|
Business Insights for Software Developers and Publishers www.softletter.com |
|
Vol 4, No 11 Is There Such a Thing as "Six Sigma Lite"?; Software Pricing Workshop Subscribe to SoftGram to receive advance notification of our SaaS University Conferences SaaS Impacting Your Business? The 2008 Softletter SaaS Report is a MUST purchase. In This Issue's Softletter
|
2008 Software Pricing Workshop A Practical Approach to Pricing Enterprise/SaaS Software, Services and Systems Presented by the Professional Pricing Society, the world leader in pricing knowledge and training Workshop Overview: Why Pricing Matters More Now Pricing is important today because products change frequently, competition is intense, and software development and delivery costs are shrinking. New software business models, such as on-demand/SaaS (Software as a Service) delivery, are threatening traditional software companies. Whether you adapt to these new models or address them another way, a tactical pricing error will hurt your company. Pricing Topics Covered Include:
The Software Pricing Workshop is designed for senior//mid-level Softletter's SaaS University Comes to San Francisco, October 14/15/16 New Track: Meet the VCs! Interested in obtaining funding for you SaaS startup? Need to understand what the venture community is looking for before opening up the purse strings? Want to investigate alternatives to conventional venture capital? Attend our half-day "Meet the VCs" track, learn what you need to do to obtain funding, and spend time one-on-one with some of the leading SaaS industry VCs. Our Atlanta and Boston Conferences Sold Out! Register today to ensure your seat at the University and save $200 on your attendance. Early Bird savings end September 5th. Is There Such a Thing as Six Sigma "Lite"? by Joel Froelich and Cris Del Angel, Proudfoot Consulting, jfroelich@proudfootconsulting.com Six Sigma, LEAN and other similar disciplines of analysis and control have been utilized for decades. Ever since former GE CEO Jack Welch sang its praises in his 2001 book, the Six Sigma process in particular has been widely used by several software companies looking to streamline their operations and capitalize on opportunities. The process has undoubtedly helped improve the financial results of major corporations such as Toyota, ING and Volkswagen. It's record in high tech is decidedly more mixed. Six Sigma is often touted as the hero of the organization or blamed as the goat, as evidenced by what transpired at 3M and Home Depot. Given the intensifying scrutiny on Six Sigma, we offer the following perspective on its effectiveness, scale and alternative approaches. Introduction to Six Sigma Six Sigma is a cyclical process utilized to identify issues and opportunities within an organization. Each step in the cyclical process is required to ensure the best possible results. This process is a progression from beginning to end. Six Sigma was first used on a wide scale by Motorola in the 1980s to improve quality through statistical measurements and benchmarking. The process entered the mainstream of public perception in the 1990s when CEO Jack Welch embraced it at General Electric. Since then, Six Sigma has experienced its share of success stories, as noted by the aforementioned companies, as well as its share of failures. Along the way, it has become a fixture in many corporate cultures. The Six Sigma process does not need to be regarded as a cumbersome undertaking. This process is comprised of five steps. Each step involves a series of actions to be completed before moving on to the next step. Six Sigma team members intimately know this process as DMAIC. Define the customer, their critical issues and the core processes involved with these issues. Also, project boundaries including the start, mapping of the process flow, and stop of the process must be defined. Measure the performance of the core business process involved. This step involves data collection to determine defects and metrics in the processes. These results are then compared to results from customer surveys to determine shortfalls. Analyze the data collected and process map to identify gaps between current performance and ideal performance. This step also involves the prioritization of issues and opportunities for improvement and reasons for observed variations. Improve the target process by developing innovative solutions using technology and discipline to correct identified issues as well as prevent problems. Control the improvements by developing, documenting and implementing an ongoing plan to monitor changes and prevent employees from regressing back to their old way of conducting themselves. Can Six Sigma Be Broken Down? Can this process be boiled down? Is there a Six Sigma "Lite" for mid-sized companies? Unfortunately, in our experience, there really is no plausible way to break off pieces of the Six Sigma process and successfully implement just a segment. Six Sigma itself is an integrated process from beginning to end. It would be virtually impossible to break it down and cherry pick only aspects of this process to implement and expect meaningful results. To achieve maximum results, this process must be carried out from beginning to end. On the other hand specific projects can be selected and be worked on, still the whole methodology has to be applied but it reduces the time and effort required to have a successful project, the downside to this is capturing benefits becomes a lengthy process. Implementing the Six Sigma methodology can be a very successful approach to process improvement. Some software firms that have implemented Six Sigma have seen their product quality improve, their costs decrease and their efficiency level increase, directly impacting bottom-line profitability. However, many times this success becomes a short-term phenomenon because companies fail to adequately consider all factors that impact the long-term sustainability of those improvements. This year's windfall can easily become tomorrow's failure. Also, the process doesn't take into account the most important aspect of corporate change, the human element. How Effective Is Six Sigma, Really? Nearly sixty percent of all Six Sigma (6s) initiatives fail to yield the desired results, according to Praveen Gupta, a noted author on the methodology and Master Six Sigma Black Belt who has been involved with Six Sigma since its origin in the 1980s. "We've noted rising concern across multiple industry sectors regarding the failure of many internally led Six Sigma/Lean projects." Gupta said. Echoing Gupta's finding is QualPro, a Knoxville, Tenn. based consulting firm, who identified 58 publicly traded companies that announced broad Six Sigma programs. QualPro then compared the stock performance to the S & P 500 stock index for these companies since their announced launch date. What QualPro found was surprising; 91% of the Six Sigma companies exhibited stock performances below the S&P 500 index. 53 of the 58 companies underperformed, the remaining five exceeded the index. What can be deduced from this information? The majority of Six Sigma programs do not benefit a company's stock performance. High profile Six Sigma failures like Home Depot and 3M show that companies cannot focus on implementing Six Sigma in isolation. These examples prove the need for human involvement in corporate change. Clearly, 6s is a set of process tools that should only be part of a more holistic process improvement strategy. Attention must also be paid to people, innovation and customer relationships.
