By Steven Pearlstein
Wednesday, April 19, 2006; Page D01

If you want to know how the General Motors and Delphi stories are going to turn out, you can find the answer in Peoria.

For it is there that Caterpillar has come up with the model for how a big American manufacturing company can not only survive, but prosper, in a highly competitive global economy.

As part of that process, Caterpillar has led the way in shredding the old social contract that once existed between big corporations and their workers -- the unwritten code that included lifetime employment, company-paid life insurance, rock-solid retirement benefits and above-market wages. There's no question that had it stuck with that model, Caterpillar would have gone the way of the auto and steel companies and the traditional airlines.

But now, having pulled off one of the most impressive corporate turnarounds in recent memory, Caterpillar -- like the rest of corporate America -- must confront a new question: What is the new social contract it has to offer around which a stable political business model can be built?

But first, a little history. By the early 1990s, Caterpillar's products were tired, its cost structure bloated, its market share declining in the face of stiff foreign competition. Management was determined to do something about it. The company was decentralized and restructured, and big investments were made to modernize factories and transform trucks and earth-moving equipment into high-tech machines. Work was shifted or outsourced to lower-cost regions and countries. The Six Sigma quality improvement program became a corporate obsession.

Perhaps most significantly, the back of the once-mighty United Auto Workers, which represented most of Caterpillar's unionized workers, was broken. Over a period of nearly seven years, the company took two strikes, operating its plants with management and replacement workers, rather than renew a contract whose cost structure would have either driven it out of the country or into bankruptcy. When it was over, the union was forced to accept a new two-tiered pay structure that called for wages for the lowest-skilled workers to start as low as $13 an hour, with more limited pension benefits, no job security for at least a decade, and a pay scale based more on skills than seniority. Existing workers agreed to minuscule annual pay increases and a first-time-ever 20 percent contribution to the cost of health insurance, along with a cap on retiree health benefits.

Today, Caterpillar is going like gangbusters. Its workforce has grown about 25 percent in the past two years, including thousands of new jobs in the United States. Its share price has more than tripled. Last year alone, its profit increased 40 percent, to $2.85 billion, on a 20 percent increase in sales. With more than half of its sales now outside the United States, it has become one of the country's largest exporters.

Much of the credit for this success goes to chief executive Jim Owens, who likes to use his experience to make a pitch to anyone who will listen for why American businesses and workers should embrace globalization. But reading through Owens's recent speeches, op-ed columns and letters to shareholders, what is most striking is how little appreciation he seems to show for the middle-class dreams that have been shattered to make Caterpillar's success possible -- or how those shattered dreams now translate into political opposition to globalization.

Imagine, for example, what the public reaction would have been if Owens had announced that, in recognition of the year's spectacular results, each of Caterpillar's 22,000 unionized employees would get a special bonus of, say, $3,000. I can assure you it would have been widely noted in the press and praised as a significant first step toward a new social contract. And who knows how much extra loyalty and commitment it would have engendered from Caterpillar's blue-collar employees.

But, instead, what those employees know is that Owens took home a performance-based pay package with an estimated value between $18 million and $38 million. They know that 50,000 nonunion employees split a bonus pool of $445 million. They know that the top executives were awarded options with an estimated value of between $80 million and $206 million. They know that shareholders earned spectacular returns.

Oh, yes, I can just hear the dismissive response from corporate types now. They'd point out that Caterpillar investors who earned a record $4.21 a share would hammer the company stock if that figure were reduced by even a penny. They'd point out that unions like the UAW have traditionally opposed performance pay, or traded it away for higher guaranteed pay or benefits. And they warn ominously that this kind of "excess" compensation would quickly render the company uncompetitive again.

But none of that really matters. Because the real world choice for the corporate elite is now quite clear -- not just here in the United States, but in Europe, Latin America and Japan, as well. Either the members of the business community will have to come up with an improved social contract that allows them to run competitive companies while ensuring that the gains of globalization are spread more equitably, or they will have to face the almost certain prospect that angry and anxious voters will roll back globalization in ways that will hurt the global economy and their newly globalized companies.

Or to put it another way: It's time for the Jim Owenses of the world to show the same backbone and ingenuity in dealing with the excessive and unreasonable demands of Wall Street that they previously showed in dealing with workers and labor unions.

CHIRANJOY SEN
TIMES NEWS NETWORK[ THURSDAY, APRIL 20, 2006 12:00:43 AM]

What started off as pure cost game, is now evolving into a process gambit. Cost has been the main reason for turning to India-based offshore business process outsourcing. However, technology experts and analysts feel that global enterprises should now also factor process improvement and enhancement into their sourcing decisions.

According to IT research firm Gartner, offshore BPO started as pure ‘lift and shift’ deals to exploit the labour cost advantage of lower cost locations. But now, BPO is evolving into a sophisticated delivery mechanism where Indian offshore service providers are using their acquired process knowledge to deliver a range of enhancements and modifications to the inherited process.

They are no longer just doing work at a lower cost, but they are also contributing ideas and suggestions on how to do the work more effectively and differently. This is especially true of third-party BPO vendors.

Says S Nagarajan, COO, 24/7 Customer, “We believe that generation III in offshoring is beginning. Companies in offshoring have evolved from generation I which was pure cost play to generation II that has been productivity play to generation III which will be value creation (not value addition) through innovation.”

In fact, Gartner in a recent report says by 2010, offshore service providers will be as well-known for their process innovation capabilities as they are today for their process cost advantages. Says Sujay Chohan, research vice-president, Gartner: “To overcome natural resistance to performing core business processes halfway around the world, some Indian-based service providers feel they need to increase their added value to compete more effectively with onshore outsourcing providers.”

Although not yet mainstream, there is increasing evidence during the last two years to show that Indian players are offering proc-ess enhancement in their services.

Process Innovation: How IT Helps

But what then is process innovation, one that is expected to drive the next level of BPO growth? “Process innovation, in essence, implies making substantial improvements to the client’'s business performance. Innovation in business processes encompasses a lot of factors like providing value-added cost savings to customers through tangible increases in efficiency and outcome; re-engineering business processes through effective utilisation of technology, workflow and resources,” says Ranjit Narasimhan, CEO & President, HCL BPO.

Ananda Mukerji, CEO, ICICI OneSource, points out that process innovation is the redesigning of existing business processes to achieve breakthrough improvements in performance measures. Mukerji goes on to add that Indian BPO companies have made real head-way in differentiating themselves from other outsourcers by not just high-quality delivery but a strong focus on continuous process improvement by using Six Sigma, Kaizen and a number of other techniques.

“Today, Indian offshore providers have developed significant process management expertise that results in real business impact. For example, in CRM processes delivering increased customer retention, helping increase average revenue per customer, identifying gaps in the customer’s product offering based on market intelligence and so on and so forth," he explains.

So the real differentiator will be managing and transforming processes so that customers’ business objectives are met and exceeded. Echoes Nagarajan of 24/7 Customer: “Many Indian companies have already been demonstrating on minor innovations that improve existing processes. We have not only focused on minor innovations but also on major innovations that enhance performance effectiveness. The most important aspect of major innovations is that they transcends boundaries in terms of onshore/offshore and creates true value for the customer on a long-term basis.”

“To sustain India’s number one position as an outsourcing destination, companies will have to focus on enhancing customer interaction and solution delivery (effectively influencing customer thinking and decisions), improving resource management (hiring people with the right skills at the right tenure); and upgrading support processes (accurate and quick financial reporting to facilitate decision making),” points out Susir Kumar, CEO, Intelenet Global Services

Cost Vs Process

But if process dominates the future, will cost remain the prime differentiator? And what benefit does process innovation bring to the client, as well as to the offshore service provider?

“Cost will always remain an important business differentiator. However, the customers will not be content with pure cost arbitrage,” says Narasimhan of HCL BPO. Ananda Mukerji of ICICI OneSource has a similar view: “Cost is an important factor but certainly not the main driver to offshore. Customers are looking at Indian operations to deliver better quality and process improvement and innovation.” Susir Kumar of Intelenet Global Services says a paradigm shift in the customer acquisition process is becoming evident.

Customers are demanding solutions based on domain familiarity that extend beyond technology services and enhance their business competitiveness.

All that’s fine, but what are the benefits to the customers? Narasimhan says companies look to partner with organisations that can provide innovative solutions to help ensure reliability and enhanced performance of their mission-essential operations. Further, he says companies looking to outsource have a straightforward approach to quality control by identifying parameters that are ‘critical to quality’.

Ananda Mukerji is more specific: “Such process improvements can help companies attain greater flexibility in operations, faster go-to-market delivery and potentially new revenue streams which were not possible without an offshore operation”.

But there’s a twist in the tale. Gartner says that s everal of the companies offer their process innovation knowledge free of charge to clients for evaluating possible process improvements, enhancements and transformation prior to bidding on potential deals. More-over, when considering their offshore strategies, global companies rarely factor in the savings and additional revenue that these hidden benefits generate.

Emphasises Gartner’s Sujay Chohan: “Potential clients must calculate the savings potential possible from transferring their business processes to India-based offshore service providers that have demonstrated competency in process innovation.” But wouldn’t cost go up once the BPO firms start charging for it.

“No,” says Chohan because the charge is for a value-addition, an incremental service — and not for the existing offerings.” Further, costs wouldn't go up simply because Indian BPO companies are increasingly improving and transforming processes, as well as automating them or performing them for less money than domestic (read: US-based) providers, according to the Gartner report.

Samsung Advanced Institute of Technology, or SAIT, is the Samsung Group's central R&D organization. It was established in 1987 as an incubator for future cutting-edge technologies with its motto - "boundless research for breakthrough."
SAIT serves as the group's greenhouse for growth by pursing three important goals.

First, as a new business creator, SAIT constantly uncovers and develops disruptive technologies and emerging markets. Secondly, as a technology provider, SAIT develops distinctive, next-generation technologies that can strengthen existing business lines. Third, as Samsung's think tank, SAIT devises mid-and long-term technology strategies and nurtures excellent engineers.

SAIT's recent major activities covered many areas. First, it developed a 10-hour battery for laptops using methanol. This advanced fuel cell technology utilizing nano agent and hydrogen ion conductor technology will eventually be commercialized when it is made available in a smaller size and becomes more competitively priced. Other SAIT projects included the development of RGB codec technology and a drive to have it accepted as the MPEG-4 standard.

