Key Points

• Working with highly regulated industries can pose a real challenge for Lean Six Sigma rollouts.
• Senior leadership buy-in for Lean Six Sigma integration is one of the most critical needs in navigating regulations.
• Multiple strategies can help circumvent regulations and compliance issues that might otherwise restrict the launch of a Lean Six Sigma program.

When an organization or group is looking to roll out a Lean Six Sigma program, it’s a good reminder to consider that this combines two very powerful process improvement methodologies. No matter the industry, Lean will play its role as it looks to reduce overall waste, while Six Sigma focuses heavily on reducing variation. 

Combining these two processes will allow any business to increase overall efficiency and deliver better customer service. Of course, to do this, companies have to work within the confines of their business vertical, which can be highly challenging for businesses in highly regulated industries like pharmaceuticals, finance, healthcare, and telecommunications. 

What Are Highly Regulated Industries? 

To understand how highly regulated industries and Lean Six Sigma fit together, it’s important to first acknowledge what exactly the former means. Using a fairly basic definition, highly regulated industries are companies that work in specific verticals like medical devices, defense, financial services, telecommunications, healthcare, and others that focus on a few very common traits. 

These traits are typically identified as businesses with strict governmental and legal oversight or those that have to focus significantly on quality and meet highly regulated industry standards. In addition, the quality of every product or service being delivered has to meet strict standards, and compliance plays a major role in any organizational move that requires approval. 

It goes without saying that companies in highly regulated industries have much longer product development and approval cycles, so it’s critical that these processes move as fast and efficiently as possible. 

What Are The Challenges Of Implementing Lean Six Sigma In Highly Regulated Industries? 

Navigating Strict Regulatory Requirements

When you think about industries like pharmaceuticals, where you have to navigate the approval of the Food & Drug Administration, or aerospace, which has to work closely with the Federal Aviation Administration, it’s essential to know just how stringent some requirements can be. As a result, there is (rightfully) an emphasis on safety and compliance over efficiency, which directly contradicts the goals of Lean, focusing heavily on eliminating waste. 

For example, developing a new drug or research process can take years to get approvals, which can stall a project if things aren’t managed carefully. Any delay in the process, which could affect approval, could increase overall costs and reduce the goal of getting these products or tests to market as fast as possible to help people. 

Balancing Efficiency and Compliance 

Let’s look at another major concern in highly regulated environments, and that is the balancing act that has to take place between efficiency, a significant focus for Lean Six Sigma, and compliance, a primary focus for the industries themselves. 

It’s unfortunate that Lean Six Sigma’s efforts to eliminate steps in process development that don’t add significant value might be construed as cutting corners in regulated industries. 

One potential example is examining healthcare and determining how much patient documentation is actually needed. Reducing the amount of documentation could violate HIPAA standards, which could mean serious penalties. 

Not Very Flexible 

Another non-surprising development in highly regulated industries is that they have standardized processes that can only be altered through a highly regulated (there are those words again!) process. As said differently, if you are trying to integrate Lean Six Sigma into the financial world, you have to navigate regulations like anti-money laundering processes that follow strict standards. 

The reality is that Lean Six Sigma won’t be able to alter this process, so it restricts the focus to non-regulated processes or just makes for smaller, less impactful improvements. 

Potential Cultural Resistance to Change

Organizations Are Risk-Averse

Highly regulated organizations and industries have a risk-averse mindset, which I personally experienced after a decade in the telecommunications world. These organizations and industries don’t want to rock the boat any more than they must, so the focus is more on stability than improvement. 

Suppose you try to ask aerospace engineers how they can effect change in the building of airplanes to cut out wasteful processes. In that case, they might indicate that doing so would compromise safety standards. The reality is that the data might not support this argument, and safety wouldn’t be compromised, but it’s hard to convince these individuals otherwise. 

Leadership Buy-In

One of the biggest hurdles in a Lean Six Sigma rollout, regardless of whether the industry is regulated, is the lack of leadership buy-in. If middle management doesn’t see that leadership is all in on making changes stick and in a very convincing way, it will be incredibly hard to bring along everyone else in an organization. 

