Presentation given on 4 Dec 2009 at The Performance Institute in Washington, D.C. Subject: Innovation and Six Sigma: Can the two co-exist? Explores necessary traits of a successful implementation of Six Sigma within a culture that also has high emphasis on innovation.

1. Innovation & Lean Six Sigma NewgrangeManagementLLC ProgramChangeServiceDelivery ℠ Can they co-exist? Amanda M. Warfield, PMP Fri 4 Dec 2009, Arlington VA The PerformanceInstitute’s “Lean Six Sigma for IT” Copyright © 2009 Newgrange Management. All Rights Reserved.

2. Process Improvement is always necessary. . . ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

3. Six Sigma vs. Lean – what’s thedifference?? “Traditional” Six Sigma Lean Six Sigma Y = f(X) + å: All outcomes and results (the Y) are determined by inputs (the Xs) with some degree of uncertainty (å). Change or improve outputs (Y) by changing your inputs (X). Variation is everywhere. Variation is bad. Find it and get rid of it. Measurements and DATA DATA DATA! Let them be your guide. Identify the few critical inputs to really affect your output. Goals: improve effectiveness and eliminate waste produce increasing customer value and satisfaction. The basic principles of Lean: Focus on the customer. Improve the value stream. Maintain flow. Pull through the system. Strive for perfection. Respect people. Delight your customers with speed, quality, and effectiveness. 5S Methods are the cornerstone of all Lean tools. ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

4. Some Common Definitions A value-added activity needs to have the following standards: It must transform the product or service. The customer must be willing to “pay” for it. It must be done correctly the first time. 5S method of the workplace – establish your ‘flow’ Sort: Get things organized! Dispose of all unnecessary items. Straighten: Everything still standing needs a standard location, and needs to be easily accessed. Scrub: Get things cleaned up! Neat and tidy is the order of the day. This could be your workplace, this could be your software program – this could be anything! Systematize: You need a system to maintain order. This could end up being manual, or an actual system or product that does this work. Standardize: You need discipline to continue implementation while also continuing to find ways to enhance/improve the process. ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

5. Some Common Definitions Speed does not mean crash your schedule… Schedule: when something needs to be done Speed: how fast you get something done within the schedule Eliminate Waste Use the 5S’s over and over again ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

6. Innovation - what is it?? Innovation = CHANGE. CREATION. Discipline in Innovation?? Innovation is a highly disciplined process when done the right way. You still need data. Otherwise, what is the problem you are trying to solve? Ideas and brainstorming are a starting point only. What happens when your idea needs to become a real product or process? ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

7. Types of Innovation Pre-cycle Innovation: Unknowns are plenty – very little in terms of inputs and outputs have been identified. Usually one or multiple LARGE looming factors driving the activity. Examples: NYSE market behavior + CMBS = a wild ride… Energy Sector + Customer Service + Homeland Security + Environment + Government Surplus = Smart Grid Post-cycle Innovation: Data drives the problem to be solved. There are less unknowns for end result. Those areas that have been identified within normal process improvement cycle as potentials for change are the target. Examples: A new underwriting framework within a commercial bank. A new software development process. A new machine within a manufacturing line. ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

8. A Tale of Two Disciplines Six Sigma-dominated management culture: Inwardly-focused continuous improvement Usually post-cycle innovation Processes, customer service, systems, operations, etc. Still trying to find those few inputs (X) that will add up to positively affecting outputs (Y) Smaller, incremental innovations Lean is a great fit. “Traditional” idea of innovation within the company culture: More entrepreneurial in nature Usually pre-cycle innovation More focus on new markets, technologies, business models or products Find BIG growth. Find NEW growth. More unknowns. DFSS is a logical starting point. Work your way into Lean. ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

9. Innovation Process Regardless of pre- or post-cycle innovation, the process is the same: Identify target. This may be broad strokes or already highly-focused. Brainstorm. Prototype. Verify. Implement. The most important and most overlooked step. ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

10. Innovation Tools – are they really all that different? Six Sigma and Innovation philosophies compliment one another. The tools are the same that you use today. Some of the more recommended tools used in innovative Six Sigma efforts: Ishikawa (Cause-and-Effect) Diagram and 5 Whys Great for those pre-cycle innovation efforts where there are more unknowns. Great for identifying some of the root causes of issues. Can help uncover the process dynamics and the areas that can be addressed easily – these are innovation opportunities that can be explored. Value Stream Mapping Identify not only the non-value adding for removal, but the value-added steps that have potential for innovation to drive increased speed or customer service. Takt Time Identify the cycle times that require improvement, and these have automatic potential for innovation opportunities. Poka Yoke (Mistake Proofing) Commonly used in a ‘Control’ phase of a DMAIC cycle. Use it during Prototyping in an Innovation cycle for verification that things are on the right track. In combination with Pareto analysis, this will help identify major issues plaguing as-is processes. These issues are a major innovation opportunity. ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

11. Innovative Six Sigma Process Pre-Cycle Innovation: (Identify target, brainstorm, prototype, verify). Implement. Post-Cycle Innovation: (Identify target, brainstorm, prototype, verify). Implement. Six Sigma (DFSS) Six Sigma (DMAIC or Lean) ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

12. What have the successful organizations learned? You need to have BOTH pre- and post-cycle disciplines in order to truly excel. Not all innovations have come from things being cut and dry or clearly-defined. Your company should be disciplined in both change management approaches and disciplines (Six Sigma and Innovation). It is highly recommended that you master one approach at a time.(ex: Six Sigma first, Innovation second). Successes must be communicated and celebrated. Individuals should be recognized for their input. Intellectual property that results from innovation must be protected (patents, trademarks, copyrights, etc). ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

13. What have the successful organizations learned? Risks to be Mitigated: You are highly likely to encounter hostility for the latter once the former (Six Sigma or Innovation are interchangeable here) has truly matured. Set the seeds early in implementation of the first program that the latter is coming. Manage expectations with regular communication. Keeping innovation activity “separate” will allow for more ‘free-thinking’. If this is done, it must be brought back into the Six Sigma “mainstream” for the Implementation piece of the puzzle. If this is not done, innovation will need to focus more on post-cycle innovations that can fall within the Six Sigma framework. Once you get to implementation, “regular” Six Sigma disciplines need to be followed through to completion. Management structures at the top are recommended to be responsible for both “regular” process improvement and more ‘pre-cycle’ innovative approaches to ensure continuity. ™ Copyright © 2009 Newgrange Management. All Rights Reserved.

14. Contact Information Amanda M. Warfield, PMP +1 (704) 579.1177 AMWarfield@carolina.rr.com ™ Copyright © 2009 Newgrange Management. All Rights Reserved.