JUNE 11, 2007
INSIDE INNOVATION -- IN DEPTH
Six Sigma: So Yesterday?
In an innovation economy, it's no longer a cure-all
At Home Depot (HD), ousted Chief Executive Robert Nardelli was devoted to Six Sigma. "Facts
are friendly" was a favorite mantra of his, neatly summing up his managerial point of view. Six
Sigma was used to streamline the check-out process and strategically place vacuum-cleaner
displays, for example. But by-products of the program irritated many at the retailer's stores, who
thought its constant data measurement and paperwork sapped time given to customers. The
bottom line on Nardelli's tenure: Profitability soared, but worker morale drooped, and so did
consumer sentiment. Home Depot dropped from first to worst among major retailers on the
American Customer Satisfaction Index in 2005.
Now Nardelli's successor, Frank Blake, another General Electric (GE) alumnus, is dialing back on
the Six Sigma rigor, giving more leeway to store managers to make decisions on their own. The
story unfolding at Home Depot echoes closely what's happening at 3M after James McNerney's
reign. There are signs of a similar pullback at many companies, even at GE, where CEO Jeff
Immelt is trying to reprogram his management ranks to innovate around a theme of
"ecomagination," with mixed success. And at Young & Rubicam, where GE board member Ann
Fudge flamed out as CEO after she tried to sell ad execs on Six Sigma.
So has the Six Sigma moment passed? "I think it has," says Babson College management
professor Tom Davenport. "Process management is a good thing. But I think it always has to be
leavened a bit with a focus on innovation and [customer relationships]." The discipline was
developed as a systematic way to improve quality, but the reason it caught fire was its
effectiveness in cutting costs and improving profitability. That makes it a powerful tool—if those
are a company's goals. But as innovation becomes the cause du jour, companies are increasingly
confronting the side effects of a Six Sigma culture.
Six Sigma clearly had a profound impact on the corporate world. According to the American
Society for Quality, 82 of the 100 largest companies in the U.S. have embraced it. And that's
quickly trickling down: Six Sigma consultants are as busy as ever as the quality-improvement
system migrates from its traditional focus on U.S. manufacturing companies to the financialservices industry and abroad. In recent years, companies as varied as DuPont (DD), Textron
(TXT), Bank of America (BAC), and Sun Microsystems (SUNW) have all made Six Sigma
bedrocks of their culture. Hybrid formulas have spawned, such as Lean Six Sigma and Design for
Six Sigma. WCBF, an organization that organizes conferences about the process, has 14 events
planned this year, up from seven last year.
Six Sigma: So Yesterday? – Business Week --- continued
But as its popularity endures, the notion of Six Sigma as a corporate cure-all is subsiding. Once a
company has done the requisite belt-tightening, "the strategic needs of a business change," says
Robert Carter, a consultant at defense contractor Raytheon (RTN). Kick-starting the top line
becomes paramount; the best way there apart from an acquisition is innovation. At Raytheon,
Carter is leading a Six Sigma effort to promote innovation. But while "most Six Sigma
practitioners are very strong on the left brain, innovation very much starts in the right
hemisphere," says Carter. Even he, a Six Sigma expert, acknowledges the "define, measure,
analyze, improve, control" mind-set doesn't entirely gel with the fuzzy front-end of invention.
When an idea starts germinating, Carter says, "you don't want to overanalyze it," which can
happen in a traditional DMAIC framework.
Of course, Jack Welch has argued that a leader needs to single-mindedly inculcate Six Sigma
into every corner of an organization. Should a CEO hedge and say, "Let's do both Six Sigma and
also be creative," employees will tune out the part they don't want to hear. Welch has said that
even if the concept is applied in areas where perhaps it shouldn't be, it'll be worth it in the long
run. It can always be fine-tuned once the workforce gets it. Call it the break-some-eggs-to-makean-omelette approach.
Problem is, you don't know which eggs you're going to break. When Steve Bennett left GE in
2000 to take the CEO post at software maker Intuit (INTU), he was eager to roll out Six Sigma.
But he did it gingerly, pilot-testing the quality-improvement tool in certain groups for a year to
prove its worth. He was unsure of how a Silicon Valley company would react, given its
associations with Six Sigma—"most of them bad," he says. So he cloaked the move under the
benign-sounding banner of "process excellence," deliberately avoiding using the name Six
Sigma. Says Bennett, "The term gives me an allergic reaction."
By Brian Hindo in New York, with Brian Grow in Atlanta