provide a fresh
perspective on the opportunities. Each potential opportunity
must then be validated so that senior leaders make their
decisions based on reliable estimates of the worth of
different initiatives.
2. Screen initial list. One of the fastest and easiest ways
to screen ideas is by performing a benefit/effort analysis,
with benefit usually defined as hard savings realized and
effort defined as project time. Plotting the results on a
matrix shows the low-effort/high-impact opportunities,
which merit the initial projects; the medium- to high-effort/
high-impact opportunities, which will require more
resources; and the low-effort/low-impact opportunities,
worth examining if any could be quick hits that solve a
nagging problem.
3. Define and set the scope of projects. To make a better
comparison of the best candidates, write a charter for each.
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Executive Summary
The charter contains detailed information about scope,
goals, resources required and timeline, all essential for
numerically scoring benefit and effort criteria in the next
step.
4. Prioritize list and select projects. Develop a set of
benefit and effort criteria around business impact, team
selection and so on, then score the charters along the
criteria selected.
Project Selection Process
7 10
From the start of the process, it’s important to engage the
Finance function to establish guidelines for quantifying the
value of projects. Some companies identify a senior
Finance manager to sponsor development of financial
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47
Step 1
Rapid assessment
and validation
Step 2
Screen
initial list
Step 3
Scope and
define projects
Step 4
Prioritize list and
select projects
Establish perfor-mance
baseline,
develop
hypotheses about
likeliest rich
targets for
improvement, and
validate with data
• Score each
project on
benefit/effort
and create
matrix
• Select highest
priority opps.
for further
analysis
• Assign selected
opportunities to
sponsors
• Draft project
charters
• Assign selected
opportunities to
sponsors
• Draft project
charters

Charter
Charter
Charter 1 1 1
9
3
17
108
96
5
9
3 9
Project
Criteria wt
Score
2
3

guidelines. The team needs to define how to calculate
benefits for each project; create a review process to track
and report benefits; and create an auditing process to
ensure calibration and completion.
Companies will always have more opportunities than
resources and time. Don’t try to tackle too much at once,
because the longer a project takes, the less likely it is to
finish and yield benefits. Instead, once you have a target
for the optimal number of active projects at any time, apply
the Lean principle of pull systems whereby the completion
of one project triggers release of the next project into the
pipeline.
The four secrets of successful change
management
Whether you are implementing change across the
enterprise or within a specific business unit, it’s important to
take the temperature of the organization first. There are
four aspects of change management that, when done well,
keep the initiative on the path to success.
1. Assess the organization’s readiness for change. It’s
critical to understand how ready people are for change,
how able they are to perform work in a new way, and how
willing they are to do so. Make no assumptions, because
surprises lurk around every corner. Do people truly
understand what it means to work in a process
environment? Has accountability to measure performance
been designed, built in, and communicated appropriately?
Are people equipped with the right skills and training for
their new roles?
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Executive Summary
2. Know the difference between leading and managing
change. Leaders should focus on awareness; they’re the
source of energy and vision. Managers, by contrast, should
focus on buy-in and commitment. Both leaders and
managers should seek out and use people who have a lot
of influence—formal or informal, no matter what their official
job title—to lead high profile, short, quick-win projects.
Some may be project sponsors of key improvement areas;
others may be team members. Look for people who will be
the first to espouse the use of new methods to achieve cost
reductions, and who can influence others.
3. Upgrade the communication plan. The basics of
building an effective communication plan are well known.
But we’d emphasize two underappreciated aspects of
communications. The first is to explicitly incorporate
feedback when determining what methods to use.
Providing the opportunity for feedback lets the speaker
know how well the message was heard, and helps improve
the plan going forward. Early in the initiative, concentrate
on forums where feedback is more feasible, such as one-on-
one conversations and small group sessions.
The second aspect is investing the initiative with the proper
emotional tone, not just reciting the logic of why things
need to happen. The emotional side of the argument has to
address both “What’s in it for me?” and “What’s at risk for
me?” When leaders publicly respect and address these
concerns, they help to convince people that a Lean Six
Sigma program is the right thing to do for the future.
4. Enforce process ownership and cost accountability.
Change initiatives can cause great confusion, especially in
the transitional periods. Sometimes key responsibilities
aren’t assigned at all. Other times, several people think
they are responsible for the same work. Process ownership
means that at every stage, there needs to be someone in
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charge of each key process—the person who makes the
call if something isn’t working right. In addition, clear
accountability of cost management during each phase of
change is essential for a consistent focus.
The case for establishing a Center of
Excellence
Some companies plan Lean Six Sigma programs without
mustering the energy and commitment that are required to
achieve results quickly. Other firms need to rejuvenate
Lean Six Sigma initiatives that have enjoyed some minor
success and then stalled. In either case, setting up a
dedicated Center of Excellence (CoE) can provide the
organizational coordination and support that makes the
difference between success and failure.