Many times the very aspects that make Six Sigma effective can reduce its overall effectiveness. It uses rigorous statistical analysis to produce data to identify defect areas, the correction of which produces better quality, lower costs and increased efficiency. A dollar value is usually assigned to the correction to illustrate to management how much money a particular change will save the company. While very effective at controlling processes, it is those elements that are harder for Six sigma
Behavioral Approaches Can Serve as a Powerful Alternative Mid-sized and larger companies looking for an alternative to Six Sigma or LEAN may be best served to by a concentrated focus on the human element of the company. By using a behavioral approach to change, management can enjoy many of the same benefits without the outlay in capital sometimes associated with Six Sigma projects. The behavioral approach focuses on optimization of existing human assets rather than capital investment in new hardware, software, and other equipment sometimes necessary to implement many Six Sigma recommendations. One recent example noted that when a company applied this behavioral approach to their processes, 85% of the issues and opportunities that surfaced were either eerily similar to, or exactly the same as the findings of the Six Sigma team independently working on the same issues at the same company. This team was comprised of Six Sigma Green Belts, Yellow Belts, Black Belts and Master Black Belts. What Is a Behavioral Approach? The behavioral approach only involves three core disciplines: Process Improvements: The thorough review and re-design of existing business processes for production, supply chain, sales, cost control, and capital expenditures to deliver measurable improvements in effectiveness and efficiency. Training and Coaching: Work with, educate, train, and communicate with client employees at all levels to provide solutions that align thinking and behavior in support of the re-designed or newly-created processes. This is critical to facilitate sustainable change. Management Operating Systems: The development of specific, focused, easily understood, high-impact benchmarks to monitor performance and to identify areas which require managerial attention. Can the Behavioral Approach Co-exist with the Six Sigma Approach? Yes. In fact, this complimentary co-existence may be an executive's best option. Few doubt the effectiveness of incorporating both the Six Sigma and behavioral approaches simultaneously to enjoy the strongest benefit to the bottom line. However, when affecting change in the corporate culture by focusing on employees (the human factor) in the process, you are more likely to enjoy significant benefits without large capital investments. The only way to enjoy a sustained change in business practices is to modify the behavior of the employees as well as put a system as well as coaching in place to ensure that no one reverts back to old bad habits. When an organization decides to make any significant change to its internal processes, just the initial talk of the intended change can be unsettling to a workforce comfortable in its current routine. The situation is exacerbated if management fails to communicate its reasons for wanting to implement the change and fails to demonstrate strong, visible support for it. The behavioral approach not only provides effective communication channels, it also promotes employee input into the changes. The Efectiveness of Any Program Depends on Behavioral Change Change agents must be mindful of one key ingredient in managing people: changes in processes or procedures are sustained only when changes in behavior occur. As a rule, people are going to be resistant to change because they are currently operating within a comfort zone. They are going to wonder why there is something wrong with the way they perform, especially if they are working within parameters set forth in their initial training. People who are asked to implement change first need to understand why a specific change is needed and that they can make a difference within their areas of influence. Experiences in the field indicate that most managers come up short in their approach to the behavioral elements of change. For example, while it might be clear what type of process change in a software development operatins, manufacturing line or server facility is needed, the results of that change hinge on whether behavior is modified permanently, rather than on whether the change has precisely incorporated the technical requirements. This change in policy might directly affect the bottom line, increase the life of an expensive piece of equipment or possibly be the difference between life and death. If properly informed in the rationale behind the policy change, the employees directly affected will be more prone to adopt and implement this change for the long term. In order for effective sustained change to occur, people must be brought in from the onset of the project. Their input from being on the job for years is just as, if not more important, than what the statistics say. There is an old African saying that states "When you hire a pair of hands, you get a brain for free." Allowing employees active input provides them with a feeling of involvement and a sense of ownership of these eventful changes. Conclusion While Six Sigma focuses on the technical identification and solving of issues, it often fails to sufficiently take into account the human factor. While focusing on behavioral change requires fewer potential large capital expenditures, what management must invest in are time, empathy, training, coaching and follow-up. In return, management can enjoy many of the same financial and operating benefits by implementing a behavioral approach.
Manage Your SoftGram Subscription
Your username is: [[eMail]]
|
Softletter's SaaS University: The Premier Event Next Session in San Francisco, October 14/15/16 Register for San Francisco Today Sponsors
Expanded Agenda Online Here San Francisco, CA Register for San Francisco Today
|
(Voice) 860.663.0552, (Fax) 860.633.0553; E-mail: softgram@softletter.com