iSixSigma

A Competitive Edge

Using Six Sigma has proven highly successful in addressing internal issues where the focus is on reducing production defects and costs. One way to take the methodology to the next level is to integrate it with the marketing function. Marketing offers a portal to an organization’s external environment – the competitive marketplace – where the emphasis is on increasing market share and revenues.

The New Collaboration

Achieving this integration of Six Sigma and marketing requires significant changes in the way both communities – those internal to an organization and those business communities as a whole – think and interact. “Six Sigma marketers” should go beyond mere defect and cost reduction in marketing processes. They should concentrate on opportunities to use the discipline and methodology of Six Sigma in the organization’s value delivery system, encompassing processes that begin with customer contact and order placement.

Given the discipline and structure of Six Sigma, organizations should focus on integrating marketing into Six Sigma, rather than trying to fit Six Sigma into marketing. Six Sigma training should expand its purview to include a focus on increasing market share and top-line revenues. The integration would require new training because the leap from cost cutting to market share growth involves changing mind-sets, as well as learning new measurement and management tools.

The following shifts are fundamental in helping organizations adapt to a more powerful, aggressive and liberated approach to the marketplace.

Speed to Customer » Speed to Market

A fundamental precept of Six Sigma is speed, usually expressed in terms of speed to the customer. The premise behind this is that the less time involved in producing a product, the lower the cost. This thinking works within the limited confines of the production facility, but when applied to the greater arena of the marketplace, speed to market should be the metric. The first to market is usually the one best positioned to achieve rapid gains in market share and market dominance.

VOC » VOM

Current thinking puts the voice of the customer (VOC) as the principal director of Six Sigma activities. VOC focuses on the organization’s customers as the source of information but does not necessarily account for changes in market dynamics that can affect market share. These changes include competitive actions and reactions, new product introductions, new legislation and rules, new technology and new competitors. Gauging changes in market dynamics requires the organization to monitor not only its customers but also its competitors. These dynamics are captured in the voice of the market (VOM).

Market Segments » Product/Markets

A market segment is a group of customers who have similar needs or wants. For example, buyers of tractors can be divided into agricultural buyers, part-time farmers and estate owners. These needs and wants are not only specific to different types of customers, but also are impacted by the products and services these customers use. Agricultural tractor buyers want high-horsepower vehicles, while estate owners want small tractors. Each product/market (large tractors/agricultural buyers or small tractors/estate owners) represents a different source of VOM for the organization. Each product/market will have a distinct set of critical-to-quality factors (CTQs) that drive the value equation.

4Ps » 5Ps

Every marketing undergraduate understands the 4Ps – price, product, promotion and place (distribution). To this group should be added a fifth P: process. Much of an organization’s value arrives in the marketplace via a set of processes – order delivery, repair, customer support and parts delivery, to name a few. These processes provide a fertile area for value enhancement.

Customer Satisfaction » Customer Value

Conventional wisdom dictates that a satisfied customer is a profitable customer. Many organizations are learning, however, that investing in customer satisfaction efforts has not produced increases in market share or revenues. In fact, many organizations are seeing strong customer satisfaction scores in the face of declining market share. The metric that is the best leading indicator of market share is customer value, the interaction of quality and the price that the market is willing to pay for this quality. The greater the sustainable value an organization can create, the greater its share of the market.

Internal Customer » End User

There is only one customer – that is the individual who buys and pays for the organization’s products or services. Too many organizations focus on internal customers (IT personnel, auditors, accountants, etc.) for advice in process improvement. Organizations must let marketing lead the charge in end-user identification and in understanding how customers define value and how to get this information back to the quality experts within the organization. Marketing can provide a clear line of sight to targeted product/markets and the needs of their buyers.

Manufacturing Floor » Marketplace

Unlike the relatively controllable confines of the manufacturing floor, the marketplace is a more seemingly chaotic environment. Marketplace dynamics – changing legislation, new competitors and so on – are, for the most part, uncontrollable. To better understand changes in value definitions brought on by new competitors, organizations will have to access new and more powerful training in sampling and multivariate statistics, such as factor analysis, cluster analysis, multiple regression analysis and value modeling.

Cost » Revenue

If cost reduction is the prize of conventional Six Sigma, then revenue generation is the holy grail of Six Sigma in marketing. Clearly both efficiency (cost reduction) and effectiveness (revenue generation) are important to the well-being of the organization because they both drive profitability.

Customers » Markets

Instead of simply embracing customers, organizations must understand how markets define value and then become the dominant value provider. An organization gains market share by customer acquisition, retention and loyalty (willingness to repurchase, sign new contracts and upgrade).

DMAIC » DMAIC

The traditional DMAIC roadmap remains basically the same in the integration of Six Sigma and marketing, though some components would have to be different. Here’s a look at the five phases of DMAIC, focused on marketing:

  • Define focuses on defining the market opportunities (product/markets) offering the greatest opportunity for growth and on quantifying the degree of opportunity, such as product/market growth.
  • Measure focuses on collecting VOM for the targeted opportunities identified in the Define stage.
  • Analyze, a critically important phase, emphasizes identifying how the product/market defines value, complete with the CTQs and a clear understanding of the quality/price relationship. This phase will require the identification and quantification of: 1) the value propositions of the key competitors, 2) the value gaps that exist between the value leader and the organization, and 3) the key people, product and process issues that underlie this value gap.
  • Improve involves developing solutions that target the underlying causes of the value gap, with an eye toward strengthening positive gaps where the organization has a value advantage and improving negative gaps where the organization has a value disadvantage.
  • Control requires the development of measurement systems to monitor market changes in the organization’s value proposition and market share.

A Better Competitor

Integrating Six Sigma into the marketing function may be more possible in organizations in which Six Sigma is strongly embedded. Incorporating this marketing mind-set in the training of new Six Sigma practitioners is a long-term investment, but one that will allow the organization to ramp up its strategic capacity to compete more effectively. Bringing marketers into the Six Sigma fold may help organizations to jump-start the integration process.

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