SAIT finalized technology standards for terrestrial DMB, that will enable handheld devices to receive high-quality broadcast programs. The institute developed chipsets for terrestrial and satellite DMB terminals. SAIT also developed a GaN based LD having a wavelength of 405nm for a Blu-ray disc of 50GB density corresponding to almost 10 times higher than that of present DVDs, achieving the world's largest optical power of 400mW and lowest noise of -132dB/Hz. Also, not only did SAIT succeed in applying accelerometer 3D gesture recognition technology in cellular phones, but also commercialized it, launching it under the spotlight for the first time in the world.

As part of its social contributions, the institute has been working to enhance educational environment in the community and incorporation of science in the nation's daily lives. This is also SAIT's motivation to create its corporate image that is to "share" with everyone.

These activities were first launched in 2000 with a "Special Community Service Team." Offering computer, English, and Science classes, Community Service Team was organized in accordance of each member's specialization. This program was later stretched out to run a Kids' Science Class in 2003, fostering a science community with the efforts of the researchers.

"1 Dept. 1 Community Service Team Campaign" also helps researchers to build relationship with underprivileged elementary school kids in the community, and offers various learning opportunity involving all the staffs who play a role as science teachers to show and teach science of everyday. In addition to the science lab, it holds various science events including a summer science camp, SAIT Open House Day, and Science Fun Club for remote school children. All staff and researchers are actively participating in organizing and preparing programs, for the kids, teachers, and parents.

SAIT is determined to further expand "Science for Curious Kids" program and reach as many elementary school students for them to nurture their dreams of becoming a scientist someday.

The institute also operates blood banks, as well as supporting handicapped people and young household heads and senior citizens who lack caregivers.

SAIT was founded in 1987 in accordance with then Samsung Group Founder and Chairman Lee Byung-Chull's conviction and foresight that possession of sophisticated technologies could create a top-tier company that leads in the 21st century.

SAIT's mission is to develop frontier technologies that can spawn new business areas and leading contemporary technologies that can turn Samsung's existing "strategic" business lines into global market leaders. At the same time, the institute helps to create synergy within the Samsung Group as a whole.

Since its inception, SAIT has been cultivating competencies for both basic and advanced technologies, and the institute bears the heavy responsibility of ensuring Samsung's future.

The "Samsung New Management" initiative was announced in 1993, and SAIT began to reorient R&D toward qualitative instead of quantitative goals. SAIT began innovating research activities in earnest from 1999. A mid-and long-term vision dubbed "New Millennium, New Technology" was promulgated and five major research areas were decided upon: digital technology, nano-technology, opto-technology, energy technology and bio-technology. At this time, work began in various new areas, including biotech and micro-electro-mechanical systems.

The Six Sigma program was adopted to improve scientific research methodologies, and a joint technology roadmap was promoted to foster strategic links with Samsung affiliates. SAIT integrated the Design for Six Sigma approach into R&D and disseminated it to other affiliates, promoting R&D innovation throughout the Samsung organization.

On July 9, 2004, SAIT declared a new vision of becoming "the world leading research institute enlightening the future," and the slogan "Leading the Next" was adopted. To this end, SAIT is concentrating resources on selected areas and fine-tuning applied technology capabilities. SAIT is honing research competencies and growing into one of the world's most respected research organizations.

Samsung Advanced Institute of Technology contributed this article.

How Lewis Campbell took the sprawl out of Textron. On the short list for GM?

You don't get to be a chief executive by waffling your way to the top. Most stick with the playbook and are steadfast and unflinching, or at least they want to be. That's what makes Lewis B. Campbell's story so intriguing. A CEO from central casting -- tall, 59, with ruddy, regular features and a resolutely confident air -- he has engineered an unlikely turnaround at the $12 billion industrial conglomerate Textron Inc. (TXT ). And he did it by letting go of every dearly held management concept he had developed over his decades as a manager.

In 2001, three years into his tenure as CEO, nine years after joining up as chief operating officer, and 33 years into a career that began in the engineering trenches at a once-proud General Motors Corp. (GM ), Campbell confronted the biggest crisis of his professional life. The economic downturn, and then September 11, had dried up the industrial and aviation markets from which Textron derived the bulk of its profits. The company's share price was in free-fall: From 1992 to 1999, Campbell had watched the stock rise from 20 to 100, but in a little more than a year it had plunged half the way back down. Over two years, from 1999 to 2001, profits sank 75%.

Campbell took a drastic step, wresting Providence-based Textron away from its roots as a decentralized holding company to one with a single strategic vision. In doing so, he has won over entrenched managers, warmed up a skeptical Wall Street, and is starting to make the elephant dance. In the past three years, Textron's share price has leaped from a March, 2003, low of 26 to a recent 94. Return on invested capital is expected to rise to 15.5% in 2006, up from 8.8% in 2003.

Textron's recent success has even landed Campbell's name on speculators' lists for the top job at GM, where he spent 24 years before joining Textron. The resolve, adaptability, and motivational touch he has displayed over the past decade are all sorely needed at the auto maker. But Campbell denies any interest in replacing GM CEO G. Richard Wagoner Jr., who, in any event, has the support of his board. "It's a heck of an honor," Campbell says, "but you won't see me there."

The turnaround, or "the Transformation," as people at Textron call it, began on Jan. 17, 2001, a date that Campbell invokes repeatedly like a lucky charm. At the time, the conglomerate business model -- the one Textron helped invent in the 1940s -- seemed to be buckling under. The old mandate for Textron's many business units was simple: Meet earnings-per-share targets and kick a tribute up to headquarters every quarter. That gave the divisions autonomy, but it left Textron's various units larded up with redundancy, bureaucracy, and not much sense of what it meant to be part of the same company. "We were adrift," Campbell says. "We were doing all the things we used to do but were not getting results."

He used his platform at an annual managerial summit, held that year in West Palm Beach, Fla., to outline his turnaround plans. The goal was ruthless efficiency. Disparate divisions would have to work together and share resources. The new Textron would "add value" to its companies, instead of just curating them. "It was a very dramatic shift," says Jack J. Pelton, then an engineering executive at Textron's Cessna Aircraft unit and now its CEO. People were not even "sure what each of the peer group businesses did."

Instead of just earnings per share, Campbell's new focus was how the company as a whole was using its capital, getting the most cash back for every dollar the company put into each unit. It was a bid to make the creaking machine run more efficiently. That sort of midstream correction is rare for a CEO, especially one who had ridden the old model to substantial professional success. "It's like doing a total 180," says Cowen & Co. analyst Cai von Rumohr. "It's like saying: 'Everything I've done in my career until now has been wrong."'

SIMPLIFY, SIMPLIFY
The change would begin with small things. In an attempt to erase the burdensome legacy of thousands of acquisitions, more than 1,500 different payroll systems were whittled down to three, 52 health care plans came down to one, and more than 100 data centers were consolidated to just a handful. Campbell launched a companywide Six Sigma drive. Each of the business units' growth prospects would be plotted on a matrix. If the unit didn't measure up soon, it would be sold, politics and personalities be damned. To develop talent, executives were transferred from posts in one unit to another. And to help coax along managers who didn't see much benefit in caring what happened outside of their unit, incentive compensation was linked to companywide performance. As logical as those moves sound, they were still "hard for individual businesses to grasp," Campbell says. "They might have to spend money to get with it. I had to convince them that the short-term pain was worth it."

Still, employees had reason to be nervous. Textron's stock kept falling for a full two years and two months after that fateful speech in West Palm Beach. "All the Doubting Thomases said: 'See? I told you,"' says Campbell. The cavalry soon arrived in the form of an economic recovery. The commercial-helicopter market jumped back to life, giving Bell Helicopter a boost. Orders for Cessna business jets kicked back into gear, and the Iraq war brought demand for Textron Marine & Land Systems' armored security vehicle.

Finally, the business model improvements began to show their merit. Without the worry over earnings per share, Campbell felt able to invest in Cessna during some of its bleakest post-9/11 moments, when profits fell 47%. Cessna managers asked for hundreds of millions of dollars in investment, and "we didn't turn down one penny -- not a one -- even though it cost us earnings-per-share in the short term," claims Campbell. "The old me might not have said yes." As a result, Cessna emerged to meet the upturn with a bevy of new products.

Since the Transformation began, Campbell has shed 45 pounds, as well as his old-fashioned, buttoned-up demeanor. "Lewis was a very formal guy," says Ed Orzetti, who was recruited by Campbell from General Electric Co. (GE ) to help run cross-company initiatives and who has since left. "He let his hair down and became much more engaged." But he's still tough as ever. When you stop 37,000 people in their tracks and lead them in the opposite direction, says Campbell, "at the end of the day, like it or not, the CEO has to be so transparently committed that even the most steadfast doubters can be turned around."

Magazine Article, Source : The Manufacturer US
Zone : Manufacturing operations
Published : 11 Apr 2006 20:22

How can innovative manufacturing companies successfully introduce new products while meeting their obligations to existing customers? Rich Weissman finds out

There was a pronounced swagger in Stan’s step as he approached the cafeteria for his morning coffee. After all, he had been selected from all of his company’s manufacturing engineers to be on an important new product development team. During the product launch meeting, the CEO himself said how important this new product was for the company, and that this new cross-functional team had to think creatively – and work quickly. Stan looked forward to implementing some new manufacturing techniques that he had recently read about. Little did Stan know that he might be placing his company, and customers, in danger.

Leading edge manufacturers are continually reducing the length of the new product development process to meet the demands of the marketplace, but may be putting existing customer orders at risk. Shorter product life cycles force companies to convert ideas into functional designs and product, using innovative manufacturing processes. Those processes may ensure fast time to market and high quality, but they must also meet the financial and operational needs of their business – else, companies risk production turmoil, unhappy customers, and financial hardship.

Both old and new product development processes have pitfalls. The multi-functional new product development process is often fractured from the start, resulting in an inefficient and ineffective launch and integration into factory operations. Traditional methods began with marketing to identify a need, then flowed through research and development and ended with manufacturing operations. However, the cumulative lead time of all sequential operations would often result in missed market opportunities.

There are controlled methods to align manufacturing processes and new product development. Concurrent engineering, where product development, including design and manufacturing activities are done in parallel, provides opportunity to reduce lead times and improve cross-functional communication.

3P, a structured product design process, incorporates the elements of ”production, preparation, and process” into a lean manufacturing flow that focuses on reduced lead time and cost. Yet, there may be other less structured methods such as greater organizational alignment and focus on the entire new product development process or looking to outside resources for help. Some companies may even outsource new product development, manufacturing, and distribution, removing it from the factory all together.

