Monday, October 26, 2015

Kaizen, Lean, Six Sigma - What's the Difference?

Kaizen, Lean, and Six Sigma are all business improvement approaches.  They can be thought of as three different tools in the business leader’s toolbox.  It is important to understand the focus and purpose of each.  Using the wrong tool will not fix the problem, and it may make things worse.  As an illustration, if I have three tools: a hammer, a screwdriver, and a wrench; I must use the correct tool to accomplish my goal.  I must use a hammer to drive a nail; a screwdriver will not do the job.  However, if I need to remove the cover of a light fixture from the ceiling, I will want to use a screwdriver.


Kaizen can be summarized as, “Fix the next problem.”  Kaizen is a team-based problem solving technique.  Kaizen puts focus on a problem to understand it and solve it – then on to the next for continuous improvement.  A Kaizen project is normally requires only a few days to complete.  The Kaizen team is usually dedicated to fixing the problem during those few days. 

The Kaizen team employs data collection techniques and uses basic problem solving tools to understand the root cause(s).  They then create a solution (within the boundaries and constraints given them by management – such as budget or time) and an implementation plan for the solution.  Often the Kaizen team is empowered by management to immediately implement their solution. 

Kaizen works very well with problems that have a singular root cause, or to improve new and emerging business processes that have “low hanging fruit.”  Kaizen is not as effective at solving complex system problems or transforming an entire business operation. 


Lean can be summarized as, “Eliminate waste from the flow.” Lean is a process analysis problem solving technique.  Lean focuses on mapping a business process flow and identifying all areas of waste – time waste, cost waste, and wasted activity. 

A Lean analysis for a process normally takes one week to one month, (depending upon the nature of the process).  Once the analysis is completed and solution options identified, the implementation of change can take several days to several months, depending upon whether facility or system changes are needed.  Lean will consider all aspects of how a process is performed, from the process controls, operator training, facilities and systems used, and the process measurements.  Often the team conducting the Lean project is the same individuals with day-to-day management responsibility for the process.  They will lead the change implementation. 

Lean works very well for improving business processes that have a continuous or regular flow.  Lean is not as effective for processes that are only occasionally performed or for problems that have suddenly emerged.

Six Sigma

Six Sigma can be summarized as, “Remove variation.”  Six Sigma is a process control problem solving technique.  Six Sigma focuses on measuring the outputs from a process, aligning those outputs with customer expectations, and then controlling the process so that the outputs stay aligned.  Six Sigma uses a structured five phase project management approach: Define, Measure, Analyze, Improve, and Control.  Six Sigma establishes a permanent management control system to ensure the process maintains a minimal amount of variation in process output. 

A six sigma analysis will normally start with several weeks of data collection, once the real-time data collection system is established.  The data will undergo statistical analysis to understand all sources of variation so that they can be either eliminated or controlled.  This often takes weeks or months to complete the analysis and testing of hypotheses.  The new control system is then implemented and used for day-to-day management of the process by process operators and managers.  Because of the extensive use of statistical analysis, often a Six Sigma team will include several people with process knowledge and several people who are Six Sigma Black Belts or Green Belts.  The solution will often require a change in management control processes and procedures and usually requires changes or upgrades to various business systems. 

Six Sigma works very well with complex business systems that have known performance goals.  Six Sigma is not as effective with processes that have changing requirements.  Also, Six Sigma is a cultural change for management and employees since all process control decisions are data-driven rather than using intuition.  Management no longer is providing direct process supervision, but is acting more as a coach, facilitator, and strategic decision maker.   Operators are now responsible for making the day-to-day decisions required to achieve desired process performance.  This culture change can take a long time.


Six Sigma
Cross functional team
Process management team
Team with process knowledge and statistical expertise
2 -5 days
2 weeks to 2 months
3 – 6 months
Find and fix a problem with clear root cause(s)
Improve process flow – time, cost, and quality
Control process output to consistently meet customer expectation
Typical Tools: data collection, brainstorming, root cause analysis, basic quality tools
Typical tools: value stream mapping, data collection, process analysis tools, Kanban, value-added time
Typical tools: data collection, process capability analysis, statistical hypotheses testing, Gage R&R, DOE, control charts
Limitation: Has difficulty addressing complex problem
Limitation: Requires a consistently used stable process
Limitation: requires expert knowledge and culture change


