GE’s Early Days With Six Sigma

It was around 1995, they came to know about that for most companies the average defect rate was 35,000 defects per million operations.  Getting to Six Sigma quality level means that you have fewer than 3.4 defects per million operations in a manufacturing or service process. That’s 99.99966% of perfection. GE’s in-house team showed that if GE was running at 3 to 4 sigma, the cost-saving opportunity of raising this quality to Six Sigma was somewhere between $7 billion and $10 billion.  For them it was amounted to a huge number, approx 10 to 15 % of their sales.  With this opportunity, it was not a rocket science for them to decide to take a big shoot at Six Sigma.

When an expert presented them Six Sigma first time, he wrote all kinds of statistical formulas.  But most of the crowd didn’t understand much of the statistical language.  Most of the people, who attended that session were somewhat frustrated with their lack of statistical comprehension but they were excited about its possibilities.  The discipline from the approach was particularly appealing to the engineers in that room.

But GE guys could sense it was a lot more than statistics for engineers, but they did not have any idea how much more it would become.   The big myth is that Six Sigma is about quality control and statistics.  It is that–but it is hell lot more.  Ultimately it drives leadership to be better by providing tools to think through tough issues.   

GE started their Six Sigma program in January, 1996 and they wanted to reach in 5 years where it took Motorola 10 years to reach. Six Sigma was called the most ambitious undertaking GE had ever taken. They believed that Quality can truly change GE from one of the great companies to absolutely the greatest company in world business.

A fundamental requirement in their Six Sigma program was that they measured it.  They had a financial analyst to certify the results of every project.

They also backed their Six Sigma initiative with their reward system.  They changed their incentive compensation plan for the entire company so that 60% of the bonus was based on financials and 40% on Six Sigma results.   They also focused their stock option grants on employees who were in Black Belt training.   They were supposed to be their best.

They just wanted their best people in the Six Sigma program and give them the options.   They made it mandatory for all their business CEOs and their best business leaders.   Because they understood–if this or any initiative was going to be successful, it had to start with the best.    Jack Welch, GE Chairman, was a fanatic about it and insisted that no one would be considered for a management job without at least Green Belt training by the end of 1998.    Yet it took them three years to get all their best people into Six Sigma.

In the first year, they used Six Sigma all over the company to attack costs, improve productivity, and fix broken processes.   By the end of this year, they also learnt to use Six Sigma for its replication opportunities.

The next phase was to use Six Sigma’s statistical tools to fix and design new products.   They could tackle the severe most problem of High Vibrations of their power plants.

In new product design, their medical systems business took the lead.   The first major Six Sigma-designed product to hit the market was a new CT scanner called the LightSpeed which came in 1998. A chest scan that took a conventional scanner 3 minutes to perform took only 17 seconds with this new product.   In the next 3 years, medical division of GE then launched 22 new Six Sigma-designed products.

They made some huge savings because of Six Sigma, but they failed to understand that why their customers were not able to feel the difference in their quality.   In fact, it took them 3 years to understand that why their customers weren’t feeling their Six Sigma improvements.   Then they got their answer: Six Sigma was about one thing–’Variation'!    They though had all studied it before, but it took some beating to them to understand the connection between averages and variation.  It was a breakthrough.

They got away from averages and focused on variation by tightening what they called ‘Span’.   They wanted their customer to get what they wanted when they wanted it.   Span measures the variance, from the exact date the customer wants the product, either days early or days later.  Getting span to zero means the customers always get the products when they ask for them.

Internally, their problem was that they were measuring improvements based upon an average–a figure that calculated only their manufacturing or service cycle without regard to the customer.

However, GE’s customers felt nothing–except variance and unpredictability.   Some customers got their orders 9 days late, while others got 6 days early.  They used Six Sigma and a customer oriented perspective involving span to guide them.  That reduced the delivery span from 15 days to 2.  Now customers really felt the improvement because orders arrived closer to their want dates.

Sounds simple–and it was–once they got it.

They were 3 years into Six Sigma before they ‘got’ it.  

It was just that they needed to take complexity out of Six Sigma.   Their plastics business reduced their span from 50 days to 5; aircraft engines from 80 days to 5, and mortgage insurance from 54 days to 1.

Now their customers noticed.

Span also helped them focus on what they were measuring.  In most cases, they were using promised dates of delivery made by a sales person negotiated on both sides–with the customer and with the factory.  What they were not measuring was what customers really wanted and when they wanted it.

Later they took it a step further.  They started to measure span from their requested delivery date to their customer’s first revenue:  a CT scanner delivery cycle from the request date by the customer to the first scan of a patient; the turnaround time in jet engine service shops from the time it leaves the wing of an airplane to the time it takes to get back in the air; and power plant delivery cycles from the time of the order to the first generation of electricity.

Six Sigma is a universal language.  They believed that Variation and Span are as understandable in Bangkok and Shanghai as they are anywhere else.

GE expanded the initiative further by taking it directly to their customers in what they called ‘Six Sigma: At the customer, for the customer’ (ACFC).  This meant taking GE Black Belts and Green Belts and putting them in customer shops to help them improve their performance.

By aligning what they measured internally with their customer needs, Six Sigma gave GE better customer intimacy and trust.

GE found out that Six Sigma is not only for engineers.  A common mis-perception made in quality programs is thinking that it is only for technical minds.  It is for the best and the brightest in any function.

Overall, Six Sigma changed the fundamental culture of the GE and the way GE developed people–especially their ‘high potentials’.   They have always had great functional training programs over the years.  But the diversity of the company had made it difficulty to have a universal training program. Six Sigma gave GE just the tool they needed for generic management training since it applies as much in a customer service center as it does in a manufacturing environment.

Remember, at the core of Six Sigma is an idea that can turn a company inside out, ‘focusing the organisation outward on the customer‘.