On the surface, the DMAIC roadmap and the concept of innovation appear to be mutually exclusive ideas. At least that’s what many critics have claimed is the Achilles’ heel of the Six Sigma methodology. Six Sigma and innovation, after all, tend to personify a natural tension that exists within quality-enhancing activities at any organization – a tension between exploitation and exploration.
The general wisdom holds that Six Sigma is an “exploitation” activity, while innovation is usually associated with “exploration.” When I speak of exploitation, the term is not being used to describe the act of gaining advantage through unfair means. Instead, it is to transform an organization’s inputs into profitable outputs under its existing business model. As for exploration, the term here refers to the organization’s efforts to pursue new potential business models, novel product or service areas, or both. In short, the former is concerned with current practices, while the latter focuses on discovering new ideas.
However, innovation and Six Sigma do not need to be combatants. In fact, they can act as compatriots; and in some cases Six Sigma can actually be seen as an innovative approach. To get a better understanding of innovation and it complex, ambiguous relationship with Six Sigma, it helps to dig deeper into the definition of innovation. As I see it, innovation transforms the useful seeds of invention into widely adopted solutions that are valued above every existing alternative.
Shared Goals, Different Outcomes
Both Six Sigma and innovation have a distinguished history. The concept of innovation dates back nearly 500 years, as a derivation of the Latin term innovare, which is interpreted as “to renew or change.” In the modern era, the most-often-referenced godfather of innovation is Joseph Schumpeter, a 1930s-era economist. Meanwhile, Six Sigma has been used by organizations for more than 25 years after getting its start at Motorola and being popularized by GE and other corporations.
Regardless of the differences in approach of these methods, most people can agree that both Six Sigma and innovation are focused on improvement. However, while Six Sigma is based on decreasing variability, innovation focuses on increasing value. Sometimes an increase in quality through a decrease in variability does create increased value for the customers; sometimes it doesn’t.
How could increased quality through and decreased variability not lead to an increase in value? The key lies in the “widely adopted” terminology of my innovation definition. New solutions may provide an increase in value that is obvious to the inventor, but not to the customer. The customer may even perceive the new product or service as a decrease in value, which, in turn, will prevent the solution from being widely adopted. This is what can keep a mere invention from graduating into a true innovation.
This discrepancy in perception between the inventor and the customer is why things like the incandescent light bulb and the traditional mousetrap stay around for so long, despite the introduction of other potential solutions.
While Six Sigma and innovation are not mortal enemies, there are some key differences between them that create natural conflicts. These differences require managers to remain vigilant about how they should merge the use of these two approaches (if at all) in their organizations.
The main tension between the two approaches is that Six Sigma requires accurate measurement. How else but through measurement will you know whether a Six Sigma project has resulted in decreased variability and a sustainable improvement? On the flip side, the more radical or disruptive an innovation project is, the more difficult it will be to measure accurately the expected risk of the project and the projected profitability and adoption possibilities.
A great example of the difficulties of forecasting risk and outcomes is the Segway transportation device. Imagine you were in charge of the project back in 2000. How would you size the market? How would you forecast the media response? How would you estimate the risks to the project posed by sidewalk regulations? How would you measure consumer readiness?
Most forecasts for new products or services are based on old forecasts, a naturally flawed measurement approach. However, forecasting simply loses all credibility when it is applied to disruptive innovations. This inherent uncertainty is why successful innovation is often the result of asking the right questions, while success with Six Sigma is often the result of finding the right measurements.
The mindset created by the need for accurate measurement is congruent with typical executive thinking, which brings me to another common tension in business – that between the executive and the entrepreneur. Mismanagement of this tension is one of the greatest obstacles that prevent organizations from innovating sustainably.
Let’s compare these two mindsets:
- The Executive Mindset – Executives typically are focused on what they can do to avoid failure. They tend to focus on doing everything they can to make the trains run on time, so to speak.
- The Entrepreneurial Mindset – Entrepreneurs typically are focused on trying to do whatever they can to create success. When faced with train delays, entrepreneurs tend to ask, “Why take a train?”
These natural tensions mean that managers have to be careful when implementing Six Sigma in some of the more creative aspects of the business. Otherwise, there is a real possibility of stifling the unstructured thinking in areas such as design and research and development (R&D), where partial ideas need to be collected and connected to form strong innovation candidates.
DMAIC for Innovation
Although managers must take care in implementing Six Sigma in the more creative aspects of the business, there is a way to implement the DMAIC roadmap within these functions. I have stretched its usage a bit further and created a DMAIC roadmap for innovation.
Imagine that you work for an automobile manufacturer and you are asked to solve the following technical challenge: “How would you make our automobiles use less gasoline?”
Think about what your approach would be. Some might focus on making the automobile lighter; others might focus on making the engine more efficient. Still others would focus on making the car more aerodynamic, and a few would think about ways to make it ran on something other than gasoline. The results you get will depend on the innovation questions you ask.
Any successful innovation effort begins with a cross-functional innovation leadership team defining what innovation means for the organization, establishing a common language and clearly communicating this message to the organization. While it is sometimes good to have people going off in many different directions at once, that needs to be a conscious choice; otherwise, the innovation energy of the organization will dissipate and little will be achieved. Defining a common language around innovation will help focus this energy.