These approaches can be used simultaneously and in concert with each other.  A few example scenarios are described below.  These are for illustration only; your business conditions may not precisely fit these:
  • A new operation is having many problems at startup.  I would start with Kaizen projects to solve any “Crisis” problems and begin to establish some predictable performance.  Once the big problems are resolved, I would follow with implementing Lean to remove waste and inefficiency from the process.  This will improve cycle time, cost and quality.  I would then implement Six Sigma to establish a control system to manage the process.
  • An existing operation is undergoing a major upgrade for new products or systems.  I would start with Lean.  Map the old and new processes to understand and communicate the changes.  As the new process is introduced, I would assign Kaizen teams to resolve unexpected problems that arise.  Once the new process is stable, I would implement Six Sigma to establish a control system to manage the process.
  • An existing stable process does not meet industry benchmarks for cost or quality.  I would start with Six Sigma to ensure the process is aligned on customer value and then determine the issues within the process.  If issues are due to singular root causes, I would use Kaizen teams to solve those problems.  If the issues are due to systemic problems with organizational processes, I would use Lean to understand and improve the process.  (If issues are due to complex business and system interactions that are inherently unstable, I would not use either of these techniques but would rely on a Design of Experiments analysis.)

Business conditions should be used to determine an approach that is best suited for achieving your goals and objectives. 

Monday, October 19, 2015

De-mystifying Earned Value – Cost Account Manager

In many cases, tell a project manager they must use earned value analysis on a project and you will hear a groan.  Earned Value Management has been tainted with an aura of overwhelming bureaucracy and incomprehensible numbers and ratios.  While some organizations may have done their best to confuse and confound project managers and project teams with Earned Value Management – it is really a very basic and easy to use set of project analytics.  This blog post will explain the role of the Cost Account Manager.  To learn more about de-mystifying earned value, download my ebook on the topic which can be found at the end of this blog.

Cost Account Manager

A common question when an organization embraces earned value management is, “Who does the earned value analysis?”  Earned value is usually a shared responsibility between the Finance, the project manager, and the Cost Account Manager (CAM).  Finance does the system work and prepares the formal report.  The project manager and CAM do the project level work and interpret the analytics.  On small projects, there may only be a few cost accounts and the project manager will normally act as the CAM for the entire project.  On large projects there can be dozens or even hundreds of cost accounts.  On those projects, CAMs will be assigned to each cost account and the project manager analyses earned value metrics at the project level.  Often I find that one CAM will have responsibility for several accounts.


The CAM’s responsibility starts at the time of project budgeting.  The CAM should either create the estimate for the work in their accounts, or review the estimates being created by others to ensure accuracy.  There are four areas of particular concern that a CAM must closely review:
  • A clear definition of the end of the task – the definition of done – and any assumptions associated with the work are validated with the rest of the project team and stakeholders.
  • The expected start and finish date of the task are based upon the final project schedule.  Schedules often are developed iteratively and the dates for activities may change several times in the planning stages of the project.
  • The estimates for all resources that will be involved on an activity are included.  Task leaders have a tendency to under-estimate or forget about other resources required to accomplish a task.  Therefore the total estimates they provide are too low.  Validate that all organizations and individuals who must work on the task are included in the estimate.
  • What allowance for risk, if any, has been made in the cost or schedule estimates?   This question must be negotiated with the individuals on the task and the project manager.  If the task is a high risk task, either the task estimate should include risk mitigation resources or the project leader should be aware of the risk and have a contingency plan. 

If the task estimators have done a good job, the CAM will only need to spend a few minutes to budget each account and set the Planned Value (PV).  The CAM should strive to get the PV as accurate as possible.  Errors in the PV will lead to variances and variance reporting.  It is easier to take a few minutes up front and get an accurate PV than to write variance reports every month.

Project Execution

The CAM must track project execution and make an Earned Value (EV) estimate for every open task at least once a month.  This normally does not take long.  For tasks that have not started, the EV is zero – no value has been earned.  For tasks that are complete, the EV is the value of the PV – all value has been earned.  So the only tasks requiring any effort for estimating EV are the tasks that are underway during a given month.  For many of those tasks the EV can be set using the 0-100 or 30-70 rules that were discussed in the Variance blog post.  Again, this takes very little time.  The only difficult tasks are those assessing progress at the micro-task level.  If the project was planned at the micro-task level, this is still easy – take credit for all the completed micro-tasks. 

The difficulty is determining the amount of EV for a long complex task that was not planned at a micro-task level.  The common phenomena is that the task stays on schedule until the EV gets to 90% complete, and then it hangs-up at 90% complete for month after month as the project team members try to complete that task.  Be wary of “percent complete” from individuals doing task activities.  Some project team members may tell the CAM what they think the CAM wants to hear in order to avoid conflict and confrontation.   If task leaders are claiming a high percentage complete, the CAM should ask what gives them the confidence to make that assessment.  If they have a good answer, trust their assessment.  If they become evasive or can’t provide any support for their assessment, dig deeper.  In that case, the CAM may need to make their own independent assessment.

