Building a business case is important to more than your improvement project, it should be one of the pillars of your decision making. A business case helps you understand why a decision is necessary, what you anticipate the solution to look like and how it will help you reach your long-term organizational goals.
Business Case Components
Strictly speaking a business case is the first direction you take in describing your project to the people who will okay the resources and the team working with the resources. At its core a business case should have the following components:
- A definition of the end product/ service that you sell to your clients.
- How your team will measure the output.
- A primary baseline (how can you measure and interpret results if you don’t have a starting line).
- An explanation of the performance gap and how that affects your business objectiv
What doesn’t it do?
A business case does not provide a magic bullet. What it does do it allow you to logically create a path to alternative solutions. The business case does not work if your team has not made a cohesive acceptance of the proposed alternative, in the case of differing opinions it may actually serve as tool that further divides the team.
Why it does work
It works because it creates focus and more often than not project teams lack a sense of focus. The best business cases create a uniform goal and team rationale. When constructing a business plan, it’s my belief that this is what you should strive for.
Change is hard and as with all of my posts, I believe in the guidance of a good belt. Talk with your belt and have a conversation about your challenges and your thoughts on solutions. Your belt is not your guru, they are a part of your solution. Utilize them.
The great thing about Six Sigma is that it puts you into the habit of seeing things in an ordered and identifiable view. This skill is highlighted in the way Six Sigma teaches you how to select projects. Project selection is the single most important decision you will make for your improvement initiative. If you pick the wrong project, it will kill your resources and your revenue. If you pick the right project you can create a new culture, introduce a new way of thinking and make a truly remarkable company.
In picking projects there are 3 core components to consider: the business case, the project charter and the benefits analysis.
The Business Case
In Six Sigma you will hear a lot about the business case and how a strong case correlates to a strong project. The business case is a the document that your improvement effort will build to answer why there needs to be an improvement and what type of improvement you will use. This document is typically used to convince sponsors of a project’s necessity.
The project charter is what you will use to tell the project team what improvements you are doing and how you will measure their success. Project charters are much more detailed than the business case and often serve as a guide for the project manager. Your belt will be able to help you determine which specifics your charter needs.
Now I know this sounds like a fancy business word, but a benefits analysis is where you will win or destroy support for your project. The benefits analysis is the financial projections for your improvement project and in my opinion, a benefits analysis should be done prior to building a business case. The analysis is designed to tell you what is to be expected in terms of resources, financial investment and returns on those investments.
Selecting a project is one of the most important steps in an improvement process and as with all these blogs this is a summary, your belt will be able to guide you through picking a project and designing a process that works best for the culture of your organization.
Rolled Throughput Yield (RTY) is a measurement metric that illustrates the losses due to rework or corrective action. The beauty of this metric is that is shows in statistical fact the relationship between the defects and the cost of poor quality. This is the tool that most management asks for without knowing the name.
What does it look like?
RTY is generally illustrated in the Poisson Model as pictured below
What doesn’t it do?
While the RTY metric provides a great visual presentation for the improvement areas and the cost of not doing those improvements, it requires a lot of data. Most companies unfortunately do not make a habit of recording specific defect data, and if your company does not have access to this data it really isn’t cost effective to put in software to capture it. If you don’t have access to the data, you are going to be operating on a kind of forecast based on what you do have access to. I do have to caution you that if your process has more than 10% defects, RTY should not be you focus. Identifying root cause should be your priority.
Now that we have gone over some metric types, you should have at least a basic understanding of why the metric is done and what it tells you. As always this is just a launch pad, your belt will be able to help you with the specifics and creating a metric that will be useful to your organization.
First Time Yield (FTY) is a traditional metric that tells you how many defects your process produces for before any improvement is done. Generally this measurement is used in the manufacturing or production field, but it can make the switch to your office easily. The formula for FTY is:
FTY: Total Unit Passed/Total Units Tested
So if you work at a membership organization and you processed 120 retirement requests and found that 50 requests were entered incorrectly, our FTY is .58 %. 70 is the total number of request entered correct or passed and the total number of units tested is 120 retirement requests.
If your process has multiple measurement areas, you will need to perform a FTY for every measureable step in the process. The great about FTY is that it is one of the simplest metrics in 6Sigma and it creates a create illustration of the current state of your process
What does it look like?
A FTY can look like any typical graph you have seen, but most will resemble the chart below. My fancier ones include the curve illustration for clients that highlight the cost of these errors to the client and how the improvements will be quantified.
What doesn’t FTY do?
FTY is a great place to start, but it is important to understand its limitations. FTY will not measure rework or provide any accounting for the cost in time or resources for that rework. There is a more accurate method for measuring that, Rolled Throughput Yield, which we will cover next week.
FTY is a great foundational measurement piece and a great way to introduce your company to 6Sigma, in a way that makes a lot of sense to the people doing the work.
Six Sigma Tools: Defects Per Unit
Defects Per Unit or DPU identifies how many individual defects are on a single unit or item. This is different from just identifying defective items, DPU identifies how many different defects are on a single item. This is where 6Sigma becomes invaluable because the identification of multiple defects addresses quality and costs to the company.
What does it look like?
I was lucky enough to find this basic DPU chart on DMAIC Tools. Now as with everything 6Sigma related this chart can be as difficult or as simple as you make it. But the key to a successful deployment is to make sure that everyone in your organization understands how to use the tool and how it will improve the process.
From DMAIC Tools
What DPU doesn’t do
DPU isn’t a magic bullet and is one of the few 6Sigma tools that is not always helpful. DPU should be deployed only when there is a clear advantage to using it. While it gives you a numerical value for defects it does not give you the root cause of your problems. You will still have to do the work and find the root cause, otherwise you will just have statistics without a meaningful interpretation.
DPU is a tool and to gain the correct usage of the tool, talk to your belt. Have a conversation about defects and how they are happening. Once you determine the root cause, DPU can be a powerful method for change.