Here are just a few reasons for the enthusiasm so many analysis on Wall Street voice: General Electric's Jack Welch, a self-proclaimed cynic when it comes to quality programs, describes Six Sigma as "The most important initiative GE has ever undertaken." GE's operation income, a critical measure of business efficiency and profitability, hovered around the 10 percent level for decades. In 1995, Welch mandated that each GE operation, from credit card services to aircraft engine plants to NBC-TV, work toward achieving Six Sigma. GE averaged about 3.5 sigma when it introduced the program. With Six Sigma embedding itself deeper into the organization's processes, GE achieved the previously "Impossible" operating margin of 16.7 percent in 1998, up from 13.6 percent in 1995 when GE implemented Six Sigma. In dollar amounts, Six Sigma delivered more than $300 million to GE's 1997 operating income, and in 1998, the financial benefits of Six Sigma more than doubled, to over $600 million.
Larry Bossidy, CEO of AlliedSignal Inc., brought the $14.5 billion industrial giant back from the verge of bankruptcy by implementing the Six Sigma Breakthrough Strategy. The company has now trained thousands of employees from every business unit and staff function in Six Sigma and the Breakthrough Strategy, with the goal of increasing productivity 6 percent each year in its industrial sectors. Broad-base Six Sigma initiatives allowed operating margin in the first quarter of 1999 to grow to a record 14.2 percent from 12 percent one year earlier. Since Bossidy implemented the program in 1994, the cumulative impact of Six Sigma has been a savings in excess of $2 billion in direct costs.
Former AlliedSignal executive Daniel P. Burnham, who became Raytheon's CEO in 1998, has made Six Sigma a cornerstone of the company, Burnham expects Raytheon to improve its cost of doing business by more than $1 billion annually by 2001.
Since taking over GE's industrial diamonds business in Worthington, Ohio, in 1994, William Woodburn has increased the operation's return on investment fourfold and cut the operation's costs half by employing the Six Sigma Breakthrough Strategy. He and his team have made their existing facilities so efficient that they have eliminated the need for new plants and equipment for at least another ten years. Woodburn and GE's industrial diamond business exemplify how Six Sigma can enable a company to cut costs, enhance productivity, and eliminate the need for new plant and equipment investments.
Polaroid Corporation's Joseph J. Kasabula, quality strategy manager for product development and worldwide manufacturing, believe that the most compelling reason companies embrace Six Sigma is its impact on the bottom line. While other programs may improve quality, Kasabula believes they do not focus on increasing a company's profits. With Six Sigma, companies focus on the processes that affect quality and profit margins on a project- by-project basis. Six Sigma is helping Polaroid to add 6 percent to its bottom line each year.
Asea Brown Boveri(ABB), which successfully applied the Six Sigma Breakthrough Strategy to its power transfer facility in Muncie, Indiana, has reduced measurement equipment error by 83 percent; piece count error from 8.3 percent to 1.3 percent; and no-load loss to within 2 percent. ABB also improved material handling, resulting in an annual estimated cost saving of $775,000 for a single process within a single plant.
We believe the Six Sigma Breakthrough Strategy should be of paramount interest to any forward-thinking executive, manager, and public administrator who wants to make his or her organization more competitive and profitable, and enhance its ability to drive change. Six Sigma principles apply to any business of any size. It applies to far more than just industrial processes-it applies to engineering, product design, and any commercial process, from processing mortgage applications, to credit card transactions, to customer service call centers. By attacking "Variation" during the design of products and services, it's possible for any organization to achieve unprecedented profitability.