Dr. Robin Karol, chief executive officer of the Mount Laurel, NJ, based Product Development & Management Association (PDMA), an advocate for product development and management professionals, feels that new product development needs to be a disciplined and comprehensive process. “Companies need to take a holistic approach,” says Karol. “It needs to be an integrated business process and not just a research and development effort.” Karol sees that new product development can easily be integrated into existing manufacturing processes if the new product is properly studied. “With all new product development activities, companies need to determine how the new product will be introduced and how its introduction will impact existing operations.”

Karol sees the need to quickly determine resource allocations. This is especially important in smaller businesses that may have fewer resources than a larger company as well as additional market, financial, and operation pressures. “No matter the size of the business, it will benefit from a disciplined approach to new product introduction,” says Karol. “The complexity may change based on the size of the business but the importance of the process does not.”

Renowned 3P expert Michael Giuliano, a senior lead and project manager with the Cincinnati, OH, based professional services organization TechSolve, worked with Tier 1 automotive supplier Greeneville Technology, Inc. (GTI) on a successful 3P project. Honda supplier GTI, based in Greenville, OH, used a one-week 3P event led by Giuliano to analyze the manufacturing process for the 2006 Honda Civic visor subassembly. “Focused 3P events can have quite a positive effect on sub optimized manufacturing processes,” says Giuliano. “Using 3P we can train engineers to take cost out of the system prior to product launch with concepts such as idea generation and rapid prototyping.” Some of GTI’s improvements included a 100 percent elimination in changeover time, a 31 percent reduction in capital cost, and a 77 percent reduction in required floor space.

The objective of the 3P process at GTI was to eliminate waste prior to production, determine the minimal resources and cost to meet TAKT time (the desired time between units of production output), and to build quality and flexibility into GTI’s production system. According to Kathy Galentine, GTI’s vice president, it was a successful process. “GTI’s participation in this activity proved to be very successful and all participants had very positive feedback,” says Galantine. “It has become very apparent that 3P can play a critical role in the success of a new model launch.” Galentine felt it critical to develop a manufacturing process that was already lean and would immediately fit into the established manufacturing flow. “In this industry we don’t have the luxury of backtracking to create a lean process. Once the investment is made, it is not cost effective to change it.”

Some companies look to state and local resources for help. Kim Sayre, engineering services manager for the University of Kentucky Center for Manufacturing, works with manufacturing businesses throughout the state of Kentucky on new product development and manufacturing strategies. Sayre’s organization, a non-academic unit based in the University of Kentucky’s College of Engineering in Lexington, is part of the state’s industrial extension program. “Our staff of engineers and product development people work with Kentucky manufacturing companies, especially those focusing on automotive products and metal forming,” says Sayre. “We also work with an array of large and small companies.”

Sayre sees that larger companies may have their own product development resources and do okay with simple revisions and upgrades. But they may have trouble in taking the product to the next level. “We will work directly with the company to analyze their products and even to perform destructive and non-destructive testing,” says Sayre. “We’ll use computer simulations to make sure the results of the design change will work well in their manufacturing operations.” Sayre also works with client companies on ergonomic and sustainability issues. “Assisting in the product development process opens the door for us to contribute in a whole range of issues in the plants. We show our client companies the science behind their products and help to rationalize their processes.”

Small companies may be ahead of larger ones when it comes to new product development. “Smaller companies may have more expertise in a particular product niche than larger companies,” says Sayre. “Their core competency may be in the marketing or assembly, but not in the process side of the business.” When dealing with smaller companies, Sayre needs to be more of an overall business advisor and that includes even working with clients on the selection of new manufacturing equipment. “We try to be as objective as possible to determine what equipment is available and appropriate to the operation and how it may mesh with the future growth plans of the company,” says Sayre. “Some of our clients rely on equipment suppliers to recommend equipment and that may poorly impact process development. We try to be a bit more objective.”

Some companies may even outsource their new product development process. Columbus, OH, based New Product Innovations, Inc. was originally founded as an engineering company, but an increased customer focus on streamlining and accelerating the new product development process allowed New Product Innovations to include all aspects of product development and manufacturing. This includes anything from market research and design through manufacturing and logistics. “Some companies struggle with new product development and it may be best for them to outsource the whole process, from market research through distribution,” says Neil MacIvor, chief operations officer of New Product Innovations. “Meeting changing market needs is critical and some companies may not have the capabilities to do it in house. Or, they are focusing on other important issues and don’t have the bandwidth for new product development.”
New Product Innovations initially saw its client base as primarily small companies, but now even large and well recognized companies outsource their product development and manufacturing processes in order to shorten time to market and not impact their existing manufacturing operations. MacIvor offers some suggestions for companies looking to outsource product development.

Companies should not try to do everything themselves, but at the same time, should be careful to fully analyze their intellectual property exposure. “Some things need to remain in house,” says McIvor. Next, partner carefully. “Make sure that there are written agreements in place and that you can live with the company you are working with.”

Finally, do your market research. “Companies need to do their homework,” says MacIvor. “Companies that do a poor job in market research will fail.”

Global market-driven demands will continue to pressure companies to shorten product development and manufacturing times to meet customer demand. Those companies that best integrate their new product development and manufacturing processes, and do that quickly and easily, will be in the position to be market leaders.

SUDHIR CHOWDHARY

Green and black belts are back in demand at IT and BPO majors like Satyam, Wipro and Infosys, for entirely different reasons though. Having won these belts earlier pushing Six Sigma practices for quality and timely delivery of services, BPO pros are now logging into real martial arts.

The country’s ITeS-BPO segment is pushing for training in martial arts and self-defense techniques for its fast-growing women employees. The reason: prevent eveteasing, molestation and more serious and unfortunate incidents like the tragic murder of a BPO employee in Bangalore.

IT and BPO firms have started the process of teaching basic self-defense techniques to its women employees — 40-45% of 4.09 lakh employees in FY 2005-06. In NCR alone, women employees comprise 40% of about 2.5 lakh IT and BPO employees. And the employees and their employers are a content lot —while women feel a wee bit safer with their new-found skills, employers seem confident of keeping their competitive edge intact. Some even claim that attrition levels are stabilising with the talent acquisition being undertaken by the players, beginning to deliver results. Officials from Nasscom and Call Centre Association of India say, “the training is not restricted to Bangalore and NCR alone. It is assuming a pan-India proportion covering other BPO hotspots as well – Chandigarh, Jaipur, Nagpur, Pune, Hyderabad, Chennai and Kolkata. State police departments along with some NGOs have come forward to train women employees and the companies too seem to be quite excited about this.”

Says TK Kurien, CEO, Wipro BPO, “It all started off with the fact that BPOs tend to hire more female employees...since the role is customer facing and companies would like to show a soft face. Majority of the BPO operations are during the night and the problem is with the drivers. There are very frequent cases of molestation, eve teasing, etc by the drivers.” He adds: “In the NCR alone, drivers form a huge floating population from neighbouring states like Haryana, Rajasthan, UP, Punjab, Himachal Pradesh and Uttaranchal. Most drivers are from villages and have had no interaction with females. Suddenly they come into a call centre environment which is a replica of New York or London. Cultural adjustments are the main reason.”

Karan Puri, head of contact center operations at iGate Global Solutions says, “The response we have got for our training on self-defense techniques has been positive. “We started the process of teaching martial arts to our women employees in Bangalore and plan to roll it out to other centers as well.”

Feedback received from majority of the BPOs – Convergys, Wipro BPO, Daksh and EXL – reveals that there are frequent cases of molestation, eve-teasing, etc by the drivers. Police verification is a major problem since the police has very limited resources or time to do this. Companies are fighting back by introducing various methods like: awareness classes for employees,training in self-defense techniques, interaction with police and driver briefings.

Says Mr Kurien, for majority of the BPOs, employee security is of utmost concern at least within the premises. And in the wake of recent incidents, companies have framed their own list of do’s and dont’s that are strongly enforced. Some of these include: The cabs are provided with radio-trunking facility to enable instant two-way communication with the control room. This is superior to cell phone communication. While training on safe driving techniques is a regular feature, security personnel keep track of every vehicle that enters and exits the company premises. Cabs that pick up or drop women employees after 9 PM have a security guard. The credentials of the security guards who accompany employees in the cabs are thoroughly checked and so on. Says Mr Puri, “Employees are excited about the self-defense techniques since most of them are very complacent and would tend to ignore danger.” Ironically, though, while this is becoming an industry norm, there is a danger of this losing steam because in order to maintain all this, financial resources are required. And BPOs especially are cost-conscious since they work on low margins.

ANSCOM AIR FORCE BASE, Mass. (AFPN) -- An ounce of prevention equals a pound of cure, according to the old adage, and the Electronic Systems Center has taken that message to heart.

(PressZoom) - Air Force officials have vowed to improve its acquisition timeliness and cost through an initiative known as "Going Green" -- green symbolizing a program that is in good shape using the stoplight model. The goal is to have nine out of every 10 Air Force programs in that category by 2010.

One way to ensure this happens is to prevent programs from ever being anything but green, center officials said.

"It costs incredibly less to identify and resolve problems early, rather than later in the program life cycle," said Rich Byrne of the MITRE Corp., who serves as the technical director within ESC's Engineering Directorate. "A recent NASA study showed software repair costs can increase over 300 times when discovered at the end versus the beginning of a program."

One way to do this is by forming so-called Blue Teams that enhance the risk-reduction efforts for an acquisition program. Many people are familiar with the concept of Red Teams, which swoop in when a program has veered off-track and work to correct it.

In contrast, Blue Teams work tirelessly to avoid the problems in the first place.

"There are instances where we've gone in and said, 'What are all the complaints we can anticipate two years down the road?,' and then we tried to engineer the system to address them before they ever materialized," Mr. Byrne said.

A prime example of this is the E-10 program. This new aircraft, which is being designed to provide superior airborne ground moving target indication, cruise missile defense and superior airborne battle management capabilities, instituted Blue Team reviews early on.

"The E-10 has a four-year history of conducting several Blue Teams each year," said Charlie Arouchon, director of engineering for the E-10 program. "These are hard, independent scrubs of the program that lead to full and open discussion. The key is in developing a culture of continuous improvement where people have an open mindset and program managers try to help the Blue Team find concerns before they become problems."

The Blue Teaming concept transcends technical issues, too. Virtually every aspect of an acquisition program can benefit from this sort of early intervention, said Sue Angell, director of ESC's Acquisition Center of Excellence.

