Many businesses were hit hard by the recent recession, but a positive aspect of the economic downturn is that it required many companies to examine their processes to identify and eliminate previously unknown waste and inefficiencies . Numerous organizations turned to Business Process Management (BPM) and Six Sigma DMAIC to take advantage of these opportunities. Nevertheless, I have observed many organizations that are confused about Six Sigma and BPM. In fact, some organizations even have separate competing programs and associated business units to manage Six Sigma and BPM efforts. In this blog, I want to examine the differences and look at how best to integrate the two approaches.
DMAIC (Define, Measure, Analyze, Improve, Control) is the Six Sigma methodology that has been used extensively in manufacturing, process control, and distribution related organizations. Six Sigma is now generally accepted as a technique that is being applied to almost all types of industries and environments including offices, service environments, healthcare, and the like. The focus of Six Sigma is to make business processes more predictable and stable so as to minimize variation in outputs. Six Sigma’s core mission is process improvement.
To date, BPM has been applied mostly in paper intensive industries such as health care, insurance, finance, utilities and government. These businesses rely on human knowledge, information databases, and process flows to produce an end result, such as a home loan or business license. These paper-based businesses rely on forms that must be completed and information gathered to produce the expected output. BPM provides the infrastructure to support person-to person, system-to-system, person-to-system and system-to-person interactions by automating data collection, storage and processing. The core focus for BPM is on process management.
The Six Sigma DMAIC methodology is effectively a roadmap for process improvement. While the methodology may appear linear, in practice it is an iterative approach. For example, you may find that upon analyzing your data (Analyze phase) that you did not gather sufficient data to determine the root cause of a problem. At this point, you may need to iterate back to the Measure phase to gather additional statistical data. The five phases of DMAIC framework are:
- Define – During the Define phase, the business process improvement team reaches agreement as to what the area of focus is and what needs to be accomplished. The team and sponsor reach agreement on the problem, which customers are impacted, and how the current process or outcomes fail to meet their customers’ needs.
- Measure – The primary goal of the Measure phase is to identify the location or source of problems by building an understanding of existing process conditions. This knowledge helps narrow the range of potential causes requiring investigation in the Analyze phase. An important part of the Measure phase is to establish a baseline level for performance.
- Analyze – In the Analyze phase, theories of root causes are identified and analyzed with data to document the root causes of the problem. The verified cause(s) form the basis for solutions in the Improve phase.
- Improve – The purpose of the Improve phase is to verify that the proposed solutions solve the problem. Solutions are often piloted to ensure that planned changes in a process do in fact eliminate defects, waste, and unnecessary costs that are linked to the customer needs identified during the Define phase. After the solution has been piloted and validated, plans are made for full-scale implementation.
- Control – Putting a solution in place can fix a problem for the moment, but the activities in the Control phase are designed to insure that the problem does not recur and that the new processes can be further improved over time.
The BPM Life Cycle, although not as well documented or understood as DMAIC, is similar to the Six Sigma DMAIC model. Its phases include design, model, execute, monitor and optimize. BPM phases are iterative, with the solution providing the ability to optimize processes as the organization grows and evolves. BPM is highly focused on change; it assumes that a process must change as the business changes. The five steps of BPM include:
- Design – The design phase involves understanding the current process along with its customer(s), information and technology requirements, and designing an improved process that will reduce existing problems and prevent future ones. Design of the solution must be based on effective analysis and definition of clear and concise requirements. The importance of having well defined requirements cannot be over emphasized. Design includes building the rules, user interfaces and links to other systems.
- Model – Designs are often complicated; the best way to evaluate and understand them is to model and test them via simulation. The model stage involves performing what-if and scenario analyses by examining various combinations of factors to determine how they affect the end result.
- Execute – Execute is focused on deployment of a solution into the live production environment.
- Monitor – Processes, once executed, need to be monitored. Monitoring involves determining what to monitor and measuring key process flows and events using different measures ranging from time, cost, and delay to assess their performance.
- Optimize – Using performance monitoring data, the business can identify additional problems in the process. The focus of optimization is to continuously improve the process and initiate changes to redesign the process to generate further efficiencies.
Most enterprises are organized and managed by divisions and departments focused on performing specific functions. The organizational units have people who are experts at performing those functions and view themselves based on their position in the organization chart. However, customers are likely to have a totally different view of the enterprise since the customer views the enterprise through the business process through which he or she interacts. For example, a customer applying for a mortgage views the mortgage company as a mortgage provider, not as a collection of departments such as sales, origination, underwriting, appraisal, legal, closing, etc. Customers do not want to be thrown around between the departments; they want to give their information once and go through a smooth transparent process from approval to close.
BPM is focused on helping organizations manage complex processes that span multiple organizational units. Information technology systems are an integral part of BPM process. BPM technology helps an organization by sharing information among systems, departments and teams. Business Process Management includes a set of tools to document, measure, assess/monitor, and control processes. It establishes ongoing accountability for managing entire cross-functional processes to satisfy customer requirements.
An organization can use the six steps delineated below to integrate BPM and Six Sigma.
- Use Six Sigma to improve processes and then automate and manage them with BPM. Utilize Six Sigma for process improvement and use BPM for process management.
- Structure the entire improvement initiative according to business processes while eliminating overlapping initiatives. Focus on achieving or improving cross-departmental collaboration. (It is amazing that we even have silos within business process improvements initiatives.)
- Deploy the Six Sigma methodology and its rigor for measurements, statistical analysis and the disciplined approach to resolving the problems.
- Deploy BPM to measure and monitor the performance of business processes using measures determined by the Six Sigma methodology.
- Apply Business Process Management as the methodology to link improvement and process design efforts directly to the management system and to organizational strategy. This allows organizations to complete a difficult transformation to one in which the entire organization is continuously focused on (a) ensuring the customers’ needs for effective process performance and (b) the business’ need for efficiency and profitability.
- Use Six Sigma to quantify the critical-to-quality issues within the organization. DMAIC and it various tools can be used for understanding, measuring, and managing variation in processes. Six Sigma will help organizations apply problem-solving and statistical tools to achieve success. Six Sigma will help organizations integrate principles, statistics, and engineering to achieve process improvements throughout the enterprise.
Six Sigma provides a tool-set to make and sustain dramatic improvements to business processes. When Business Process Management and Six Sigma are used in combination, they provide the basis for improved performance and growth, as well as a truly customer focused enterprise.