Perhaps more importantly, if leaders are not buying into Lean Six Sigma changes, the project might not get the resources, including budget and manpower, it needs to not just be completed, but thrive. 

Training Employees

Employees in highly regulated industries are unlikely to have significant Lean Six Sigma training, but are very trained in regulation and compliance. As a result, their already heavy workloads will create a barrier to adopting these types of processes. 

If a regulated industry wants to create a work environment that is responsive to continuous improvement, extensive training is required to ensure employees know the benefits. Training also requires a budget from leadership, so there is a direct tie between these two challenges. 

The key here is that the idea of “we’ve always done it this way” is a hard mentality to break.

Navigating Data Overload and Complexity

Legacy System

It might be surprising that legacy systems are still prevalent, but they shouldn’t be as commonplace as in highly regulated industries. This means that data is floating around everywhere, but there is no universal touchpoint. Rolling out Lean Six Sigma, which relies heavily on data analysis, will be a real challenge, as a team needs to bring together legacy data systems that don’t necessarily work with one another. 

Documentation Requirements

Another significant hindrance in any LSS rollout is the necessity for detailed documentation of every process step. If you want to change the pharmaceutical world, there has to be a Change Control Record, which could add weeks to the Improve phase of DMAIC. The same can be said for Sarbanes-Oxley in finance, which can also slow down Lean Six Sigma’s data-driven focus. 

Sensitive Data Concerns

Sticking with healthcare as a prime example of where LSS challenges can arise, you will have to work with limited access to sensitive data if you have to navigate things like HIPAA. This means an organization would attempt to determine its goals with incomplete data when assembling a Lean Six Sigma analysis. 

In other words, if you are trying to look at how to improve wait times in a hospital but can’t access electronic health records, you won’t get a complete picture of just how long every patient waited before being treated. 

Strategy to Successfully Implement Lean Six Sigma

Leadership Buy-In

If you consider implementing Lean Six Sigma successfully, you must get leadership on board. This will be one of the most important aspects of any successful rollout, which means you need support from senior leadership to support Lean Six Sigma initiatives. 

Another potential consideration is working closely with leadership to understand how to engage with anyone involved in regulatory matters early on. Stressing the importance of working alongside any regulations will ensure a heavy focus on a successful rollout from the start. This will also ensure that Lean Six Sigma is not just an afterthought but a centerpiece of any process improvement strategy right from the start. 

Phased Projects

Starting small with either phased or pilot projects within a highly regulated industry might be helpful. Instead of creating an entire organizational change, start with just one aspect of the organization and show that results can be impactful. Once this data is available for senior leadership, you can get additional buy-in to move on to larger-scale deployment of Lean Six Sigma processes. 

Cross-Functional Teams

It cannot be emphasized enough how important it is to have cross-functional teams in place and aligned with any Lean Six Sigma strategy rollout. There must be strong representation from different teams like R&D, legal, manufacturing, quality assurance, and others that can all help ensure that any implementation of Lean Six Sigma recommendations will be smoothly implemented and not break down the current regulatory processes. 

Training 

The final piece of any puzzle related to Lean Six Sigma rollouts in highly regulated industries will be training. Specialized training for employees, especially those who navigate regulatory frameworks, will be critical to showcasing how Lean Six Sigma can succeed while maintaining or improving existing quality standards. 

Other Useful Tools and Concepts

It’s clear that the main idea of rolling out Lean Six Sigma is implementing process improvements to improve the customer experience. If you want to learn more about this, consider how it’s important to empower cross-functional teams to break down any barriers to a successful LSS rollout. 

Similarly, you might want to learn more about harnessing big data to see what opportunities and challenges it can present in a Lean Six Sigma world. To tie all of this together, you might want to look at different case studies of how startups scaled using Lean methodologies to get a real sense of how well this can work in highly regulated industries and otherwise. 

Conclusion 

Today, highly regulated industries are undoubtedly among the most resistant to change. For good reason, these businesses don’t want to rock the boat without worrying about upsetting regulatory agencies or potentially harming a customer, which could be detrimental to the business in the future. The good news is that some of the fears are great, but there are ways to work around them.