"We talk a lot about streamlining the source selection process, but we must broaden the definition to also include the steps leading up to the actual selection process. Most of the value will come from better managing those steps," she said. "It's important, for instance, to look at the program risks at the same time we accept the workload. We also need to ensure we have solid requirements, a sound acquisition strategy and that we put out a very clear request for proposals."

Ms. Angell's office is already helping program managers with all of this. As the center works to institutionalize a broadened version of the Blue Teaming concept, it's possible that most programs would have independent specialists from the ACE review and help them perform their pre-source selection activities, she said.

Other functional offices such as contracting and legal could also play a part on such teams.

"There are a lot of resources that can be brought together to make sure a program starts out in great shape," Ms. Angell said. "And that's the best way to help ensure it stays healthy."

One of the benefits of the Blue Team process is that once it's been operating for awhile, it should start to yield some recurring signals that serve as "leading indicators" of potential problems.

"These will tell us when we need to form a Blue Team, if we haven't already," Mr. Byrne said.

Blue Teams are just one of many ways ESC is doing business consistent with the Air Force Smart Ops 21 construct. Smart Ops 21, which seeks to improve productivity while reducing waste, relies on proven industry practices such as Six Sigma and Lean.

"All of ESC's processes are actually based on a culture of continuous process improvement, and that's really what Smart Ops is all about," said Dr. James Cunningham, ESC's director of engineering.

( Courtesy of Air Force Materiel Command News Service )

by Chuck Paone
Electronic Systems Center Public Affairs

By Stephen A. Zinkgraf.

One of the most important competencies an organization can develop is that of driving change. Six Sigma is a management system for handling change within your organization. This chapter will provide you with an overview of the different dimensions of Six Sigma.

As Larry Bossidy, with whom I worked while at AlliedSignal (now Honeywell), points out in his excellent book, Confronting Reality (with Ram Charan), one of the most important competencies an organization can develop is that of driving change. Most organizations find leading change is a very difficult proposition. Larry asserts that, for a company to become good at driving change, it must train itself to drive change.

The change initiative is the building block to driving change. Your company will be reinvented one initiative at a time if each initiative is launched successfully. Larry Bossidy, while CEO of AlliedSignal, preceded the Six Sigma initiative with two smaller initiatives: Total Quality Management (TQM) and Total Quality for Speed (TQS). Using these first two initiatives, he taught the $14 billion company how to launch initiatives. But even Larry would probably admit that the Six Sigma launch was the quickest and deepest of the initiatives launched in AlliedSignal at the time.

The purpose of this chapter is to provide you with an overview of the different dimensions of Six Sigma. I will present the following dimensions:

Six Sigma—the initiative
Six Sigma—the alignment
Six Sigma—the discipline
Six Sigma—leadership development
Six Sigma—the methodology

The Six Sigma playbook
I assume you are interested in deploying Six Sigma for a number of reasons. First, you are interested—perhaps because you are the senior leader—in launching a Six Sigma program to transform your organization. Or, maybe you have recently been chosen to lead this mysterious program for your company, and you want to know more about it. You may want to sell the idea of launching Six Sigma to your senior leadership team and you need more specifics. You’ve read about Six Sigma and talked to peers in other companies about it. You’ve got a lot of unanswered questions to be answered before you can feel comfortable. You want to understand the resources required, your time requirements, and the cost of the program. You want to clarify the milestones and actions necessary to produce a model program launch.

I will assume you have a reasonably good strategy. You’ve surrounded yourself with good people and you have a good instinct about what needs to get done. But you can’t quite get your organization to turn the corner. This book is meant for you. Launching a Six Sigma initiative will serve as the impetus your company needs to start the journey from being good to being great. But, even more importantly, following this roadmap to launching Six Sigma in 90 days will ensure a very quick implementation with a 99.99996 percent (i.e., Six Sigma accuracy) chance for success.

And, finally, you want a forecast of the potential measurable impact on your organization’s growth and productivity. You also understand that undertaking a major initiative aimed at redefining your organization is a very risky business. You certainly don’t want to be known as a leader who has produced yet another program of the month (though every program I’ve seen has lasted more than a month—shoot, sometimes up to six months).

You are an organizational leader who struggles to move your organization to a new level of performance. Your company’s productivity does not represent the typical productivity in your markets and is not where it needs to be. To add to all that, you’re not growing fast enough. You are facing challenges ranging from global competition in the corporate arena to greatly reduced government support in the nonprofit arena. Your organization does many things well, but there seems to be something missing on which you can’t quite put your finger.

Understanding that you’re paid to make money for your company, defeat your competitors, and stimulate them to play in other markets, every good leader dreams of creating a culture that will do just that. You probably did not rise to where you are in your organization by allowing your competitors to hammer you day in and day out. The global rate of economic change is so intense that you feel you must prepare your organization to quickly recognize market changes and react quickly to invent new business models to achieve competitive advantage.

In the heat and pressure of competitive change, you must build an organization that will drive change quickly. You would love to create a new core competency that would allow your company to quickly invent and execute new business models. Because competition is hot and winning is important to the livelihood of all your employees, I have created a playbook with which you can launch a major performance-enhancing initiative—Six Sigma.

But, at the end of the day, your vision embodies the idea of leaving a legacy of an organization where

Every employee understands the company’s business, goals, and vision.
Every employee knows how he or she contributes to the company.
Every employee knows how to improve their processes.
Every employee knows how to solve problems.
Every function works together seamlessly.
This book is based on over 17 years of direct Six Sigma experience and work with over 45 corporations over the last 8 years. We have experienced the entire continuum ranging from world-class Six Sigma launches (AlliedSignal, 3M, Cummins, and Celanese) to launches bordering on the mediocre.

Many Dimensions of Six Sigma
Six Sigma has many faces. Surprisingly, little of the benefits of Six Sigma have to do with the statistical techniques that are often associated with it. While in its simplest definition—a methodology that focuses on processes to improve growth and productivity—Six Sigma is much richer than a set of advanced statistical tools. Let’s look at the value proposition for Six Sigma from your point of view, that of a leader. I will address Six Sigma as a

Change initiative.
Method of aligning actions to strategy.
Driver for operational discipline.
Leadership development program.
Methodology.

Six Sigma—The Initiative
Even with the success of the Six Sigma launch, the CEO, Larry Bossidy, kept the pressure on AlliedSignal to change by launching a technology initiative (Technology Excellence), an initiative to connect to our customers (Customer Excellence), and an initiative to reduce paperwork, a Digitation initiative. So, playing on the success of previous initiatives, AlliedSignal developed a core competency to drive change. This book uses that learning cycle as the foundation of the launch methodology.

Because Six Sigma has been so successful in accelerating the performance of so many companies, this book focuses on the process of launching the Six Sigma initiative within a very fast 90 days. The evidence clearly shows that many senior leaders who departed Six Sigma companies and who have moved to other companies have introduced Six Sigma as one of their first change initiatives. Fred Poses (American Standard), Jim McNerney (3M), David Weidman (Celanese), Jim Sierk (Iomega), Paul Norris (WR Grace), Bob Nordelli (Home Depot), Wes Lucas (Sun Chemical), Dan Burhnam (Raytheon), and Ed Breen (Tyco) all left the Six Sigma companies AlliedSignal, GE, and Motorola to drive Six Sigma early in their new assignments—and successfully, I might add.

By learning how to launch the Six Sigma initiative, you will also learn how to launch any initiative quickly and efficiently. You will launch Six Sigma using the same milestones required to launch any initiative. In fact, our launch methodology follows John Kotter’s of Harvard University change model, as described in his fine book, Leading Change. This model will be explained in further detail in a later chapter.

Therefore, you will have a well-documented theoretical framework within which to launch follow-on initiatives. You will successfully launch Six Sigma, and you will gain fuel-injected performance as a result. As a result, you will achieve the twofold benefit of earning the impressive results of Six Sigma and completing a learning cycle in launching successful initiatives. Success in your Six Sigma launch will ensure that your organization will have the core competency to embark upon future change initiatives with confidence and speed.

Six Sigma—The Alignment
Six Sigma allows an organization to align its processes, people, and strategy with the economic market (voice of the customer). This alignment is not easy to attain, but is imperative for success in today’s marketplace. In Stephen Covey’s recent book, The 8th Habit, he reports the results of a Harris Interactive poll addressing an organization’s ability to focus and execute their highest priorities. Some 23,000 employees were polled, with some surprising results:

Only 37% said they have a clear understanding of what their organizations are trying to achieve and why.
Only 1 in 5 are enthusiastic about organizational goals.
Only 1 in 5 said they had a clear line of sight between their tasks and their organizational goals.
Only 15% felt their organization fully enables them to execute their goals.
Only 10% felt their organization holds people accountable for results.
My consulting practice has worked with over 50 corporations in launching Six Sigma. I would say the preceding results were typical of most companies before Six Sigma was launched. I will show in Chapter 5, "Strategy: The Alignment of External Realities, Setting Measurable Goals, and Internal Actions," how to use Six Sigma to align your organizational activities to your strategies, people, and processes with your company’s external realities and financial targets. A sound Six Sigma launch will be the first step to improving the connection between your people, their actions, and their impact on your company’s performance.

Six Sigma will establish a clear link among the Six Sigma projects you identify each year with the external realities of your business, your strategic objectives, and metrics. Your organization’s population will view with clarity how their actions impact their organization’s performance, from the lowest level to the executive office. Six Sigma will be the tool with which you bring your strategy to reality—one Six Sigma project at a time.

Six Sigma—The Discipline
Six Sigma provides one very clear benefit within the scope of process improvement—the creation of a disciplined organization. This does not mean you will create a bureaucracy to support Six Sigma. You will, however, create a straightforward, comprehensive, and comprehensible system by which strategic projects are identified, prioritized, resourced, tracked, and completed. While you will create an infrastructure and systems to support your Six Sigma program, this infrastructure will not in any way obstruct your organization from becoming excellent in business execution.

As Jim Collins says in his book, Good to Great, "Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action." The goal is to create a culture of discipline with an ethic of entrepreneurship. The infrastructure you create to support Six Sigma will ensure you are getting the return on investment in dramatic business results that you deserve.

By training your people to follow the Six Sigma process improvement methodologies, you will create a disciplined organization around problem solving and process improvement. This strategy makes sense because everything your customers see from you of value is the output of a set of business processes. You will see consistency in the way your organizations select, prioritize, resource, and complete strategic projects. You will see projects that are consistently aligned to your strategic goals. You will create a new core of process improvement experts—Master Black Belts, Black Belts, and Green Belts. And you will see serious accountability for results. With all that, you will see enormous growth in creativity and innovation. You will also allow for each of your businesses to apply Six Sigma to the problems that are unique to them.

