Six sigma and innovation.

Inman, Deborah F. ; Buell, Rebecca ; Inman, R. Anthony 等

ABSTRACT

Innovation is a proven success factor for many firms, specifically 3M. However, some feel that the impending implementation of the six sigma strategy may hinder the innovative process present at 3M. This paper looks at these concerns and makes recommendations regarding its inclusion within the strategic framework of one of the world's most innovative firms.

INTRODUCTION

In today's high-tech world, innovation has become a driving force for individual firms and entire economies (Bixler, 2002). Long-term success requires that the customer be excited by innovations provided by a company's product and services, hence continued survival requires continuous innovation (Pyzdek, 1999a). Success is about putting innovation at the heart of the company (Mazur, 2002). One such company meeting this description is Minnesota Mining and Manufacturing (3M). In fact, 3M exemplifies the use of innovation as a distinctive competency.

3M began its tradition of innovation in the 1920s, when it introduced waterproof sandpaper. That tradition has lasted 100 years, introducing such products as masking tape, Scotchgard, Post-It Notes, and even astronaut Neil Armstrong's boots. 3M now has 7,100 research and development (R&D) employees in 71 laboratories around the world ("Innovation has been ...," 2002). In keeping with tradition, 3M has a unique policy allowing scientists to spend up to 15% of their time working on unauthorized projects of their own creation (Haeg, 2002; Pyzdek, 1999b).

Despite this background of innovation, some analysts believe that 3M's performance is still relatively "lackluster" in comparison to its potential. In response, 3M's new CEO, W. James McNerney has implemented the management technique/philosophy six sigma. Under the auspices of six sigma, McNerney has vowed to slash inefficiencies, implement an employee performance ranking system, and reduce the company's workforce by 7%. He rationalizes that, while 3M has outperformed other companies in its industry, it has always been an underachiever (Mullin, 2001). Specifically, McNerney expects to reach these goals by improving the prioritization of investments, reducing cycle times, and improving areas such as sourcing, indirect costs, and e-business. (Mullin, 2001).

However, not everyone sees this as good news. There are some who feel that a rigorous process such as six sigma actually detracts from creativity. Some of 3M's most prominent names, Art Fry, inventor of the Post-It Note and former 3M CEO, Lewis Lehr, for example, are concerned that six sigma's structure will stifle employee creativity (Haeg, 2002). So, are companies implementing six sigma destined to suffer from a lack of future innovations? Is six sigma too structured and controlling for processes such as R&D? This possibility is the key issue of this paper. We look at the innovation process and the potential impact of six sigma upon this process. After discussion of the issues, recommendations are made for 3M and others who wish to incorporate the six sigma process.

WHAT IS SIX SIGMA?

A cost-saving, inefficiency-slashing program, six sigma is a business concept that touts improving quality and business processes. Specifically, it is "a disciplined method of using extremely rigorous data-gathering and statistical analysis to pinpoint sources of errors and ways of eliminating them" (Harry & Schroeder, 1999). The Greek letter sigma (s) represents a standard deviation from the mean or average. The objective is to reduce process variation so that plus or minus ([+ or -]) six standard deviations lie between the mean and the nearest specification limit (Statistical six sigma definition, 2003). This translates to no more than 3.4 defective parts per million opportunities. Hence, six sigma implementation begins by measuring defects per million opportunities, allowing only 3.4 defects. Most companies do no better than three sigma (Arndt, 2002) and are pleased with their performance. However, even four sigma performance would still allow 500 incorrect surgical operations per week, 20,000 incorrectly filled pharmaceutical prescriptions each year, and 2,000 lost articles of mail each hour (Marash, 2000). Six sigma companies then set aggressive short-term objectives but strive toward long-term goals.

A six sigma project succeeds by reducing subjective errors in the assessment of problems. Six sigma firms follow a five step process which includes defining a process measuring the process to assess current performance, analyzing information to determine where the errors lie, improving the process and eliminating the errors, and finally setting up controls to prevent future errors (Arndt, 2002).

Developed by Motorola in the 1980s, the six sigma philosophy has spread to other companies such as GE, Allied Signal, and Texas Instruments. The difference between six sigma and previous quality philosophies is that six sigma is being promoted by top management, not just by quality managers. It is being touted not only in technical journals but also on the business pages of newspapers and magazines (Marash, 2000).

There are definitely some success stories. Dow Chemical, DuPont, GE Plastics, Air Products and Chemical, Avery Denison, Great Lakes Chemical, Honeywell, (Schmitt, 2002), W.R. Grace (Sauer, 2001) and Rockwell International (Hasek, 2000) have all embraced six sigma, with quick monetary results. Allied Signal saved $1.5 billion through 1998 and was looking at a subsequent $600 million per year savings thereafter ("Six sigma secrets," 1998).