A CAM should strive to make the EV as accurate as practical.  An inaccurate EV will lead to errors in the earned value metrics of SV, CV, SPI, and CPI.  When a CAM develops a reputation for always being wrong on their EV, their credibility with Finance, the project manager and stakeholders will suffer.  If any of these believe that the CAM is intentionally providing a wrong EV (to avoid variance reports for instance), the CAM’s integrity and credibility is ruined.  This can destroy the CAM’s career.

Analyzing the Earned Value Metrics      

The CAM is the individual who prepares the variance report and often the CAM will determine which method to use for creating a project or cost account forecast which were discussed in the blog post on Forecasting.  Since the CAM created the PV at the time of project budgeting and provides the EV on a monthly basis, they are usually the most knowledgeable person about the costs and schedule of the tasks in the cost account.  The calculations for variance, performance indices and forecasts are very easy and straightforward.  Therefore the role of the CAM is not primarily one of doing math; rather it is interpreting the values and providing insight to the project manager, project team and stakeholders.  This insight should lead to improved project performance, realistic expectations, and lessons learned that can be used on the next project.  

Monday, October 12, 2015

A Value Creation Platform

Innovation projects often start with a customer needs analysis.  The company wants to understand the “voice of the customer” so that the innovative new products can provide value in areas that are not being serviced.  But what if the product or service is so innovative that the customer can’t even envision it?  The customer doesn’t have any needs because they don’t understand what could exist.

An example is the smart phone with its thousands and thousands of apps.  Customers were not asking for a phone with all the features and functions that are available in the app store when the smart phone was first introduced.  They wanted to make phone calls.  Their customer needs were in the area of call quality, contact lists, and ease of use.  The smart phone platform totally transformed their perception of cell phone value and customer needs.

The key takeaway from an innovation perspective was the creation of a platform that would allow others to create.  This is a form of co-creation - where one innovation is the enabler for hundreds or thousands of other innovations.  Platform innovation is very powerful once it is accepted by the co-creators.  It will transform society and create exponential growth in customer value.

And the smart phone is not a unique example.  If we look back in history we can see other technology platforms that fundamentally changed how people lived their lives.  Customer value and customer needs were radically transformed.  Here are several examples:

  • The printing press invented in 1440.  When the printing press was invented there were very few books and very few people who could read.  If someone had done a market research study and conducted focus groups, printing of books and documents would not be near the top of the list for consumers.  Yet that innovation was the platform that enabled the Reformation and the Renaissance.  Men could easily express and share their ideas with others who were far away.  This led to a rapid growth in knowledge and knowledge transfer. The results were rapid global exploration, scientific breakthroughs, and a surge in the arts.   It also gave rise to new industries that were directly related to printing such as newspapers, magazines, and book publishing.  The ability to read, write, and communicate through the written word is now assumed in modern society.  

  • The electric motor invented in 1834.  The electric motor was the next logical invention following the invention of batteries and the scientific explanations concerning electromagnetic fields.  The motor was first created to be an alternative to steam engines and therefore the emphasis was on bigger motors with more torque.  There was no market research showing the need for small, quiet, and extremely accurate motors.  Rather the availability of the motor and its cost and size led to its rapid incorporation into all types of machinery.  The characteristics of the electric motor – cheap, reliable, consistent torque – were the enablers of machine design and innovation that was an essential part of the industrial revolution.  Today, you cannot find a piece of equipment in a factory that does not have at least one electric motor in it somewhere.

  • The integrated circuit (microchip) patent was filed in 1959. Although the technology was patented, numerous patents were filed by several companies to quickly fine tune the process and soon there were numerous chip manufacturers.  The integrated circuit technology platform allowed for automation and advanced control of virtually every machine and device in existence.  This led to increased performance and more features while also lowering costs and improving quality. A win-win-win-win.  Integrated circuits have re-energized old mainstream industries and have been the enabler for many new industries.

So let’s look at several characteristics of this aspect of co-creation - that is the creation of a technology platform that customers can use to create new families of products.

Open Platform.  The innovation platform was open enough to allow others to innovate their own products using the platform.  Inventors are often very protective of their invention.  It is their baby and they want to nourish it and reap the benefits that the invention creates.  But for a platform innovation to have a game-changing effect, it relies on many others using the platform in their own innovations.  This is the co-creation element.  Creating a platform open to customers and users results in new products and applications, this will further reinforce and benefit of the platform.  The platform inventor must provide the technical support or documentation to allow the platform customers to innovate and co-create value with the platform. 

Platform Support.  The speed of customer co-creation is increasing exponentially.  It was literally over one hundred years after the printing press was invented until the impact of the wide availability of the written word began to be felt.  The electric motor started to proliferate in the late 1800’s – fifty years after its invention.  The integrated circuit was creating a major impact by the early 1970’s – barely ten years after it was invented.  And a large number of commercial apps for smart phones were available within two years of the introduction of the iphone.  The technology adoption cycle is now very short for co-creation innovations.  The platform inventor must be immediately ready and able to collaborate with customers; or they may leave the platform behind and go on to the next new platform.