While the Six Sigma methodologies provide a standard, disciplined roadmap for attacking problems, the tools within the roadmaps provide the insights that stimulate creative solutions. With the Six Sigma enterprise support systems you implement, you will be able to track the impact of your new Six Sigma capabilities to the bottom line in terms of earning per share, productivity improvements, and organic growth.

Six Sigma—Leadership Development
Smart leaders are constantly trying to surround themselves with the right people. You will find that Six Sigma is a great developmental process for your future leaders. James Kouzes and Barry Posner in their book, The Leadership Challenge, say great leaders

Challenge the process.
Inspire a shared vision.
Enable others to act.
Model the way.
Encourage the heart.
Challenge the Process. You will train Master Black Belts, Black Belts, and Green Belts—hereafter referred to as Belts—to challenge (and improve) the process by the very nature of Six Sigma. Any shortfall in performance can always be tracked back to a poorly executed business process. Six Sigma provides a set of roadmaps that specifically delineate the steps with which to challenge any process.

Inspire a Shared Vision. You will also train your Six Sigma Belts to become dynamic team leaders. They will learn the value of inspiring a shared vision with respect to the projects they are assigned. They will enable others to take action by teaching their teams the tools of Six Sigma.

Enable Others to Act. Each person on a Six Sigma team will be able to walk away and solve some of their own problems. Your Six Sigma Belts will model the way by leading their teams from the front to successfully solve problems. They will always be the leader their team looks to for guidance. As they progress through their career ladders, as midlevel and senior-level leaders, they will set clear expectations because it will be obvious they have already done Six Sigma and they know what they can get out of Six Sigma.

For example, while working with Jim McNerney of 3M in launching Six Sigma, Jim drove one of the fastest launches of Six Sigma on record. But it worked because it was obvious when he spoke that he knew what he was talking about. In fact, he taught me a thing or two about Six Sigma. He had launched Six Sigma into two divisions of General Electric successfully and it showed.

Model the Way. Six Sigma provides the perfect leadership training experience. The Six Sigma Belts demonstrate their capability in leading through well-defined, well-resourced projects with quantitative goals for accountability. The good leaders will be easy to identify. Poor leaders will become evident as well. You will rely on a quantitative measure to select your high-potential people during your succession planning—by tracking how much money they brought to the bottom line in their Six Sigma projects.

Encourage the Heart. And, finally, your Six Sigma Belts will know how to encourage the heart. They will show their teams that they can win against the odds. They also will show their teams that they can accomplish amazing things if they keep the goal in sight and follow the discipline of Six Sigma roadmaps.

Every company has a method to identify and groom high-potential employees. The problem with the identification process is the lack of quantifiable qualifications. There is error in the selection process no matter how good it is. Real A-players are missed and lower potentials are sometimes selected. With Six Sigma, it’s easy. If a project leader brings in $1 million to the bottom line, chances are good that he or she has a lot of potential. You will find quite a few "sleepers"—high-potential people who have been flying under the radar, but who flourish within the discipline of Six Sigma.

A senior leader in Cummins said it best, "All our future leaders need to be experts in process improvement." Think of it—an outstanding group of young leaders who are not afraid of breaking paradigms, love driving change, and are experts in process improvement.

Six Sigma—The Methodology
So what’s involved with launching a Six Sigma initiative and what are the methodologies? This section presents a very high-level overview of the Six Sigma initiative. The following chapters will overlay the details that are necessary for a successful Six Sigma launch. The high-level steps in the Six Sigma methodology will include: (1) selecting the right projects; (2) roles and responsibilities of the primary players—Belts and Champions; (3) the right roadmaps and tools; and (4) the right results.

Selecting the Right Projects
Selecting the right projects sounds easy at first. The objective is to identify the set of projects that—if completed—will yield the most significant impact of growth and productivity. A good business strategy is the prerequisite to the process of selecting projects. Metrics (operational and financial) for measuring strategic progress is also a requirement. It turns out that the greatest challenge in the Six Sigma methodology is selecting and prioritizing the right projects. I will discuss this challenge in detail in Chapter 9, "Committing to Project Selection, Prioritization, and Chartering," but projects should reflect activities directly tied to either long-term business strategy (known as top-down projects) or short-term business results (known as bottom-up projects). Successful Six Sigma companies have created a disciplined process to select, prioritize, and scope projects. These companies create a vibrant dynamic between senior leadership driving for strategically important projects and everyone else driving for projects that will reduce immediate costs while improving quality or capacity.

Manufacturing companies select their Six Sigma projects around the general metrics of cost, quality, and capacity. Companies representing the service industries will likely be focused on speed and accuracy. Understanding how each metric relates to the business drives the prioritization process. If a business is capacity constrained, for example, the business will focus on improving capacity metrics.

Roles and Responsibilities of the Primary Players—Belts and Champions
Six Sigma initiatives require the selection of people representing several roles in process improvement. These people lead and support Six Sigma projects and will become the process improvement engine of the organization. The roles—Champions (Initiative, Deployment, and Project), Master Black Belts, Black Belts, and Green Belts—have distinct responsibilities in driving Six Sigma.

Two types of champions provide protective support for the Six Sigma program. The Initiative Champion, sometimes known as a sponsor, ensures that the program is institutionalized at the organizational level. He or she is accountable for measurable business results to a fairly high level in the organization. The Initiative Champions will reside at the Director or Vice-President level within the organizational structure. Many times, business leaders double as Initiative Champions.

The Project Champions work directly with the Belts to ensure that the Belts have the proper resources and organizational support to successfully complete their projects. Project Champions have the most critical role in a Six Sigma launch. They are most accountable for the successful completion of the company’s portfolio of Six Sigma projects. An executive at Cummins said, "There is no such thing as an unsuccessful Black Belt, just unsuccessful Champions."

Companies internalize (i.e., become consultant-free) their Six Sigma programs by developing Master Black Belts (MBBs). The MBBs are expert in the process improvement roadmaps and tools. They will also be proficient in driving deployment strategies. They will ultimately replace external consultants and will provide mentoring and training required for the long-term success of the Six Sigma program. MBBs create value through the mentoring process (i.e., ensuring that Black Belts and Green Belts are successful) and secondarily through training new Belts in process-improvement skills.

For example, one of AlliedSignal’s first Master Black Belts, Bill Hill, mentored 12 Black Belts who achieved some $30 million total for their first 12 projects. Clearly, Bill was a success in ensuring that each project was completed as quickly as possible. MBBs also work closely with the corporate leadership in project selection and Six Sigma deployment. The MBB is the Champion of the technical side of Six Sigma. They are experts in all the tools included in the number of Six Sigma roadmaps that are available.

Black Belts (BBs) drive strategic (i.e., big and important) projects; companies consider Black Belts as strategic resources. They receive extensive training in the roadmap and tools discussed in later chapters and demonstrate clear expertise in solving complex chronic problems. Our successful clients allow their Black Belts to work full-time on their projects. The standard procedure within a Six Sigma deployment expects Black Belts, after they learn to use one of the several process improvement roadmaps, to drive two or three project teams simultaneously.

Green Belts (GBs) drive shorter-term tactical projects. Green Belts are widespread throughout the company, and use one of the process improvement roadmaps to solve problems within their area of the company. Green Belts are generally part-time on projects and carry out their usual responsibilities. The training of Green Belts is 50% or less of the training of a Black Belt, and they can be trained by Black Belts or Master Black Belts. Therefore, the Green Belt training program can be widespread and delivered locally and cost effectively. Green Belts always attend training with an important project.

The Right Roadmap and Tools
Most companies do a good job of identifying important problems, identifying a team leader, and pulling the right team together. The teams, however, usually hit a wall when actually trying to solve a problem. Companies generally do not have a recognized, standardized, and systematic way of solving chronic problems. Companies now move away from relying on the top 10% (high-potential) employees to solve big problems and turn to the top 40% to solve problems. Six Sigma provides this inherent power.

Having common roadmaps and tool sets provides the problem-solving backbone for the company that yields a common language and set of expectations. For large, complex corporations such as Motorola, Honeywell, and GE, this common language ties the corporation together and also provides a way to easily assimilate new acquisitions.

The Right Results
The final evaluation of the success of any Six Sigma program is the verification of quantifiable business results, usually measured in pretax income per annum. My favorite metric is dollars per trained Belt. Larger companies train hundreds of Black Belts and Green Belts, who are completing projects all around the company. In the process, companies invest significant resources and training to support their Six Sigma efforts. Companies successfully implementing Six Sigma expect a return-on-investment (ROI) of 30x to 100x over a two-year period.

Organizations will normally implement a centralized project tracking system to determine the effectiveness of the Six Sigma program. By systematically tracking project results, the program is constantly validated and improved. If done correctly, the financial analysts of the organization will be able to convert project results to earnings per share.

The Playbook
As a leader, you face the ultimate challenge of driving dynamic change across your organization, resulting in the organization’s long-term success. Virtually every organization—profit versus nonprofit; manufacturing versus services—meets significantly new challenges every day. These challenges attack you from every direction, both domestically and globally. As you make your way through the "fog of war," you try to determine the actions that, if executed properly, will transform your company into a high-performing engine. In short, you have a vision of what needs to get done, but you may not know exactly how to do it.

This is the playbook for launching a Six Sigma initiative in your organization. I will present a play-by-play plan to launch Six Sigma in 90 days. I define the first 90 days as the time interval starting with the first executive training session and ending with the first day of the first training wave of Six Sigma Black Belts (Black Belts will be your future process improvement leaders). This playbook is organized into three parts: (1) Pre-launch preparation; (2) Launch; and (3) Post-launch actions.

Part I: Pre-Launch
The pre-launch preparation chapters provide you with the specific actions and milestones necessary to get to the starting line.

Chapter 2, "The True Nature of Six Sigma: The Business Model," provides you with insights into the process of focusing on money (e.g., results), finding the money, and delivering the money. I also address the business model to ensure alignment between your Six Sigma activities and your balance sheet.

Chapter 3, "Six Sigma Launch Philosophy," gives you an executive overview summarizing the nature of a typical Six Sigma deployment. My team and I have sifted through some 50 Six Sigma launches to find the best practices.

Chapter 4, "Getting Early Support: Selecting a Six Sigma Provider," supplies you with the rationale for using an external support group and a list of requisites to consider when evaluating providers. I also provide a quantitative decision matrix and a draft of a request for proposal.