Six sigma is not limited to manufacturing processes alone. Advocates feel it may also be applied to functions such as accounts receivable, sales, and research and development. While more difficult to evaluate areas in which processes are not standardized, six sigma can still be applied (Arndt, 2002).

THE INNOVATION PROCESS

Innovation is defined as "an iterative process initiated by the perception of a new market and/or new service opportunity for a technology-based invention which leads to development, production, and marketing tasks striving for the commercial success of the invention" (Garcia & Calatone, 2001). Once a product moves through the production and marketing phases and enters the marketplace, it's status moves from invention to innovation (Garcia & Calatone, 2001). As the product becomes an innovation, value is provided to customers. "Value consists of the performance characteristics and attributes that a company offers in the form of a good or service for which customers are willing to pay" (Hitt, Ireland & Hoskisson, 2001). The effect of value is felt in a company's bottom line; therefore, creating value in a good or service is necessary for a firm's competitive success.

Students of innovation argue that a firm's ability to innovate is a function of its local environment (Afuah, 1998). A study of creativity among corporate research scientists found that environment was a critical factor in stimulating or blocking creativity (Kiely, 1997). Badawy (1997) states that "in order to stimulate and reinforce creativity [innovation], appropriate organizational climates [environments] should be established." A review of innovation literature reveals that an environment conducive to innovation is marked by the absence of three factors present in most highly structured or hierarchical organizations: fear of uncertainty, fear of failure and productivity measurement. Uncertainty, failure and measurement, as they pertain to innovation, are now discussed.

Uncertainty

There seems to a general consensus, in the literature, that innovation is unpredictable and characterized by uncertainty (Brown, 2001; Afuah, 1998; Badawy, 1997, Peters, 1997). As such, unexpected occurrences can be good sources of innovation (Afuah, 1998). For example, when Upjohn was testing minoxidil for treatment of high blood pressure, they found hair growth to be a side effect. The result was the marketing of Rogaine (minoxidil) to treat baldness.

Failure

Manners, Steger and Zimmerer (1997) say that "people who have spent their lives building self-esteem based upon technical competence will go to great lengths to avoid losing that fragile base." Badawy (1997) goes further to warn that engineers are professional individuals who demand special treatment and cannot be managed like other labor. Others (Pyzdek, 2001b) even feel that the big risk is not fear of failure but the failure to risk. Examples of "successful failures" include Art Fry's failed superglue experiment (Post-it Notes) and James Wright's failed attempt at developing a synthetic rubber for airplane tires and soldiers' boots (Silly Putty). Other "failure" discoveries include X-rays, Frisbees, Velcro, penicillin, Coca-Cola and the slinky (Niemann, 2003).

Measurement

Innovation is the result of creative activity not of analysis (Pyzdek, 1999a). Creativity cannot be achieved "by the numbers" (Pyzdek, 1999a) nor can it be measured (Kiely, 1997). Pyzdek, (1999a, 1999b) points out that the creative organization is one that exhibits variability, resource redundancy, quirky design and slack. Trying to measure and control all aspects of the innovation process causes engineers and scientists to restrict the depth of their exploration, leaving little room for pursuit of novel ideas (Katz & Allen, 1997). Therefore, an organization that is tolerant of a large variety of deviation from the norm is more likely to enhance creativity (Shapero, 1997).

SIX SIGMA AND THE INNOVATION PROCESS

The current rapid rate of change in technology places a higher premium on being able to quickly offer [new] goods and services to the marketplace. "With the rapid and widespread diffusion of technologies used to produce goods and services, speed to market may be the only source of competitive advantage" (Hitt, Ireland & Hoskisson, 2001). As innovation is pushed into this rapid product development cycle, heightened expectations of the marketplace call for better tools to improve the productivity of the innovation process. Six sigma, often viewed as a toolbox full of new devices (Sauer, 2001), is seen by some as potentially helpful to the innovation process.

Christensen (2002) believes that innovation isn't random; its outcomes only appear to be random because we don't understand all the factors, such as management strategies, degree of company integration, capabilities, and resources, that affect successful innovation. If we can use six sigma to master these variables, the products, processes, and services created will have more predictable outcomes. This implies that six sigma can also serve to eliminate waste of time and resources in the conception process by linking it directly to customer wants and needs. Barry Siadat, AlliedSignal's chief growth officer feels that six sigma will shorten cycle time and increase speed to market, and finally, it will reduce costs ("Six sigma secrets," 1998). These sentiments are reflected by Daniel Laux, president of Six Sigma Academy, who feels that six sigma can now be applied to all industries and all functions and can even be used in R&D to find innovative products (Gilbert, 2002).