Depending on the scope and scale of the initiative, a
Center of Excellence typically consists of five to ten full-time
people including the director, a business analyst, and
process improvement experts. They provide support to the
business unit champions, project sponsors, and the project
leaders. The CoE has several objectives:
• Focus the organization on the most important
projects, and generate faster returns on invested
resources
• Establish a critical mass of capabilities
• Provide training, coaching, and guidance to the
50
business units
• Actively monitor and manage ongoing performance
50

Executive Summary
• Take an enterprise-wide approach by devising
standard process metrics, sharing improvement
ideas and lessons learned, and identifying avenues
of cross-unit collaboration
Two of these areas merit more discussion, as they both
dramatically increase the benefits that companies can reap.
First, performance management, meaning a mechanism
that closes the loop between estimates of project savings
and actual results achieved. The CoE should take the lead
here by reporting aggregated project results and program
performance, which allow seniors leadership to understand
where the program has been successful and where
problems are impeding performance.
The second area is replication – capitalizing on successes,
applying lessons learned to other areas in the organization,
and building institutional knowledge in the process.
Replication speeds up the improvement cycle and allows
the enterprise to capture the benefits sooner. The CoE can
also identify technologies or concepts that can be
transferred from one situation to another.
As an organizational entity, the CoE reports to a Steering
Committee, CEO, or appointed senior leader responsible
for the process improvement initiative. The CoE director
works with each of the business unit leaders and business
unit champions on identifying and prioritizing projects and
setting cost targets. Each project is assigned to a project
sponsor, then chartered and staffed by the business unit.
The CoE provides process improvement expertise and
capability development to the project leaders and team
members as needed.
There are three general options for structuring a CoE, as
shown in the figure below. In the consolidated model,
resources from the business units or an external partner
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reside within the central CoE, which assumes PL
responsibility. The CoE leadership makes decisions on
resource funding and personnel, process improvement
priorities, and approaches and standards. A consolidated
model works best when the various business units are
similar in nature.
In the distributed model, the larger organization has
responsibility for maintaining only top-level decisions, such
as which methodology to employ, while other decisions get
made by the business units. This model lends itself to
organizations composed of very different business units,
such as holding companies or loosely coordinated
enterprises. One drawback here is the inherent difficulty in
applying lessons learned and best practices from one
business unit to another. For this reason, the distributed
model should be used where there is little opportunity to
capitalize on intellectual cross-fertilization.
The representative model can be confusing. Most of the
process improvement resources will reside in the business
units, with a matrix reporting relationship to the business
unit and the CoE. These people will usually remain located
within the business units, but there is still a “core” CoE
group charged with coordinating training, monitoring and
reporting performance objectives via dashboards to the
steering committee, maintaining a knowledge exchange,
and providing Lean Six Sigma experts to mentor and coach
project leaders. The representative model can work for
organizations that have business units with similar
operations but distinct cultures, and thus want to maintain
autonomy.
Whatever the organizational structure, the CoE can help to
ensure that a company fully leverages its Lean Six Sigma
investment, especially as it transitions from early launch
52
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Executive Summary
stages to maintenance, where there is a greater need for
coordination and sharing among business units.
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Three models for the Center of Excellence
Consolidated
• LSS resources are centrally located and fall under a central
Center of Excellence PL
• More command and control to the central organization
• Central authority makes decisions related to standards,
functionality, funding, and change management
• Information flows from the central body to business units
• Centralization of resources allows for timely investment,
resource decisions
Highest-leverage actions to improve payback
Given current economic pressures, executives are rightly
looking for ways to improve the payback from their Lean
Six Sigma investments. They want more flexibility to cover
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Representative
• Resources reside primarily within the business units, with
a small core of central expertise
• Governance body consists of representatives across the
business units
• Central body responsible for decisions related to degree of
standardization and work jointly to capitalize on lessons
learned
• Strategic decisions guided by central authority, which LSS
decisions made within business units
Distributed
• Resources reside within the individual business units
• Central body responsible only for overseeing the most
top-level of decisions
• Each business unit responsible for its own process
strategy and improvement approach
• There is little or no information flow between business
units
• Each has awarenessof LSS Center of Excellence: rationale
for adopting its methodology; how CoE supports
organizational goals and objectives; scope and deploy-ment
timeline; how BUs can leverage the CoE
• Maximizes individual business unit autonomy
Continuum

Executive Summary
a range of situations: lack of sufficient internal capabilities,
desire for proof of concept before launching a broad
engagement, urgent operational issues that need to be
resolved quickly, and so on.
