Can Lean Six Sigma Help Startups?

When you look closely at the history of Six Sigma, it becomes clear that it has been implemented in organizations that are combating to survive in the red ocean. The curious mind boggles over the fact whether startups can survive without implementing the Six Sigma initiative?

Let’s start by first understanding what Six Sigma really is.

Six Sigma is a data driven methodology to reduce variation in a business process. Historically developed by Motorola in 1987 and then successfully implemented by GE. The word Lean on the other hand, has an iconic history with Toyota Production System and is defined as the continuous elimination of non-value adding steps in a process.

For a CEO, Six Sigma can be a strategic initiative that is aligned to reduce the operational costs, increase profits and to be taken forward as a corporate culture. An engineer may see it as a quality metric while a customer service representative may use it as an improvement methodology. In effect, Lean Six Sigma is removing non-value adding steps in a process and then reducing the variation from the remaining valuable activities within the process.

Statistically, the lowercase Greek letter sigma represents the measure of variation in a data set. By being able to reduce the standard deviation, you can reduce the Cost Of Poor Quality (COPQ) and directly impact the customer satisfaction. On the whole, Six Sigma is the continuous pursuit of producing better products and services in terms of quality and cost by an overall reduction in variation.

In Six Sigma there are two methodologies in place. To improve upon a business process DMAIC is used, which is made up of five phases:

However, when the customer wants to create a new process, the methodology used is popularly known as Design For Six Sigma (DFSS) or DMADV which comprises of the following phases:

Six Sigma can be summed up using the formula Y = F(x) , where Y being the output, is the measure of how the customer feels and x’s represent the inputs, are all the value adding steps in the process. The tools provided by Six Sigma help us determine the factors that are producing variation. This role of determining the critical x’s that can improve the Y, is the main essence of the DMAIC process.

Lean Six Sigma Success Stories

According to Entrepreneur Asia Pacific

“It’s really about breaking things down into steps, which is something most small companies don’t do very well,” says Rose Kasianiuk, president of Calgary, Alberta-based RK Business Solutions Inc.”

Having closely worked with numerous startups incubated at the National Incubation Center Islamabad, we see that there is some depth to the statement above. Amongst the many, one of the key reasons a process is created is when certain steps are being carried out in repetition to produce the same output. In the context of a startup at the incubation stage, you are creating a product or a service for the first time and searching for the right business model. Therefore, processes for creation of a product are developed at a later stage once the CEO/Founder finds a product market fit. According to HBR, understanding Process vs Product is essential to create innovation and apply it properly.

For a startup in this search phase, six sigma tools can help identify the core causes of the problem when customers are validating their riskiest assumptions in order to effectively pivot to the next version of their business model scorecard. A snapshot of some of these tools include:

Once the search operation is complete and the startup moves up to the growth stage, Six Sigma DMAIC methodology can help the small growing businesses create and improve upon value adding processes that would increase revenue, decrease cost and enhance customer satisfaction or provide them with the right tool kit to analyze their problems. Having said that, implementing Six Sigma is a business decision that needs buy-in, in terms of impact, effort and probability of success, from all the stakeholders involved.

Here at the National Incubation Center Islamabad, we are planning to equip startups in the growth stage on an identified need basis, with the knowledge to help them apply Six Sigma to their business-critical processes. Along with this, startups in the validation phase are in the Six Sigma awareness process, that will gradually be succeeded by a Six Sigma practical training once they are looking to scale.