At one time, product development generally occurred by happenstance (Six sigma secrets, 1998). In the chemical industry, research scientists produced a new substance, while analytical chemists performed measurements and added specifications later (Sauer, 2001). For discrete products, the conventional R&D approach started from a developer and proceeded to design and prototype through build and test iterations, later resulting in design changes and wasteful rework (Management innovation ..., 2000). With a six sigma approach, researchers first find what the customer wants and then look at the process capability study (Sauer, 2001). Then the customer's need and problems can be clearly defined and non-value work eliminated (Management innovation ..., 2000), thereby shortening the innovation process.

Studies showing that as much as 80% of quality problems originate in design (Who needs ..., 2002) have led firms to look to six sigma's toolbox for design improvement. An aerospace firm experienced a mismatch between the part dimensions represented in the model itself and the measurement specified by designers. Because of the design error, the first products were consistently wrong. Each individual model was always fixed but because the design process that produced the error was not fixed, the error continued to occur and had to be continually fixed; at a cost of $150,000 each time. Proper use of six sigma could have avoided this fiasco (Finn, 2000).

Successful examples include AlliedSignal who used six sigma to reduce variation in performance in the "upfront" design of their AS900 engine. This resulted in reductions of 30% in work-hours, 50% in fan module variability, and 9 months in time-to-certification (Six sigma secrets, 1998). A major innovation in metal injection molding material, developed by a Honeywell six sigma team, enabled the production of a new variable-weight golf putter for a customer, capturing $1 million in sales for Honeywell (Six sigma plus, 2001). Both Dell Computer and IBM utilized six sigma to evaluate products before the first shipment, resulting in savings from detection of manufacturing and design issues (Design for six sigma ..., 2002). Even 3M has already realized $1 million savings after a six sigma review found that a dental ceramic wasn't being properly cured (3M: A lab for growth, 2002).

Despite these success stories, the application of six sigma to innovation has its detractors. Johnson (2002) states that "R&D activities involve inquiry, analysis, synthesis and other activities that naturally reshape and change as they proceed-and so naturally defy systematic improvement efforts." Thomas Pyzdek , a regular columnist for Quality Digest adds that You would kill the creativity of research if you tried to apply six sigma there" (Dusharme, 2001). Craig Hickman and Christopher Raia (2002) use the terms convergent and divergent thinking systems to further illustrate this contrast. They (Hickman & Raia, 2002) state that "convergent thinking system, which include most established business organizations, survive on order, measurement, and predictability. In contrast, most innovations result from divergent thinking environments that thrive on disorder, imagination, and ambiguity."

"Not so successful" stories include a multinational firm that upon achieving six sigma success in one division, decreed that the entire company should follow suit. Six sigma worked fine in areas of high volume or repeatable processes, but low volume departments had to go looking for data to feed the tool. Often, this data had little or no relevance to customer satisfaction, yielding a distorting effect on quality management (Six sigma-A true story, 2003). While IBM focused on reducing defects and making incremental improvements using six sigma, EMC Corp. and Cisco Systems, Inc. were pioneering innovations that took the leading position in their markets away from IBM (Gilbert, 2002).

A more than cursory look at these success stories will reveal that six sigma's utilization seems to be ensuring success during the development process after the innovation is conceived; what is known as application development. But what about the actual conception of the idea behind the product, the application itself?

Can a company such as 3M, one whose most well-known attribute is innovation, afford to "tinker" with success? Not according to Thomas Pyzdek. Pyzdek (2001) feels that companies that apply six sigma wall-to-wall are going about the philosophy in the wrong manner. He believes that management should not take the idea (six sigma) too far and try to apply it "across the board" (Dusharme, 2001). R&D departments should apply six sigma to the development aspect but never to the research aspect, as six sigma brings too much organization to a process that should be rather casual and disorganized (Dusharme, 2001; Pyzdek, 1999a).

Six sigma is methodical and organized, rigorous and structured, which seems in contrast to the productive innovation environment. Pyzdek (2000) feels that the greatest enemy of creativity is hierarchy. An overly-structured R&D organization with numerous levels of hierarchy, an abundance of rules and regulations, and a flow of paperwork can sap energy that would otherwise be used for the creation, application, utilization and generalization of knowledge (Pasmore, 1997).

For all firms, six sigma seems to result in compressed product-development times and products that have a much higher hit rate, i.e., are more successful in the marketplace (Stevens, 1998). And six sigma can generate increased sales through better customer relations that promote improvements and innovations (Schmitt, 2002). But a misdirected focus of six sigma in R&D may make an organization less creative, crushing the innovation that is the essence of R&D's contribution to the success of the firm (Johnson, 2002). Hence, a number of recommendations are in order.