New high-leverage actions have emerged that address
both sides of payback – the upfront cost and the return.
One action is a focused deployment, which provides an
alternative to the classroom training method of the
traditional Lean Six Sigma deployment model.
A major distributor of office products took this more flexible
approach, starting initially with a group of just four Black
Belts and a small consulting team. The team deployed
concurrently on four fronts and within the first six weeks
had analyzed the firm’s financial landscape and selected
the highest-value opportunities; mapped the business
process architecture; developed a deployment strategy and
custom training program, and chartered the projects.
Because of the fast pace, the Black-Belts-in-training
operated in an apprenticeship role by “learning and doing”
at the same time, receiving one and a half days of training
every other week. The consultants, meanwhile, led the
training and coached their apprentices on how to use the
right tools and analysis.
Other alternatives to the three- to four-month timeline of the
traditional deployment model include these:
• I do-we do-you do skill development. Consider using
this model for a limited number of high-potential, focused
projects. It begins with traditional classroom training,
either via a brief overview (one week) or more robust
training (two to five weeks). An expert practitioner leads
the team, while the person-in-training is primarily an
observer. Next, the roles are reversed, with the expert
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shadowing the apprentice, who takes the lead role.
Finally, the new team leader flies solo.
• A master consultant or sensei. The sensei provides
overall guidance for the deployment and deep expertise
in a limited area. This works best for a limited number of
easily identified cost drivers, and where the company
does not need rapid results but rather a reasonable rate
of return over a moderate time horizon. Toyota has used
this approach to develop capability within specific
departments and its supplier base.
• Internal staff augmented with outside resources.
Experienced advisors can be brought in temporarily to
jumpstart an initiative or to fill in areas of the business
where resources are constrained. Experienced
practitioners can bring fresh insights, hit the ground
running, and quickly build strong teams.
• Applied learning. This approach aims for immediate
project results. Tools and methodologies are introduced
to participants in a “just in time” manner and focused
immediately on the business issue at hand. Experienced
practitioners stay with the project team through the life of
the project, which facilitates skill development transfer
and quick delivery of project results. The model often
requires several weeks of pre-work, two weeks of in-class
training, skill application via Kaizens or Value
Stream Assessment (VSA) sessions, and extensive out-of-
class coaching. The organization’s staff becomes
qualified to lead subsequent events on their own.
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Executive Summary
General map of an applied learning model
Prework
Kaizen
Lean Six Sigma
Training
• Blended e-learning. This approach combines self-guided
study plus interactive, live classroom activities.
People work at their own pace on e-modules that convey
basic concepts, then attend classroom sessions where
they get to apply what they learned under the guidance
of an instructor. The training is scheduled for a specific
time, on a specific day. Blending the types of learning
has proven more effective at improving skill transfer, at a
reasonable cost, than either type used independently
Success with these newer approaches will depend on the
same factors as more traditional models: having highly
engaged executives, linking project selection to a deep
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Pre-event
work
1 week
Prework
Kaizen
Prework
Kaizen
1 week 1 week
2–4
weeks
2-6
weeks
Client-led
follow-on
projects
• Final data
collection
and mapping
• Stakeholder
alignment
• Team
stand-up
• Logistics
• 1st Kaizen;
training,
execution led
by expert
faciliator
• Basic tools
training
• Identify next
business
issue
• Participant
co-leads
next Kaizen
with expert
facilitator
(on issue
previously
identified)
• Project #2
objectives
completed
• Advanced
tool taining
• Identify next
issue
• Continue with
Kaizen cycles
on targeted
areas
VSA
Training
Kaizen
VSA
Training
Kaizen
Prework
on key
process
areas
1 2
…
…

understanding of business priorities, and making sure that
staff have the support they need to finish projects quickly.
Re-energizing a tired legacy program
It’s not uncommon for companies to get impressive returns
early on from their Lean Six Sigma efforts, but then see the
rate of return taper off or vanish. To re-energize the effort,
you need to know where it has gone astray. Typical root
causes range from an overly narrow effort, to insufficient
key metrics, to indiscriminate use of staff, to poor project
selection or pipeline management.
Of all these problems, one of the worst is selecting projects
that don’t contribute enough (or are perceived that way) to
the goals that senior leaders care about: economic profit,
costs, margin, shareholder value. The best way to deal with
this problem is to establish a formal performance
management system and impose strict accountability for
the various processes.
A performance management system defines metrics at
every level of management, as well as specific
responsibilities for tracking and reporting performance on a
regular schedule. For example, the figure below shows a
typical monthly review by executives, and similar processes
should be spelled out for each level.