It is short-sighted for any company that is developing platform technologies to think that they should own the platform and all applications.  That will limit and likely kill the platform.  Instead open the platform up to customers and begin co-creation.  The value that the platform creates at the customer will accelerate both the customer growth and the platform growth. 

Monday, October 5, 2015

Innovation Across Industries

Innovation occurring in one industry can migrate across industries.  In fact an innovation in one industry that is considered an incremental change can be disruptive when it migrates.

This month is National Pizza Month in North America.  In honor of that, let’s examine innovation across industries by considering the case of the pizza printer. 

3-D Printing

The concept of 3-dimensional printing has been around for years.  I first worked with a stereolithography (SLA) printer in the mid 1990s.  This equipment would “print” a 3-dimensional object out of plastic resin.  This was done by creating literally thousands of “slices” of the object that were so thin that they were essentially a 2-dimensional slice through the product.  The SLA equipment then “printed” each slice, stacked them on top of each other and bonded them together. The result was the 3-dimensional object.  

To do this the SLA printer would analyse a 3-D CAD model of an object and create “slices” of the object.  Most SLA equipment then used a photo-sensitive resin and a UV laser to “print” each slice.  The resin would be in a big bath and the laser would print or sketch the pattern for that slice of the product.  The resin would react to the laser by solidifying in the shape that was sketched by the laser.  Once that layer cured, the object was lowered in the bath by a few millimeters and the next layer was printed on top of the first.  The object essentially grew downward into the resin bath.

Over the years other approaches to 3-D printing were developed.  Innovation led to new materials being used that had different material properties of strength, flexibility, and appearance.  New processes were developed that would work with even more materials than just photo-sensitive resins.  The size of the equipment changed allowing bigger objects or very tiny objects with tight tolerances.  Also, the price of the equipment came down as technical efficiencies and user/operator interfaces were improved. 

Today, almost all R&D centers have 3-D printing capability and some manufacturing operations are using these in their standard processes.  Changes and improvement in the technology and equipment are seen as incremental innovation, not breakthrough or disruptive innovation. 

3-D Food Printing

So now let’s migrate the technology to another industry – that of food preparation.  In the R&D and manufacturing worlds, there are 3-D printers using all kinds of material.  What if those materials were pizza dough, pizza sauce and cheese?  You would have a 3-D printer that could print a pizza ready to put into the oven. 

And the added capability of the printer technology is that you could print the pizza in whatever shape you want.  So you could print pizza that were the shape of your team’s logo for a Saturday afternoon party with friends to watch the big game.  Or you could print a pizza that looked like your kid’s favorite TV or movie character for their birthday party.  The options are literally endless.

You might think I am talking science fiction but the technology is here today.  NASA has sponsored 3-D food printing development for astronauts.

In fact, we don’t have to stop at pizza.  There are many other foods that could be printed.  The food printer demonstrated at the Consumer Electronics Show in 2015 and shown in this video could also make cookies and candies.  Why not one to make pasta, pastries, breakfast cereals, chips and crackers?  

If it is processed food, a 3-D food printer can be created to process it into fantastic shapes.  The other benefit of the 3-D food printer is that it can print-on-demand.  Whenever you want it, just give it the design and in a few minutes you have a pizza ready for the oven.  In fact, a logical innovation extension will be for an oven attachment so that the pizza is printed and baked by the same machine.

Innovation Migration

So how do we look for other opportunities for innovation migration?  A key technique is to rephrase what you are trying to do into very generic terms and then investigate how that type of activity is done in other industries. Let’s look at the food printer as an example.

When making a pizza you start with the pizza dough, add sauce, add cheese, add toppings and that bake it in a pizza oven.  A more generic way of saying that is that a pizza is several different materials that are layered on top of each other and then processed.

The second key is to be scanning and reviewing the products, processes, and materials in other industries to find similarities.  You want to intentionally place yourself “outside the box” of your industry to find the similarities and assess whether they can be adapted to your industry and business context.

So in our pizza example, when you look across industries, you quickly find that the 3-D printers today will often have several different materials that are applied in layers to create a basic object and that object is then further processed in order to make it stable and fit for use.  The similarities in function are obvious; it is just changing the materials and the nature of the processing. 

When the product or process migrates from one industry to another, it will often bring new advantages and capabilities with it.  In the case of pizza printing these are ability to print-on-demand and printing different shapes.

Try this exercise in your industry – describe what you do as generically as possible and then look in companion industries for products and processes that do that same generic function.  You may have a disruptive innovation on your hands in no time at all.