Chapter 5, "Strategy: The Alignment of External Realities, Setting Measurable Goals, and Internal Actions," delineates the process by which projects are linked to the organizational strategy. This chapter describes the process by which projects are selected and prioritized to obtain a direct line of site to the strategy.

Chapter 6, "Defining the Six Sigma Program Expectations and Metrics," discusses how to measure the success of your Six Sigma launch with metrics that are directly tied to your strategic and annual operating plans. This chapter instructs you in how to develop your strategic metrics and, more importantly, how to develop aggressive but achievable goals.

Part II: The First 90 Days
This part covers the time from the initial executive training workshop to the launch of the first wave (class) of Belt training. This part provides specific actions and milestones that lead to a successful Six Sigma launch. Each chapter provides a step-by-step roadmap to accomplish a specific set of actions and provides recommended timing. Launching a Six Sigma program in 90 days is realistic. Very large companies such as Honeywell and 3M have done so, along with several smaller companies. In fact, 3M beat the 90-day timeframe by about 60 days.

Chapter 7, "Defining the Six Sigma Project Scope," helps you decide what your Six Sigma deployment will look like. The chapter recommends how you tie Six Sigma to earlier initiatives, and compares the advantages and disadvantages of pilot projects versus full-scale organization-wide deployments. I discuss approaches that consider division to division and geographic deployments. In addition, the chapter reviews the multitude of Six Sigma and Lean programs that are available to you to deploy in your organization. Depending on your strategic requirements, this chapter advises you on which programs to launch and in what order.

Chapter 8, "Defining the Six Sigma Infrastructure," outlines the roles and responsibilities of the key players in a Six Sigma launch. It will offer selection criteria and timing. Data infrastructures are also addressed.

Chapter 9, "Committing to Project Selection, Prioritization, and Chartering," is one of the most important chapters in the book. This chapter provides a step-by-step methodology by which breakthrough projects are identified, prioritized, and chartered. By following the suggested methodology, you can learn the valuable core competency of strategic project selection.
Chapter 10, "Creating Six Sigma Executive and Leadership Workshops," recommends how these very critical workshops should be developed and formatted. This chapter presents several different approaches to each workshop, along with sample agendas. I discuss best practices as well. These workshops set the stage for the next step, which is to develop an overall, long-term deployment plan.

Chapter 11, "Selecting and Training the Right People," reviews the roles of the significant Six Sigma players and details the training required to fulfill these roles. The chapter also discusses the pros and cons of hiring personnel externally and developing personnel internally. And, finally, the chapter provides insights into the process of internalizing the Six Sigma training.

Chapter 12, "Communicating the Six Sigma Program Expectations and Metrics," provides ideas for developing a comprehensive communications plan. Emphasizing the who, what, when, where, why, how, and how much, this chapter discusses the coordination of various communication channels. This chapter provides you with the essence of marketing Six Sigma throughout your organization.

Part III: Post-Launch
This part discusses the means and methods for institutionalizing your Six Sigma program for the long term. We provide a leadership roadmap, along with specific actions that must occur every year for the program to last. Milestones like compensation plans, career ladders, and software support are detailed.

Chapter 13, "Creating the Human Resources Alignment," provides guidance in aligning Human Resource systems to the Six Sigma program. This chapter discusses organization structure, succession planning, career planning, measuring Belt performance, and reward and recognition.

Chapter 14, "Defining the Software Infrastructure: Tracking the Program and Projects," provides an overview of the requirements of a project-tracking software system. The chapter also provides some examples of systems I have encountered over the years.

Chapter 15, "Leading Six Sigma for the Long Term," provides a detailed leadership roadmap that, if followed, ensures the long-term success of your Six Sigma program. This step-by-step approach is based on our work with over 40 companies over the last 15 years.

Chapter 16, "Reinvigorating Your Six Sigma Program," provides methods to assess your current deployment and reinvigorating it based on identified gaps in the deployment. Success in deploying Six Sigma provides the opportunity to launch successive change initiatives.
This playbook is designed to provide you with a turnkey method to launch a Six Sigma initiative in 90 days. By using this fast approach, you can quickly and effectively align your people to your strategy, processes, and customers. By doing it within 90 days, you ensure that you will have a different company within 12 months. These fast launches also demonstrate (require) the full commitment of your leadership team. These 90 days will be the most memorable of your career.

by Randall Smith, Timothy Rhines, Ph.D., and Richard Crowley

Critical Components of Six Sigma

* Rigorous methodology.
* Focuses on error reduction through value-added activities and streamlined processes.
* Application of statistical analysis tools to identify root causes (not just symptoms).
* Highly metric and customer driven with measurements of process capability, performance, variation and quality.
* Implements control mechanisms to ensure sustainability of results.
* Management philosophy and strategy.
* Cultural change and engrained philosophy.


In recent decades, industry has been deluged with various approaches to process improvement. Although the exercises recommended by quality gurus such as W. Edwards Demming and emphasized in the quest for the Baldridge Award were valuable, the results were often self-serving and difficult to measure. Six Sigma is a data-driven approach that relies heavily on the “voice of the client” as a focus for improving operational businesses and work environments. As a result, the process is far less subjective than previous “quality” programs and recognizes that measurable results are paramount to the impact of change.When employed effectively, Six Sigma becomes a part of a company’s culture and, from an organizational perspective, this translates to solutions that significantly improve the efficiency of business practices.

Six Sigma was pioneered by companies such as Motorola and General Electric and was focused on achieving efficiency gains in manufacturing processes. Today, the program has evolved into an effective tool for a diverse range of businesses. Although many of the tools used in the manufacturing sector still apply, most have been adapted to be more specific and dynamic to individual business models. For the laboratory environment, Six Sigma has been fine-tuned to make the tools more appropriate for a serviceoriented business that has science as its product. Because science itself is a rigorous process built on procedure and measurable data, the integration of Six Sigma in the analytical arena was a natural fit. The implementation of the Six Sigma process provides staff with documented evidence of the transformational changes needed to exceed regulatory and scientific requirements and expectations.

Team Design, Project Selection

Selecting appropriate projects is critical and requires comprehensive knowledge of the systems, processes and priorities of the business. As a result, the foundation of the Six Sigma process is people, and the roster of the project teams must include appropriate representatives of operational staff, management and financial analysts as well as specialists in the Six Sigma discipline. These specialists are known as Black Belts, who have received the highest level of training, and Green Belts, who have also undergone formal training and are assigned to lead individual projects. In addition, team members also receive extensive training before being assigned to projects. Some organizations also have designated Champions whose role it is to manage and apply the Six Sigma process for specific operational groups.

The selection of projects is based upon their impact on the critical components of cost, delivery and quality of services. In other words, projects should improve the quality and delivery of products to clients, reduce the cost of doing business, improve processes that will save the organization and clients money, and promote a safer and amenable work environment. There are a variety of tools that are used to identify appropriate projects. The most important factor is to collect a suitable amount of baseline data in order to provide a clear understanding of the scope and endpoints of the process. Projects should not be selected by “putting the cart before the horse” and assuming a process needs improvement based on anecdotal information. A preliminary high-level functional mapping exercise can be used to efficiently identify processes which meet the criteria for project selection and minimize the potential for wasting time on projects that will have a minimal organizational impact.

Teams assigned to projects undergo a rigorous process of data collection, review and analysis. Although it is important not to get bogged down in minutia, extensive documentation of the process in question is needed to properly assess the interactions and variables that comprise the procedures. Using rudimentary statistics (e.g., linear regression ANOVA), the data sets are analyzed to identify the factors that have the most significant impact. These factors then receive the primary focus in the reengineering of the process. In some cases, projects have led to the simple elimination of steps that were done for years but added nothing to the process. However, in many instances significant changes in staff responsibilities, data systems, and communication channels are required.The changes recommended should only be implemented if the data shows a clear beneficial impact to the cost, delivery, or quality of services.

Proof is in the Pudding

Any scientist will tell you that data, correctly collected and applied, doesn’t lie and several analytical processes have showed significant quantifiable improvements in laboratory procedures and data reporting techniques. The keys to quality analytical services are efficient processes and error-free data. Applying the Six Sigma model to the testing process can facilitate tremendous improvements in key integral components of sample flow and the reporting of data.

For example, effective sample management and handling play a sometimes overlooked but highly significant role in analytical testing. This process includes maintaining a chain-of-custody for the samples, proper storage and labeling as well as preparation for testing. Although the process would seem quite straightforward, one such analysis found that several staff hours were spent meeting these requirements for each batch of samples. A rigorous functional examination of the process revealed the factors most influential to inefficiencies in the process. Through error reduction and streamlined procedures, the time was reduced to less than 10 minutes.

The data review process may vary depending on the reviewer’s experience and techniques as well as the type of data, manner in which the data are presented and the purpose of the study. The lack of an optimized and standardized process for analytical data review and approval results in an inconsistent and inefficient review process. The Six Sigma process employed to evaluate the data review process had an objective to modify the process in order to reduce the hours associated with the review and approval process. In addition to improvements in the functional aspects of the review process, the project elucidated the need for a protocol checkout system and standardized peer-reviewing training program. In the end, process improvements resulted in a reduction of the time for data review and approval by 50 percent, as well as in the design and implementation of an efficient and consistent data review process, which enhances the integrity and quality of the scientific data.

Some initiatives move outside the walls and become collaborative projects involving both the laboratory and client. For example, while conducting product release testing for GMP (good manufacturing practice) purposes, the rejection rate more than doubled at one point. By reviewing all of the variables including those on the client side, the cause was discovered and resolved. This resulted not only in drastically lower rejection rates, but increased throughput, thus allowing faster and higher quantities of product release. Integrating best practices between companies solidifies strategic partnerships and exemplifies pursuit for unparalleled client service.

Six Sigma focuses on the customer and improves processes enabling the delivery of higher quality services and a competitive edge in the marketplace. In addition to process improvements and customer service, Six Sigma projects can make the work environment safer and more conducive to productivity. Sooner or later, everyone in the organization should have some degree of exposure to Six Sigma which leads to personal and professional development. This way, Six Sigma becomes not just a quality program, but also a way of doing business; in some organizations, Six Sigma training is required for management positions.The foundation of the process is facilitating reduced variability and increased efficiency while eliminating non-value-added activities. All this leads to the ultimate goal of retaining and building relationships with clients for a mutually beneficial future.

Randall Smith is the Six Sigma Champion and Business Manager for Covance’s Chemistry Services unit; Timothy Rhines, Ph.D., is the associate director of the Covance Pharmaceutical Analysis group; and Richard Crowley is a senior science writer and editor of the Covance publications Food Science Newsletter and Evolution. Covance is a leading provider of chemistry and life sciences testing services for the pharmaceutical, dietary supplement, and food industries. For more information, visit: www.covance.com.