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Executive Summary
Ask staff about
Perf. Mgmg.
action plans
Review monthly
perf. metrics
with SVP and GM
Metrics mean nothing without accountability. A global
retailer we worked with had recurring problems with its
product re-pricing system. It regularly saw a large gap
between labor hours allocated to stores to complete the re-pricing
work and the actual hours consumed. Individual
store execution of label changes was inconsistent, and
technological glitches messed up the timing and quantity of
new labels. These problems were symptomatic of a lack of
process ownership, as there was no clear owner of the re-pricing
59
process.
59
Performance Management Process for Executives
Monthly deliverables
for Executives
• Target vs. actual
• Variance analysis
• Countermeasure
proposals
Create
countermeasures
to close gap
Discuss:
Target vs. actual,
action plan, and
continuous impv’t
Did Perf.
Mgmt. meet or
exceed
target?
YES
NO

To establishing a system of process ownership, take a
macro-level view to assess where natural process
boundaries should exist, identify the person who will be in
charge of each segment, and spell out the specific
responsibilities for those roles.
Another way to raise the horsepower of the Lean Six Sigma
engine is through an analysis of what is going well and
what needs attention. The people closest to a problem may
be unable to see it because they’ve grown accustomed to
the status quo. So a neutral third party will be useful to
assess what’s going on behind the scenes. This person
should examine project selection, financial guidelines, links
to strategy, roles and rewards, and other criteria. The
specific actions taken as a result will naturally depend on
the problems and opportunities unearthed.
A major Lean transformation effort at a service company
had stalled two years in, with senior leaders expressing
disappointment at the lack of impact on business results or
culture. While the company had quantified significant
financial impact, the lack of rigor around reporting results
meant that no one believed the cited benefits. An
evaluation revealed several problems. The firm had
indiscriminately applied Lean tools and Kaizen methods,
resulting in some improvement “events” that took almost a
year to complete. Executive engagement varied across the
organization. And project selection occurred as a series of
one-off events.
To re-energize the effort, management realized they would
have to develop two core competencies: integrate Six
Sigma into the improvement methods, and develop a better
system for project selection and monitoring. Within a year,
the company completed a formal deployment planning
process and trained 30 deployment champions in project
selection. Those skills were put to immediate use to
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Executive Summary
provide a mix of project types, and by the end of the
second year, the company realized over $50 million in
additional benefits.
Taking the time to re-energize a Lean Six Sigma
deployment can pay off not only raising the return on the
investment already made, but also in generating significant
additional savings.
* * *
Ultimately, it’s all about creating enterprise value and
competitive advantage. As defined by Accenture’s
research, high-performing companies consistently outpace
peers in revenue growth, profitability, and total return to
shareholders. They sustain their superiority across time,
business cycles, industry disruptions, and changes in
leadership.
To achieve those goals requires advantages in
organizational structure as well as execution. And Lean
Six Sigma is a critical set of tools and methodologies that
can help you get there. “The Lean Six Sigma Guide to
Doing More With Less” can help business leaders advance
on the path to high performance, no matter what level they
start from.
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Get your copy of the full book, The Lean Six Sigma
Guide to Doing More with Less
The Lean Six Sigma Guide to Doing More with Less,
published by John Wiley and Sons, will be available
February, 2010.
Books are available at leading retail stores, such as Barnes
Noble and Borders, and online through amazon.com,
barnesandnoble.com, books-a-million.com, borders.com,
and 800ceoread.com.
To learn more about Lean Six Sigma, author Mark George
or Accenture’s Process Innovation Performance work,
please visit www.accenture.com/leansixsigmabook.
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Executive Summary
About the author
Mark O. George is managing director in Accenture’s
Process Innovation Performance service line. Process
Innovation Performance solutions help clients become
high-performance businesses by taking an end-to-end,
process-based approach to address key business
challenges, as well as working with clients to rapidly
enhance the internal capabilities needed to continuously
improve operational and innovation outcomes.
For almost twenty years, Mark has helped clients with
operational excellence initiatives that have helped
transform businesses and accelerate financial
improvements. Mark has developed enterprise
transformation deployments that have helped companies
achieve hundreds of millions in economic profit, while at the
same time helped establish cultural transformation for long
term sustainability. His experience includes leading Lean
Six Sigma initiatives at more than two dozen Fortune 1000
companies, in multiple industries such as automobile
manufacturing, financial services, food and beverage,
telecommunications, electronics, and medical products. He
has also provided support to the U.S. Military.
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About Accenture
Accenture is a global management consulting, technology
services and outsourcing company. Combining
unparalleled experience, comprehensive capabilities
across all industries and business functions, and extensive
research on the world’s most successful companies.
Accenture collaborates with clients to help them become
high-performance businesses and governments. With
approximately 177,000 people serving clients in more than
120 countries, the company generated net revenues of
US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its
home page is www.accenture.com.
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