CNN/Fortune (not to be confused with CNN/Business2.0, CNN/Money, CNN/Time… apparently CNN doesn’t do original content anymore) has an online article today on "Tearing Up the Jack Welch Playbook" that proposes that Welch’s rules are no longer appropriate. Some of them, such as "agile is best" trumping Welch’s old "big dogs own the street" make perfect sense, and have been known to us in the lean world for quite some time.
But one of them is worth thinking about… "look out, not in" replacing "be lean and mean". One quick glance at the detail for this change and you’ll notice a plethora of problems. For starters, it has nothing to do with "lean"… it’s all six sigma. In fact, the word "lean" isn’t even mentioned after the title. We bump into the misunderstanding of the two concepts quite often, and as we know some consultants are trying to combine the two into a new way to make a buck, with one even trying to trademark the term. Although in their defense they can be complementary methods.
Obviously the fundamental issue is that six sigma optimizes processes, and lean focuses on waste. Six sigma alone can lead to the danger of optimizing a process that lean might tell you is not required in the first place. Lean alone can remove waste but leave inefficient (but still value-added) processes in place.
So now we know that the article should really have been entitled "look out, not in" replacing "six sigma". Let’s look into that a bit more…
The article claims that more than a quarter of the Fortune 200 followed Welch’s lead and dived into six sigma. Of 58 large companies that announced six sigma programs, 91% have trailed the S&P 500 ever since. Ok… why were those 58 selected (ok, that is "more than a quarter" of 200), and if that’s the population on which the 91% is applied, then why does 91% of 58 not yield a nice number? Somebody apparently doesn’t know basic… err… stats. Somewhat concerning when thae data comes from Charles Holland of consulting firm Qualpro, which as the article points out "espouses a competing quality improvement process". Probably because they could no longer trademark "six sigma". Actually a look at their website seems to indicate a methodology remarkably similar to classic multivariable design of experiments.
And I won’t even start with the problems with basing the data off of companies that "announced" six sigma programs as opposed to those that actually did it… let alone did it well. Or all the other variables that could make a company trail the S&P 500 (but did they improve?). I could say the same about lean… if I only had a penny for every company that "announced" a lean program.
The article points out that six sigma "looks inward", which is true in a sense. So does lean. In both cases it’s called continuous improvement, and it’s a good thing.
But I don’t think six sigma can be blamed for creating "an inward-looking culture" as the article proposes. The article then links that supposed cultural malaise to a decline in innovation. Aha! "Innovation"! Any business article these days apparently must include at least one reference to that most magical of words. So… Jack Welch is now responsible for stifling innovation at all kinds of companies around the world? That’s a good one. From that great leap all kinds of canned quotes on innovation can suddenly be used to fill up the rest of the article.
Forget your wasteful and inefficient processes! Go forth and blindly innovate!