RECOMMENDATIONS

As applied to R&D and innovation, six sigma's usefulness lies in solving quality problems that can be reduced to sub-problems; projects can then be planned with a more narrow focus. Six sigma's power is optimized when applied to "inside the box" problems" (Spanyi & Wurtzel, 2003) as encountered in the product development stage. Were six sigma to be applied during these early design phases, it would catch design problems early on, instead of much further in the process. American firms spend about 95% of R&D budgets on product technology and only 5% on process technology. Conversely, the Asian automobile industry spends about 75% of R&D on process technology and only 25% on product (Treichler, Carmichael, Kusmanoff, Lewis & Berthiez, 2002). If more companies adopt a six sigma framework stressing process technology more than product and significantly reducing manufacturing defects in the process, they can expect to save significant costs, increase product life cycles, and reduce warranty and other service costs (Treichler et al., 2002).

However, care should be taken to ensure that creativity, the backbone of any innovative company, is not stifled. In order to ensure this, the creative environment must be protected. Manners et. al (1997) relates that "In research work, the basic tenet of protection typically means protection from the consequences of failure. In order to keep work excitement and openness high, the manager must communicate that you take some risks and I will protect you if you fail."

In addition to protection from the fear of failure, firms should take steps to ensure that R&D employees are protected from the fear of uncertainty. Instead of building a product simply because we have the technology and the wherewithal to do so, should we only consider products that have a ready market? But did customers really know they wanted or needed Post-It Notes? Innovation does not always produce a product or concept that is readily embraced by a market. Peters (1997) claims that throughout the history of successful corporate innovation, neither the first nor the second prototype has ever worked. Hence, procedures should not be so strict that experimentation is hindered (Johnson, 2002) or R&D departments alienated (Treichler et al., 2002). Use methods that establish appropriate protocols but be careful not to overcontrol in such a way that inhibits experimentation and innovation (Johnson, 2002).

Finally, don't try to manage innovation "by the numbers." Innovation thrives in chaos (Peters, 1997) so productivity is difficult if not impossible to quantify. Why shackle it with a measurement system, especially if measurement adds little or no value to the outcome. Don't be afraid to build variability, slack and redundancy into an organization (Pyzdek, 1999a). Remember, an organization that is tolerant of deviation is more likely to enhance creativity (Shapero, 1997).

Utilizing the discussion on fear of failure and uncertainty and measurement, the innovation process can be described as in Figure 1. The innovation-conducive environment, when coupled with rigorous structure and hierarchy results in the results emphasized earlier: sapped energy, decreased knowledge generation and utilization and decreased creativity. The innovation-conducive environment coupled with protection from fear of failure and uncertainty and unnecessary measurement results in increased motivation to perpetuate innovation via creation, application, utilization and generalization of knowledge.

CONCLUSION

Innovation perpetuates an organization. Employees are interested in the future of their company and like to work to ensure it. From innovation you get esprit de corps and fulfillment. Innovation is exciting. It is crucial to sustaining the enterprise (Stevens, 1998). It can't always be judged in terms of costs and benefits, especially if it is critical to sustaining the firm. Successful innovation includes the right to fail (Mazur, 2002), uncertainty and measurement slack, something six sigma does not allow.

For firms generating "improved" products or advances in existing technology, six sigma may be appropriate to the research and creation process. However, for firms, such as 3M, that rely almost exclusively on "new" and previously unconceived of products and services, six sigma may prove to be a detriment to the creative process. Therefore, while six sigma is a useful management philosophy, it should not be applied across the board in these organizations.

Six sigma can vastly reduce development time, generate increased sales through better customer relations (Schmitt, 2002), contain costs, create alignment between strategic planning and operations (Sauer, 2001), create an infrastructure of change agents not employed in the quality department (Pyzdek, 2001a) and unleash the creativity of everyone in the organization, providing a flood of ideas along with a method to manage the flood. Just don't let it dry up the flood.

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Deborah F. Inman, Louisiana Tech University

Rebecca Buell, Louisiana Tech University

R. Anthony Inman, Louisiana Tech University

Figure 1
The Effect(s) of Protection and Structure on the Innovation-Conductive
Environment

Innovation-Conducive + Protection = [up arrow] Motivation
Environment
 Fear of Failure
 Fear of Uncertainty + Structure = [down arrow] Creativity
 Measurement [down arrow] Knowledge Creation
 [down arrow] Knowledge
 Application
 [down arrow] Knowledge
 Utilization
 [down arrow] Knowledge
 Generalization