Quality is being addressed in the United States today by a number of initiatives such as lean manufacturing, 5S, TPM (Total Productive Maintenance), Constraint Management, and Six Sigma teams. All of these improvement systems have positive impacts on an organization’s performance.

However, in order to optimize the resources expended to implement these initiatives, the way organizational members interact must first be considered and improved. How communication occurs, conflict is dealt with, change is implemented, meetings are facilitated, projects are managed, and the overall organizational system is planned, are all important enablers or barriers to quality improvement efforts.

Leaders must effectively engage all employees and get their commitment for the improvement initiatives. In order to gain this commitment, leaders must be aware of how others receive their communication. Verbal, nonverbal, and e-mail communication should be discussed and continually improved. If leaders are able to listen well and incorporate employee input when possible, commitment will grow among all employees.

Another communication requirement is effective conflict management.

Conflicts occur in organizations because people care about their work or their dignity. How they demonstrate that caring is critical. We each have different tendencies for dealing with conflicts. Sometimes these tendencies are useful and other times they are counterproductive. New skills for dealing with workplace conversations are available and desirable. There are ways of asking permission for dialogue that increases openness for both parties. It is helpful for leaders to identify and focus on the underlying needs that drive each of us. Respectful feedback techniques can easily be learned.

Change is one of the biggest barriers to successful quality initiatives.

Oftentimes the required changes make sense to the leaders because they have had many discussions about the needs and considered much data that has convinced them of the value of the change. Employees must be involved in dialogue that helps them choose to change also. Fear of change is usually fear of the unknown. Explain the reasons for the change to employees and involve them in designing the new organizational systems to implement the change. People who are involved in the change tend to buy-in. Those who are left on the outside of the communication channel tend to resist what they don’t understand.

Quality initiatives always increase the number of meetings and projects in which employees are involved. Each meeting costs money and ineffective, boring meetings can kill the desired value from the efforts. There are techniques for planning and facilitating a meeting, and documenting decisions, responsible people, and timelines. Don’t waste your organizational resources with wheel-spinning, train employees in consistent, organized, respectful meeting techniques.

Organizations are a system of processes. A change in one part of the system will likely impact another part in significant ways. That characteristic of organizations requires leaders to look at the big picture, anticipate the change ripple, and plan for it.

Incorporating some of the above techniques will have extremely valuable paybacks in improved organizational performance. Don’t plow into new quality initiatives until you have worked on your leadership of communication, conflict management, change implementation, meeting management, and systems orientation infrastructure. Once you have, your investment dollars for improving your system for producing products and services will realize the true benefit that you as a leader seek. Ignore these elements and you will find yourself and your employees frustrated and angry.

R. Glenn Ray is the president of RayCom Learning, which helps leaders who want to create team breakthroughs. To learn more about RayCom Learning, visit the Web site www.raycomlearning.com. Ray’s third book “You Can’t Push a Pig into a Truck” is scheduled for publication later this year. He can be reached at 1-888-574-5370 or at rayray@raycomlearning.com. Everyday Leadership appears each Wednesday on the Business page.

Azim Premji, 60, owns more than 80% of Bangalore-based Wipro, India's third largest software exporter, which had annual revenues of $1.8 billion in 2005. Forbes magazine reckons that his net worth exceeds $13 billion, and it places him at No. 25 in its most recent ranking of the world's richest people. In the first of a two-part interview with Knowledge@Wharton, Premji speaks with Ravi Aron, a professor of operations and information management at Wharton, about Wipro's reorganization last year following the departure of its former CEO; why the company chose to move to an organizational structure based on so-called verticals; how Wipro's business operations are changing; and the challenges the company faces in recruiting and building management talent. Pratik Kumar, Wipro's head of human resources, joined Premji in answering some questions. The second part of the interview will appear in the next edition of Knowledge@Wharton.


Aron: After Vivek Paul [Wipro's former CEO] left the company last year, you made radical changes in your organizational structure. How did they affect your markets and your vision for where Wipro is going?


Premji: The most important thing you must appreciate is that, with the reorganization, we tried to bring Wipro's leadership closer to the customer. In the process, we tried to de-layer the organization and empower our business leaders with a much higher degree of P&L and growth responsibility. That is why we removed an entire layer which was there previously. Our executives are seasoned enough in their jobs and they have performed long enough in their roles to be confident that they can deliver results through the new structure.


The reorganization also brought the mainstream of the company, which is really our global technology business, closer in alignment with the original corporate staff, which has now become our business staff.


Aron: As part of your new structure, have you started redefining the organization with P&L responsibility at the level of the vertical? [Editor's note: Wipro's vertical structure divides the company into units such as Telecom Service Providers, Product Engineering Solutions, Finance Solutions, and Enterprise Solutions. These units further cater to industries such as banking, insurance, securities, and so on.]


Premji: No. Each vertical is like a self-contained business. It is like a mid-sized company even by U.S. standards, because each vertical generates about $300 million in annual revenues. Though they work under a common structure, with resources such as Finance, HR, Quality and Marketing, each vertical has people who represent these functions. So, in effect, each vertical is like a separate company.


Aron: Does that mean you intend to delegate more authority and responsibility to these self-contained companies?


Premji: Absolutely.


Aron: What is your thinking behind this?


Premji: It all goes back to leadership. It speeds things up and gets decisions made faster. It empowers people more, and it allows them to further empower those who report to them, because their jobs have suddenly become much more responsible.


Aron: So, in some sense, are you saying that a desire for greater customer proximity drove Wipro's reorganization?


Premji: Yes, it did -- as did a drive for speed. I hope the reorganization will make Wipro more agile because it's one thing to design a new organizational structure, and quite another to execute well. We believe that the new structure will help us execute our strategy well.


Aron: It's unusual for an Indian company to organize itself in terms of customer-facing, autonomous sub-companies. Do your senior executives have the necessary strategic views to be able to deliver under such an organizational structure?


Premji: We have been moving toward this type of structure for the past three years, though we have nailed it down more comprehensively now. We have tested it in various stages, and now we have the confidence to do it more thoroughly. It's not that we suddenly decided to create customer-facing units. We have greater maturity in this tested organizational structure compared to our competitors.


Aron: Let us now turn to some of your business challenges. I notice that Wipro's BPO revenues are growing rapidly. If you look at revenues per employee -- that is, the value that each person who works for Wipro contributes to the bottom line -- that number has grown by about 6.5% to 8%, whereas Wipro's BPO operations have notched up growth of more than 30% over the past 18 months.


Premji: I agree with you, but I think this is a matter of misaligned productivity. I think you will see different ratios in the future.


Aron: I also notice that Wipro's overall revenues, if you compare fiscal 2005 with 2004, grew by about 38%. In contrast, companies like Infosys and Tata Consultancy Services (TCS) grew at 47% and 45% respectively. So my question is: Is there a particular way in which you want to differentiate yourself from these other Indian IT firms or is that really not an issue?


Premji: It's always an issue to differentiate Wipro and get closer to target companies like IBM and Accenture rather than companies like Infosys and TCS. We are trying to do this in two or three ways. Consider, for instance, our product engineering services business. I think we are trying to do it by way of the competencies we have built there, with specialized teams for telecom and embedded systems, which are focused on verticals. Scale is another differentiator. In the products engineering services business we are 10,000 people strong, which makes us the largest products engineering services company in the world on a third-party basis. It gives us a huge depth of competence.


Moreover, the business we do now is evolving to models where we take turnkey responsibility for deliverables such as the design of end products -- next generation products. We don't just make subsystems for customers or work as part of a project team. We are also trying to build similar skills in some of our other businesses. We use the competencies developed in practices like technology infrastructure as well as in enterprise platform implementation to differentiate ourselves from others.


Yet another area where we plan to differentiate ourselves more strongly than we have done in the past is the Wipro Quality System. This is an integration of SCI, CMM Level 5, Six Sigma and lean manufacturing, which we believe will take us to the next level of quality as compared to our global competition. We have already launched lean manufacturing in software last year. We have a pretty good hands-on feel for what we can expect from it, but we have to fine-tune it as we go along. I think we have a very solid platform.


Aron: You said that you are now taking on turnkey responsibility for deliverables and that you no longer plan to do sub-system work such as testing a chunk of circuits...


Premji: You can do both. You don't demolish a cash-cow business. You just simultaneously try to build the business of tomorrow, which really differentiates you.


Aron: That's a great point.


Premji: The mundane business is also extremely profitable. It has a tremendous annuity value, and you don't ignore businesses like that. For example, maintenance of software and hardware are tremendous annuity businesses. If you build strong efficiencies into execution, they make very good margins. It is like a yin-and-yang situation: How do you build these strong annuity businesses and at the same time build other businesses that will establish certain differentiators in the marketplace, so that your image as a partner takes on a different dimension? That is the question.


Aron: For the high-end, turnkey businesses that you are transitioning into, you said you now employ 10,000 people -- and that makes you the largest company of its kind in the world. Could you give us a couple of interesting examples, off the top of your head, which symbolize what you are trying to do?


Premji: Of course. For instance, we have been working with some global telecom companies on designing the next generation of main switches. With a leading European mobile communications company, we are designing the next generation of mobile hand sets, including certain embedded technology, which becomes a differentiator for them. For an automobile manufacturer, we are designing a fairly sophisticated telematics system. [Editor's note: Telematics is an emerging auto communications technology which integrates wireless voice and data to provide services such as emergency roadside assistance.]


Aron: This is interesting. Does it mean that Wipro is moving beyond offering headcount-based services into developing products, or product equivalents, for companies? This is a question that financial analysts often ask Indian IT companies.


Premji: Yes, but the typical customer is an OEM [original equipment manufacturer]. Sometimes the intellectual property belongs to him completely, sometimes it belongs to him and to us jointly, and sometimes it belongs to us completely. It depends on the model we use for the particular customer, and the area where we are working for him.


Aron: Do you see a difference between this kind of business -- the telematics project, designing handsets for the European telecommunications firm, etc. -- and, say, designing billing software for General Motors or Motorola? Is there a difference between these lines of business?


Premji: Not necessarily. It depends on the originality of the work and the technical ladder height at which we operate. But the turnkey projects allow us to set Wipro apart because very few companies have the depth of knowledge to be able to tackle such work, whereas in projects such as billing software, we are exposed to much wider competition. Another thing that makes us unique is that we started our company designing hardware for the Indian market after imports were banned in 1980. That is how we built the competency platform which we transitioned into serving the global customer.