Articulating an innovation vision also will help provide this focus. A vision is about the “where” and the “why,” not the “what” or the “how.” Jack Welch, former CEO of GE, once said, “Good business leaders create a vision, articulate the vision, passionately own the vision and relentlessly drive it to completion.” An innovation vision can help employees answer questions like, “What kind of innovation are we pursuing as an organization?” or “Why should employees, suppliers, partners and customers be excited to participate?”
Organizations also must define their innovation strategy. This is not merely an agenda for new product development or a technology roadmap from R&D. Instead, an innovation strategy identifies who will drive a company’s profitable revenue growth and sets the innovation direction for an organization toward the achievement of its vision. A well-defined innovation strategy helps the organization define which innovation challenges to focus on and what tactics will best help the organization conquer those challenges. At the same time, it serves as a map to refer back to as projects and ideas are being evaluated, so that, ideally a link can be maintained between the organizational and innovation strategies.
While it is often harder to estimate the market size for true innovations than it is for line extensions or product improvement projects, it is still important to measure certain things related to innovation. Here are some key innovation measurement questions that need to be asked:
- What are the organization’s innovation goals?
- What is the capacity for innovation in the organization?
- What is the organization’s appetite for risk?
- How will the organization finance innovation projects?
- How will the organization measure the innovation’s success?
Innovation requires a great deal of analysis. This includes analysis of the key insights from which the team generates ideas; analysis of the brand equity and capabilities of the organization that can be leveraged; analysis of what direct and adjacent competitors are doing now; and analysis of the future strategic actions that competitors are expected to take. In completing this analysis, it is useful to use a methodology like Rowan Gibson and Peter Skarzynski’s four lenses from Innovation to the Core (Harvard Business Press, 2008):
- Challenging orthodoxies: Questioning deeply held dogmas inside companies and inside industries about what drives success.
- Harnessing discontinuities: Spotting unnoticed patterns or trends that could substantially change the rules of the game.
- Leveraging competencies and strategic assets: Thinking of a company as a portfolio of skills and assets rather than as a provider of products or services for specific markets.
- Understanding unarticulated needs: Learning to live inside the customer’s skin, empathizing with unarticulated feelings and identifying unmet needs.
The Analyze phase is not simply about generating insights; it also is about generating the ideas. When it comes to innovation, people don’t always realize that their “great ideas” are actually only partial ideas. So, another part of the Analyze phase, when it comes to innovation, is the connection of partial ideas to create potentially complete solutions. During Analyze, there also is a great opportunity to take these raw ideas and make them better. The crescendo of this phase is the analysis of all of the potential ideas, their evaluation by cross-functional teams and the final picking which ideas to fund.
The Improve phase is about getting down to business, developing the selected ideas and creating the actual innovation. This includes prototyping, market testing, customer feedback and – most importantly – learning and iterating. A key part of this iteration is finding the right questions (and answers) to highlight reasons for potential market success or failure.
But there is another part of innovation that is often under-appreciated: the role of communication. When bringing an innovation to market, an organization also is bringing new value to customers that they may not understand intuitively.
Too often, companies fail at innovation because they ignore the importance of communication. How can you contribute to the improvement of an idea if you don’t understand what it is or the magnitude of its impact? Internal communication can help turn employees into passionate believers and supporters of the ideas. Externally, communication can help explain the new value for an incremental innovation, or to educate the customer about the value of a disruptive innovation.
Control is about making innovation repeatable, sustainable and successful in the organization. How do you make innovation a deeply embedded capability of the organization? The organization must move from pursuing a “firefighting” approach to innovation and instead create a continuous process with organizational commitment at every level.
Organizations can work to build a company culture with improved tolerance for risk and an understanding that failure is a real possibility. Instead of avoiding failure, innovative companies seek success and mitigate failure through a portfolio approach (working on a collection of strategically similar projects at once) and by embedding an ability to learn fast from failure or success.
Other methods to ensure that innovation is ingrained in an organization’s core values include:
- Building an organizational structure and policies that enable resource flexibility and movement of resources to projects where they are needed most.
- Creating a culture that supports the free flow of information to employees about customer insights and the value of innovation.
- Providing the leadership commitment, the processes and tools, the rewards and recognition, and the skills training necessary to create a sustainable innovation process culture.
Six Sigma and innovation can co-exist. While the terminology of each approach may differ, it is possible to create a shared vocabulary and a shared understanding of how the two methods of creating positive business change can work together. The key is to find the proper balance between chaos and structure, exploration and exploitation.
Innovation and Six Sigma actually have a lot in common. To achieve high levels of quality and continuous innovation, practitioners of both methods require commitment and a professional approach. If you can embed quality into your products, you can also embed innovation into your organization.
About the Author: Braden Kelley is the author of Stoking Your Innovation Bonfire (John Wiley & Sons, 2010). Kelly also is a public speaker, editor of the “Blogging Innovation” blog and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Follow @innovate on Twitter.