The role of the project charter in Six Sigma initiatives is well understood. It provides the informational architecture for the project and accordingly can either make or break the project. And while specific charter content is unique to different organizations, author Zack Swinney captures a number of these areas in a very useful and valuable iSixSigma article titled “Six Sigma Project Charter.” The list begins with project title, and ends with project time frame. Included in the list are such issues as:
- Cost of poor quality: This is a quantification of the cost of poor quality to include scrap, fines, wasted hours, etc.
- Process improvement: This details the process to be improved.
- Process problem: How is the process broken or not functioning properly?
- Process start and stop points: This sets up the parameters of the project, its boundaries.
- Project goals: What are the results from this project?
- Process measurements: What measures will be used to assess the performance of the project results?
These informational areas really get to the essence of the deployment. However, two other areas of information that are critical to the long-term success of the Six Sigma effort need to be added:
Does Project Detract from Value Being Provided?
The first is to account for how a project might detract from the value a company is providing to its customers. Continuous improvement initiatives often focus on cost reductions and reducing the waste associated with specific processes. They are often identified by individual within the organization and may be informed by some customer information including complaints, returns, interviews, etc.
Unfortunately, too many projects can be initiated for short-term economic gains ultimately at the expense of longer term strategic advantage. In other words, cost cutting can trump the organization’s capacity to provide value to customers by cutting areas that are essential to the organization’s capacity to deliver value and compete effectively. Cutting certain inventories, parts depots, personnel, product lines, among other, can reduce the organization’s competitive value proposition.
Often the question “Do these cuts harm our competitive value proposition?” goes unasked. Not only is it important to ask this question but it is equally important to ask for evidence or proof that the project is not going to reduce customer value. To answer this question the organization must know and understand how customers define value and how the organization’s value delivery system provides or does not provide this value. Projects that can potentially detract from the organization’s competitive value proposition occur when multiple projects are undertaken, some of which may actually compete with others and have unintended consequences. Requiring an analysis of whether the project will potentially detract from the organization’s competitive value offering and providing evidence of this conclusion reduces the probability of value detracting outcomes.
Does Project Add to Value Being Provided?
If a Six Sigma project does not detract from the value provided to customers, does it actually add value? Again, answering this question requires the organization to understand how customers define value and how the value delivery system works. The answer to this question also requires evidence. Is the value being added important? Does it enhance the value sufficiently to create a differential value advantage? Does it extend a value advantage that the organization enjoys or does it close a value gap that is impeding the company’s penetration of its market?
The answer to these questions requires the organization to understand in detail what the critical-to-quality elements (CTQs) are, their relative importance to the customers, and the organization’s performance on these CTQs relative to key competitors. Focusing on a relatively unimportant CTQ, one that has marginal contribution to customer value, may cost more than the revenue that its improvement generates.
Additionally, the project should focus on an area that is within the strategic scope of the organization. As the number of projects increases the probability that some of them may lie outside the strategic scope of the organization. These result in investments that provide, by definition, no strategic return and become a form of waste themselves.
Defending Competitive Value Proposition
Adding these requirements to the project charter forces the organization to understand its competitive value proposition and how changes to its processes will either enhance or detract from that proposition. The organization’s competitive value proposition is one of its most important assets. It has the ability to both attract new customers and retain current ones.
Value is a strong predictor of market share, top line revenues and overall competitive performance. Continuous improvement projects undertaken without an understanding of how they may subsequently impact the organization’s competitive value delivery system run the risk of harming one of the organization’s most important assets. A project charter that clearly articulates consequences to the organization’s competitive value proposition reduces this risk and insures a more strategic and value laden outcome.