Delivering Customer Value through Six Sigma

Identify the Root Causes of Value Performance Gaps: A Six Sigma: Generation 3 Cause and Effect Matrix

Reg Goeke
Contributor: Reg Goeke
Posted: 07/26/2009
Six Sigma: Generation 3 is all about creating and delivering superior value. The metrics of customer value are ideally suited to the discipline of Six Sigma because they:
  • quantify critical-to-quality factors (CTQs) from a customer perspective,
  • are demonstrably valid and reliable, and
  • can be explicitly linked to the organization’s value streams in order to identify new process improvement opportunities that will add value.
Most importantly, those metrics provide the market perspective on value that is essential if you want to use the tools of Six Sigma to increase top-line revenue and market share. The challenge lies in harnessing those metrics to help you identify and prioritize the Six Sigma projects that will have the greatest impact on your ability to create and deliver superior value.

An earlier column in this series addressed the fact that, from a customer perspective, most organizations really have only two or three value streams. Each value stream begins with a customer need, and ends when that need has been fulfilled and the customer has paid for it. Depending upon your industry, examples of value streams might include:
  • The "order to delivery" of some equipment or service
  • Parts supply for self service
  • Repair, service or changes to a product or service
Value streams are comprised of many different processes that span functional silos within the organization, but the first step in identifying process improvement priorities is to narrow your focus to the relevant value stream.

CTQ Performance Gaps Provide Direction

The Measure and Analysis phases of Six Sigma Marketing point the way to the value stream(s) that will give you the biggest bang for your improvement dollar. The Measure phase quantifies CTQs and their relative importance, while the Analysis phase identifies value performance gaps that can be leveraged into sustainable value advantages, or remedied to achieve value differentiation. Combining these two sets of data provides the direction necessary to focus attention on the most important value streams and processes (Table 1). (Click on diagram to enlarge.)

Table 1

CTQs are listed to the left in the table, along with their importance weights as calculated from the model. The relevant value performance gaps are those between your organization (XYZ) and your targeted competitor (Competitor 1, in this case). Cross-multiplication of performance gaps with importance weights will tell you which value stream (or product or people) you should focus improvements upon in order to "out-value" your targeted competitor. In this case, the most important value performance gap pertains to (coincidentally) the most important CTQ. That won’t always be the case, depending upon the size of the gap. This analysis would direct your attention to an "equipment servicing" value stream, specifically, the servicing of equipment at a dealer level.

Gaps on Value Performance Criteria Increase Actionability

In order to make your customer data more actionable, you can decompose the Dealer Service CTQ (Critical To Quality) into its constituent value performance criteria (survey items) and extend the gap importance analysis to the next level (Table 2). (Click on diagram to enlarge.)

Table 2

At this level of analysis, the importance of value performance criteria (VPCs) can be calculated based on either factor loadings, or on simple bivariate correlations with the CTQ. Performance gaps are calculated in the same manner as with CTQ gaps, and the importance of each gap is calculated, again, by cross-multiplying the performance gaps with the VPC importance. In this example, the ability of dealer service people to a) understand customer needs, b) answer customer questions and c) demonstrate technical knowledge that will have the greatest impacts on the Dealer Service CTQ which, in turn, will have the greatest impact on value creation and delivery. These, then, are the specific outcomes (the Ys) that are impacted by the inputs (processes, people and products = Xs) that your organization can control.

Evaluate the Impact of Causes on Desired Outcomes: A Modified Cause and Effect Matrix

The final step in using the Voice of the Customer (VOC) to direct your Six Sigma projects is to evaluate the impact of value stream processes on the value performance criteria (VPCs) associated with the most important CTQ gap. The value stream associated with "Dealer Service" has to do with repairing equipment and is comprised of the following individual processes:
  • Process associated with initial customer inquiry ("My tractor broke down.")
  • Scheduling process
  • Inspection/diagnosis process
  • Actual repair process
  • The process of getting necessary parts to the service personnel
  • The process of transporting the tractor to the shop for repair
  • The warranty evaluation process
  • The credit checking process
  • The process of crediting unused parts back to the warehouse
  • The invoicing process
A modified Cause and Effect Matrix juxtaposes these processes against the VPCs for an evaluation of process impact (Table 3). The importance of each VPC performance gap is carried over from Table 2. (Click on diagram to enlarge.)

Table 3

The impact of each process on each of the Value Performance Criteria can then be estimated by your management team, using a simple numeric scheme ranging from no impact to high impact. In Table 3, for example, the Inspection/Diagnosis process has a high impact on customer perceptions of the technical knowledge of the dealer’s service personnel, so that impact is rated "9."

Cross-multiplying the impact ratings and the gap importance scores for each process results in the identification of those processes that are having the greatest impact on customer perceptions of quality and value. In this example, those are:
  • The scheduling process
  • The inspection/diagnosis process
  • The actual repair process itself
Subsequent mapping of the repair value stream will focus on those three processes to identify opportunities to enhance the delivery of superior value. (Click on diagram to enlarge.)

Figure 1

This is one example of how the tools of Six Sigma Marketing (Six Sigma: Generation 3) can be used to bring a customer focus to the identification and prioritization of Six Sigma projects. Value-enhancing opportunities identified through this focused value stream mapping exercise can then be evaluated in terms of both cost containment and quality improvement. Projects focused on improvements to quality—quality as defined by customers—will produce a winning value proposition and substantial gains in market share at the expense of your competitors.

Take the Six Sigma Marketing Challenge

Is your organization ready to transition to Six Sigma: Generation 3? To find out, take the Six Sigma Marketing challenge.
Reg Goeke
Contributor: Reg Goeke
Posted: 07/26/2009


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