By tobyehatch-Oracle on Feb 25, 2015
There are so many wonderful business tools and methodologies out there that can help us monitor, analyze, set strategy and improve efficiency, etc., but can they all work together? Where do they connect? In this post I will focus on how EPM and Six Sigma intersect.
Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving toward six standard deviations between the mean and the nearest specification limit) in any process – from manufacturing to transactional and from product to service. The principals of Six Sigma were originally were created by William Deming in his rebuilding of Japanese manufacturing industry post-WWII by applying statistical methods to measure, test, and improve design, quality and service. By the 1980s, Six Sigma management techniques had been adopted more broadly for business process improvement and U.S. manufacturers such as Motorola, GE, Honeywell, and Dow competing in the global market. By the 1990s, Six Sigma transcended manufacturing as Ritz Carlton Hotels applied total quality management and process improvement techniques to delivering five-star luxury service for their guests and were recognized twice with the Malcolm Baldrige National Quality Award by the U.S. Department of Commerce.
The Six Sigma method, when employed properly, aligns your organization and processes to achieve efficiency and a standard quality (whatever the standard should be).
Enterprise Performance Management is focused on
* Setting strategy for the company, including
- Which products/services should be the focus in order to be competitive
- Who are the desirable customers
- Which markets to play in
- What are the short and longer term goals
* Setting budgets, simulating forecasts
* Monitoring strategy execution
* Adjusting the strategy based on outcomes
* Reporting on the financial outcomes
To be very successful, the two methods should be employed together – EPM setting the desired strategy, Six Sigma providing the optimal processes and products/services to achieve the strategy; Six Sigma reporting on the outputs of the company and EPM reporting on strategic and financial outcomes.
Six Sigma’s job is primarily focused on lean operations, eliminating waste and inefficiencies from monitoring feedback to knowing what’s working and what’s not, and when to ask what-if, making adjustments based on that feedback for continuous improvement, etc. – where Enterprise Performance Management has both an internal and external view. It is simply not possible to set your near or long term strategy successfully without having an understanding of the external markets, external customer sentiment, competitors’ movements and of course R&D on new products and services.
Without getting too philosophical, EPM typically functions assuming products and services are being made well and focuses on setting strategy and executing the strategy. Six Sigma focuses on making the products and services well and assumes that they are the right products and services to be made and delivered. In my opinion, they need to work hand-in-hand to successfully achieve your strategy.
For more information about Oracle Enterprise Performance Management (EPM), click here