DMAIC for Innovation
As I get my feet wet in the health insurance industry and start to move forward in crafting a plan to deliver improvements and innovation to the membership and billing organization, it is very clear that the organization is very focused on Lean and removing waste from its processes.
In the spirit of Lean and process improvement, I thought I would share some thoughts on Six Sigma and the DMAIC (Define, Measure, Analyze, Improve and Control) framework that I pulled together. In future articles, I will share my thoughts about Lean and its intersection with innovation.
But in the meantime, here is my DMAIC for innovation...
Can the popular Six Sigma framework be adapted to look at innovation? Much has been written about how a formal Six Sigma approach and a formal approach to innovation cannot co-exist. But is that really true?
On the surface, these two formal approaches personify the natural tension between exploitation and exploration activities within any organization. Six Sigma is generally thought of as an exploitation activity, while innovation is usually associated with exploration. When I speak of exploitation, I’m not speaking of child labor and deforestation, but of optimizing the transformation of organization’s inputs into profitable outputs under its existing business model. And when I speak of exploration, I’m referring to the organization’s efforts to pursue new potential business models, new product or service areas, or both.
Let’s look back before we look forward.
A brief history The Six Sigma methodology is celebrating its 25th anniversary this year after being developed by Motorola back in 1986 and popularized by GE and others. As many of you know, Six Sigma began as a methodology focused on improving quality, but over time organizations have adopted and adapted the methodology to encompass activities focused on continuous improvement and on cutting costs.
Meanwhile, innovation dates back nearly 500 years as a term to the Latin innovare, which is often interpreted to mean “to renew or change,” and the most often referenced godfather of innovation is Joseph Schumpeter (1930). So despite being focused on the new, the philosophy of innovation is actually older than that of Six Sigma.
But, so what?
The people who see innovation and Six Sigma as compatriots and not combatants are correct. This is because in some cases, Six Sigma can actually be seen as an innovation approach--but not in every instance.
Say what?
Let’s look at my definition for innovation and then dig a little deeper, and this ambiguity will make more sense:
“Innovation transforms the useful seeds of invention into widely adopted solutions valued above every existing alternative.”
Shared goals, different outcomes I think we can all agree that both Six Sigma and innovation are focused on creating improvement. However, while Six Sigma is focused on achieving improvement by decreasing variability, innovation is focused on achieving improvement by increasing value. Sometimes an increase in quality through a decrease in variability does create increased value for the customer and sometimes it doesn’t.
Say what? When would an increase in quality through a decrease in variability not lead to an increase in value for the customer?
Well, one important component of my innovation definition above was the end bit--“valued above every existing alternative--and widely adopted”--which is the real key. New solutions have an obvious increase in value (that the inventor always sees), but at the same time they generally have an accompanying decrease in value for the customer (that often an inventor fails to see) that prevents their solution from being widely adopted (and thus staying an invention instead of graduating to become an innovation).
It is therefore possible for a new solution to deliver increased quality but actually destroy value for the customer--and not be widely adopted as a result. This is why things like the incandescent light bulb and traditional mousetrap stay around for so long despite the introduction of other potential solutions.
Natural conflict You should see by now that while Six Sigma and innovation are not mortal enemies at their cores, there are differences that create natural conflicts. This requires managers to be aware and to consciously manage how they are going to use these two approaches together (if at all) in their organizations.
The main tension between the two approaches is that Six Sigma at its core requires accurate measurement. How else 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 attempting to be, the more difficult it will be to accurately measure both the expected risk of the project and the expected profitability and adoption possibilities.
A great example of the difficulties of forecasting risk and outcomes is the Segway. Imagine you were in charge of the project back in 2000. How would you size the market for personal transporters? How would you forecast what the media response would be? How would you estimate the risks to the project posed by sidewalk regulations? How would you measure consumer readiness accurately?
We all know that most forecasts for the new are based on the old, and that this measurement approach is flawed, but it loses all credibility when applied to disruptive innovation projects--and we have to accept that. This inherent uncertainty is why successful innovation is often the result of finding the right questions, while success at Six Sigma is often the result of finding the right measurements.
The mindset created by the need for accurate measurement is congruent with the executive mindset, which brings me to another of my favorite tensions in business--that between the executive mindset and the entrepreneurial mindset. Often, not effectively managing this tension--more than any other--prevents organizations from being able to successfully innovate in a sustainable manner. Let’s compare these two mindsets:
The executive mindset: Executives typically are focused on what they can do to avoid failure. Executives 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. Entrepreneurs tend to ask questions like, “Why a train?”
These natural tensions mean that managers have to be careful not to make adoption of Six Sigma methodologies too widespread. Otherwise, there is a real possibility of stifling the unstructured thinking in the more creative areas of the business, such as design and R&D. This is especially true where the initial stages of idea discovery take place--when partial ideas need to be collected and connected to form strong innovation candidates.
Linking Six Sigma to innovation In organizations using Six Sigma and innovation, there are real opportunities to use the two together. Maybe it is in using Design for Six Sigma (DFSS) in the later stages of your innovation process to ensure that your new products and services deliver the same level of quality as your existing product or service portfolio. Or, with open lines of communication between your innovation and Six Sigma groups, maybe there are opportunities for:
Six Sigma groups using an expanded methodology focused on continuous improvement to pass interesting improvement ideas that are a bit too radical to be accurately measured, or just a bit too variable. The innovation group, on the other hand, might be able to collect and connect the dots, or to challenge the right other areas of the organization or its partner/supplier/customer ecosystem to find a workable solution.
Innovation groups enhancing, evaluating or developing ideas might be able to reach out to people in the Six Sigma group for help in either identifying better ways of measuring potential performance of different ideas, or possibly even for help in knocking down certain obstacles that might arise in the commercialization of ideas.
Six Sigma groups to leverage the innovation group to help them identify solutions that can achieve Six Sigma results when they can’t identify potential solutions internally capable of producing the requisite level of quality within accompanying tolerances for variability.
