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What is Six Sigma and How Can It Help Me?

So, what is Six Sigma and how does it apply to marketing? Well, that is a great question and one, which I found myself asking when I was first introduced to Six Sigma as Director of Channels at Seagate.

Six Sigma was originally created by GE to help reduce waste in its manufacturing process. Over the years, GE realized that huge amounts of waste were being created whenever they manufactured a product and that waste was reducing their bottom line and profits.

So, a huge effort was launched to reduce waste—Six Sigma calls this defects. GE's goal was to reduce the number of defects in their manufacturing process to 3.4 defects per million (down from 4.0 defects per million). This would create a cost savings of well over a billion dollars. This would be accomplished by improving their process from a "no-failure" percentage of 99.99% (four sigma) to 99.9999% (six sigma)—a relatively small decrease in defects that resulted in huge cost savings.

But what does this have to do with business development or marketing? Well, the same idea of increasing efficiency and reducing defects can apply to your marketing projects and processes. Making the commitment to measurement is a huge step. But we can also apply this to processes that affect customer satisfaction. For example, if you have a process that pays MDF or rebates and are constantly getting customer complaints about inaccurate payments, late payments, or no payments, Six Sigma can reduce these defects and, therefore, increase customer satisfaction. If you are spending millions of dollars on marketing campaigns but never seeing incremental revenue, you can use Six Sigma to examine your marketing process to determine why.

Six Sigma consists of a five-step process called DMAIC—an acronym that stands for Define, Measure, Analyze, Improve and Control. It is a structured, disciplined, rigorous approach to improving processes. Each phase is linked to the previous as well as the next with the goal of making improvements resulting in fewer "defects." In marketing, we can think about this as less marketing blunders and more home runs resulting in new leads, incremental sales, higher profits and more satisfied customers.

Let's take a closer look at each step in the Six Sigma process.

Define
The first phase is Define where we clearly state the project's purpose and scope. Background information on the process and customer are collected and our goal is to create several outputs:

1. A clear statement of the intended improvement – the business case and the team charter.
2. A high-level map of the process currently in place
3. A list of what is important to your customers (internal and external)

The solid definition we create links to the next phase...

Measure
The goal of the Measure phase is to focus our improvement efforts by gathering information on the current situation. The outputs of this phase include:

1. Baseline data on current process performance
2. Data that pinpoints a problem's locations
3. A more focused problem statement

The outputs provide the basis of the next phase.

Analyze
The goal of the Analyze phase is to identify root cause(s) and confirm those with data. The output is a theory that we will test and confirm. Once we verify our theory and the causes we begin to create solutions in the next phase.

Improve
The goals of the Improve phase is to try out solutions that we believe will fix the root causes. Our output is planned and tested actions that should reduce the impact create by the root causes. In addition, a plan is created for how results will be evaluated in the next phases.

Control
The goal of the Control phase is to evaluate the solutions, plan and to maintain gains by standardizing a new process. We can also outline steps for on-going improvements.

1. A Before-and-After analysis
2. A monitoring system
3. Complete documentation of our results, learning and recommendations.

By following these four phases and applying them to market processes, we create a predicable marketing process with reduced costs, higher ROI and greater customer satisfaction.

Here's a quick example of a Six Sigma project that I implemented at Seagate.

Over the years, our channel partners loved our Partner Program and benefits like MDF and rebates. However, since our resellers needed to create and implement an approved marketing program and provide proof of performance that the activity had actually been implemented, the time between their implementation and the associated costs and the time that they received a payment from Seagate often took up to 90 days. Obviously, this is a long time for a reseller to wait for their money and we often received complaints about the length of the process.

The business impact was significant: resellers did not want to implement marketing campaigns because they did not want to be exposed financially, MDF funds went unused, lead generation campaigns were not implemented resulting in less lead and sales. Even worse, for marketing, executive management thought that; if we did not use all our funds we didn't require them. This resulted in their opinion that funds should be reduced or eliminated—from marketing perspective this was a disaster.

Our Vice President of Finance was understanding, but immediately rejected the idea of adding more headcount in the accounts payable department to speed-up the process. Rather, he suggested that we first use Six Sigma to analyze why the process was taking so long and what could be done to shorten the time for payment.

During the Analyze phase of the project we made some interesting observations:

1. The majority of MDF claims were under $5,000 – a number that our finance VP was not overly concerned about. But, those claims received the same scrutiny as a claim for $50,000—which were very few
2. A claim had to go to four different people for approval no matter what the amount.
3. Claims sometimes sat on an auditor's desk for over five days before any action was taken.
4. Missing proof of performance was the biggest reason for delays and usually the required documents were in-house but had been delivered to the wrong department.
5. Seagate's in-house automated MDF tracking system was slow and cumbersome to use—so people typically put these claims at the bottom of their priority list.

Our recommendations for the "Improve" phases, was three-fold:

1. Only require a detailed audit on claims over $25,000—claims of lesser amounts would only be spot-checked.
2. Only require a four-step approval on claims over $50,000. Claims less than that the accountant could approve up to $10,000. Claims between $10,000 and $50,000 only needed additional approval up the line.
3. Educate resellers how to send their claims to Seagate to avoid mis-routing. In a huge company, a simple "mail-stop" number on an envelope can save days.
4. Update or acquire a software tool that could handle a large number of MDF activities.

Steps 1, 2 and 3 were approved and implemented immediately. Step 4, with an estimated cost of between $50,000 and $150,000 was put on hold until we had more data.

In the first 90 days of implementation, the time it took to process claims was reduced from an average of over 45 days to just under 10 days—at zero cost to Seagate. We had found our bottlenecks, fixed them and now had a process that our resellers could live with. MDF usage increase, funds were utilized to within 90 percent and the overall program was saved. That's just one example of the power of Six Sigma.

All it takes is a little thought and planning plus a willingness to take the time to evaluate the basic problem. Six Sigma works and it can help you make your marketing processes more efficient too!

If you'd like more information on applying Six Sigma methods to your marketing processes, contact us at info@corestrategies.com.