Aron: So this goes back to the history of Wipro's own trajectory of innovation, if I understand you correctly.


Premji: That's right.


Aron: Are the examples of turnkey projects you gave me significantly more innovative than projects like ERP [enterprise resource planning] integration or adding a CRM [customer relationship management] patch for a company?


Premji: They are certainly technologically more complex. You need people with deeper experience and the ability to handle greater complexity.


Aron: What demands do these new businesses make on your senior management? And what are you going to do to make sure that they are ready to meet those challenges?


Premji: Our managers need to have a strong integration of managerial skills and technical understanding. One cannot substitute for the other. That is not an easy combination to get, especially if you want to sustain growth. Technical people tend to be more "techie" and management people are more "managerial." To have strongly integrated managers who have a deep understanding of technology is a rare and difficult combination to build. You have to invest a lot in selecting and training these people.


Aron: Traditionally, companies like Wipro and the other Indian IT firms have been known for their technological competence. They are known for recruiting some of the best minds, but you just said that you have to train them very heavily in management skills. What kind of challenges do you have in mind?


Premji: We have done a lot of recruiting from campus. A few of the people we hire have MBA degrees, but typically they are hired from campus. We train them in Wipro's quality and managerial processes early in their career, and we give them a strong blend of responsibility for people and technology. We keep them fine-tuned on technology through a lot of refresher programs that we run within the company, in which we use faculty from universities quite extensively. We get first-rate faculty members from the leading engineering and science institutes to train our people.


Aron: You made an interesting observation about the difficulty of having technical folks do managerial work, and how it makes growth a challenge. This brings me to a question that is often asked about Indian companies. Today, Microsoft's revenues are more than 20 times Wipro's revenues. In your mind, do you see Wipro growing to the size of Microsoft or IBM?


Premji: It would be reasonable to assume that Indian services exports in IT and in BPO will grow cumulatively for the next five years at about 35%. They are now growing between 23% and 25% a year. I do not see any reason why leading companies like ours cannot grow faster than the growth of exports from India. After that, it is a matter of interpolation and desire. Do you keep scaling the organization? Do you use high-leverage models? Do you use productivity tools so that your headcount doesn't increase as fast as your revenues do? That is what we are trying to achieve, and it is not an easy challenge. How do you build maybe 8% productivity growth a year in your business model? To do that, you have to grow 8% a year in terms of revenues with the same headcount, or to grow 16% in revenues a year but with just an 8% increase in headcount.


Aron: Wipro currently employs some 45,000 people. If you grow at 30% a year for the next few years, let's say your revenues double, but you wouldn't want your headcount to double to 90,000. One of the observations that often is made about service companies -- in contrast to product companies -- is that businesses based on human skills inherently don't scale gracefully. Beyond a point, the company becomes so large that it is impossible to manage an organization if it grows to, say, 150,000 people. This seems to suggest there are natural limits to growth and asset size. What do you think?


Premji: I don't see growing to 150,000 to 200,000 people as an insurmountable challenge. Take a company like Accenture -- it has almost 120,000 people now, and they have scaled up by almost 20,000 people in the past two years. That has come about mainly because they have gone to global delivery models. That is doable. After 200,000 people, you might have to think laterally about how to grow beyond that point. You have to think about partnership models -- how do you manage partners and still have transparency with your customers? That is important, because you are still responsible for the deliverables in the end.


Aron: If Wipro wants to scale up to the size of Accenture or IBM in terms of revenues, what are the challenges of training large numbers of technically competent people who are unused to Western management styles? What is Wipro doing about that?


Premji: We have two sets of training. One is campus-induction training and technical training, which is bundled into one; the other is training in leadership and soft skills. Our leadership training focuses on management development, but we go deeper into the organization and we also include issues like training people in areas such as consultancy, negotiations, and customer sensitivity as well as cultural training for Germany, the U.S. and Japan. This is handled by an internal team supplemented by external faculty, including academics or consultants who have specialized areas where they can contribute.


We provide leadership training at the entry level, which is for people when they first go into supervisory jobs. Then we have training for middle management, senior management and top management. All these are modular, residential workshops, and they are conducted by faculty members, at least 60% of whom are internal. It has been working reasonably well. In fact, we are investing much more in this area. We've done some reorganization so that our training is linked with evaluation. After people have gone through the training programs, we follow through and monitor how they perform on the job.


Aron: The problem for Wipro going forward and ramping up in terms of revenues and people in India is not going to be the availability of programmers or technical people; it will be the availability of upper and middle management. If you look at business schools in India such as the Indian Institutes of Management (IIMs) or the Indian School of Business, companies like Wipro, Infosys or TCS are not attracting the top talent from those institutions. The employers of choice for those students seem to be the investment banks and consulting companies. This poses two kinds of challenges for you. First, how do you attract the top talent from campuses? And second, how do you get lots of really sharp people for your middle- and upper-middle management? I would really like to hear your perspective on this.


Premji: For one thing, we have spread our recruitment net wider than the top five business schools in India; we now hire people from the top 25 management institutes. We have MBAs whom we have recruited from these institutes, and they rank very close in quality to people we hire from the IIMs. We have to be careful to focus on the top half or top 33% of the class, because then the students tend to be very bright. Our experience with these students has been extremely good. Many investment banks and multinational companies that recruit in India, paying students multinational salaries and offering overseas jobs, are not present at these institutes. Our competition here typically tends to be companies hiring for domestic jobs and non-investment banks. That has made these institutes a strong source for recruiting management talent. In fact, last year we took in 160 people from these schools.


Second, we do lots of internal training and give people major responsibilities even if they are only 60% ready. Our experience is that people are pretty elastic when you give them responsibility, and they just grow rapidly with the job. Third, we have a good reputation for recruiting laterally, and we recruit from our competitors as well as from other industries. These people bring high levels of project management skills, service skills and customer interaction skills in terms of the way that middle managers and supervisory managers have to deal with customers. Our experience has been strong on this count also. And because we have been recruiting from outside for many years now, our culture seems to have enough veracity and openness to be able to induct even middle management and senior management talent from outside and still integrate them into the Wipro culture without any serious disengagement.


Knowledge@Wharton: What leadership qualities do you look for in executives you hire at Wipro?


Premji: We have defined seven or eight leadership qualities. We have defined those because we needed some consistency in terms of what we measure against when we recruit; what we measure against when we promote; and what we want our training to be oriented towards in terms of the skills and competencies we want to build into people. Pratik, could you add more about the leadership qualities?


Pratik Kumar: We look for people who can work effectively in an unstructured environment, who have great adaptability and who can be reasonably comfortable in situations that are not crystal clear and where there is a level of ambiguity. We also recruit people who have a lot of self-initiative because these are qualities that will lead them to succeed in our kind of environment.


In addition, we have a clearly crafted list of leadership qualities with which we measure our own managerial talent and I will touch on those very quickly. One is customer orientation, because we believe that for an organization to be successful, this is a particularly important rule. Strategic thinking is becoming more and more important; we need people who can balance short-term and long-term goals, and who are ready to sprint and run a marathon at the same time.


Self-confidence is another quality that I think is becoming increasingly important. Many people have spent their whole lifetime working in environments which have been predominantly Indian. When they have to deal with people from different cultures and with different styles, it is important to see how well they are able to hold their own. Self-confidence also means your ability to take good news as well as bad news. How well are you able to do that? That is another important element. Other important leadership qualities we look for are commitment to excellence, willingness to groom other leaders in the organization, and the ability to work in teams. All these qualities are interwoven in everything we do in the organization.

Published: April 5, 2006

By Rick Whiting

Most companies are performing data analysis somewhere, in some limited way. But author and consultant Tom Davenport, speaking Tuesday at the InformationWeek 2006 Spring Conference in Amelia Island, Fla., said market-leading companies are going beyond using analytics in a piecemeal fashion and making it a core element of their strategic planning process.

Data analysis has long been used for specific tasks by highly trained analysts, such as actuaries in insurance and six sigma quality analysts in manufacturing, noted Davenport, who holds the president's chair in Information Technology and Management at Babson College. "It existed, but it was not central to the business," and it remains largely invisible to top decision makers, he said.

But forward-thinking companies--maybe 10% of all businesses--have taken an aggressive approach to building their competitive strategy around analytics, Davenport estimated. That includes finding the right customers and charging them the right price, minimizing inventory while maximizing product availability in the supply chain, and accurately allocating costs and understanding what's driving financial performance.

The best-seller Blink argues that relying on intuition can be effective for decision making, but Davenport claims intuition is just "built-in analytics"--relying on pure intuition would be dangerous. Instead, he pointed to several successful companies that have relied on analytics for years, including Marriott and its revenue management analysis efforts and the use of supply chain analytics by Wal-Mart and Proctor & Gamble. Other companies, such as casino operator Harrah's, have turned themselves around through the effective use of customer analytics.

A recent study Davenport conducted on 32 companies found that about one-third were truly competing on analytics, while a half dozen or so each fell into the categories of clear intent, almost there; has the vision, but a long way to go; and possesses some local, nonstrategic analytical activity. A couple were still wrestling with the basics, he said.

Davenport outlined the five attributes that characterize data analysis efforts at companies that are successfully competing on analytics: a commitment to investing in analytics at the CEO level; widespread use of modeling and prediction; identification of a company's distinctive capabilities or processes (such as supply chain management at Wal-Mart) and the use of analytics to support it; management of analytics at the enterprise level; and large-scale ambitions for using analytical results.

Davenport suggested that companies pick a major focus and a secondary focus for their analytical efforts, pointing out Harrah's use of analytics for customer loyalty analysis and service performance, and UPS's use of operational analytics and customer data analysis. A competitive analytics program should have two primary user groups, such as product category managers and suppliers at Wal-Mart, logistics managers and hospitals at Owens & Minor, and actuaries and customers at Progressive Insurance.

Managing analytics at the enterprise level also requires that line-of-business managers give up their "fiefdoms of data," Davenport said, in favor of a more centralized data management model. And some level of centralized data analysis expertise, such as provided by a business intelligence competency center, is needed.

There's a wide range of technology available for collecting and analyzing transactional data. "It just requires money," Davenport said. The most difficult part of implementing a data analysis strategy includes such intangibles as the need for high-level analytical skills among employees and managers, and instilling a culture of testing and learning. "This stuff takes a while, so you'd better start now," he said.

By Beth E. Musselman
Army Materiel Command