Reference no: EM132230664
Read and analyze the article.
Present your analysis as it relates to Six Sigma, Innovation and Firm Performance in the following items presented in the article:
Quality Management and Project Management
Organizational Processes
Process Management and Firm Performance
Limitations and Future Research
The effect of Six Sigma projects on innovation and firm performance Mahour Mellat Parast *
Abstract
The paper develops a theoretical base for the effect of Six Sigma projects on innovation and firm performance. It has been proposed that Six Sigma projects enhance technological innovation of the firms; however, they are beneficial for firms in stable environments. Since Six Sigma programs are focused on variance reduction and efficiency, these initiatives are not very effective in dynamic environments, where the rate of technological change is dramatic. With their emphasis on variance-reduction and efficiency Six Sigma programs can be effective in enhancing incremental innovation. In addition, due to the focus of Six Sigma projects on existing customers, they may impede innovation for new customers. Accordingly, implementing Six Sigma projects in fast pace environments with high level of inno- vation and change may be a challenge, and may not result in the expected outcome. Building upon theories form process management and quality management the paper proposes several propositions to address the effect of Six Sigma projects on innovation and firm performance.
Published by Elsevier Ltd and IPMA.
Keywords: Six Sigma; Project management; Process management; Technological innovation; Exploration; Exploitation
1. Introduction
In the pursuit of higher operational effectiveness and organizational performance, scholars and practitioners are looking for new approaches to improve operational performance, boost profitability, and enhance competitive- ness. As a structured methodology emerged from quality management, Six Sigma programs have received consider- able attention in the never-ending journey of process improvement (Linderman et al., 2003, 2006; Choo et al., 2007a,b).
Having been developed from quality management phi- losophy (Goeke and Offodile, 2005), Six Sigma has attracted academic research in recent years (Raisinghani et al., 2005; Schroeder et al., 2008). It has been identified as a process improvement approach that dramatically improves performance, enhances process capability, and produces bottom line results for organizations (Dasgupta, Evans and Lindsay (2005) define Six Sigma as a business process improvement approach that seeks to find and eliminate causes of defects and errors, reduce cycle times and cost of operations, improve productivity, better meet customer expectations, and achieve higher asset utilization and returns. According to Hammer (2002) Six Sigma employs a project-based methodology to solve a specific perfor- mance problem recognized by an organization. The focus of Six Sigma is on the customer rather than the product (Douglas and Erwin, 2000).
Although scholars and practitioners cite numerous examples on the positive effect of Six Sigma projects on firm performance (e.g. Hoerl, 1998; Rucker, 2000; Roberts, 2004; Johnson, 2005; Foster, 2007) there are concerns and criticisms about the effectiveness and impact of Six Sigma projects. In the US banking industry, Bank of America and Citigroup were considered as organizations that heav- ily invested in Six Sigma and benefited from it (Rucker, 2000; Roberts, 2004). Despite the popularity of Six Sigma programs there is little theoretical support on the 46 M.M. Parast / International Journal of Project Management 29 (2011) 45–55 effectiveness of Six Sigma projects on organizational per- formance. Some argue that Six Sigma is simply a repackag- ing of traditional quality management which is subject to the limitations and criticisms of quality programs (Dahlg- aard and Dahlgaard-Park, 2006). Accordingly, there is a need to better understand organizational and contextual variables that facilitate or impede effective implementation of Six Sigma projects.
The purpose of this paper is to develop a theoretical framework to determine the effect of Six Sigma programs on innovation and firm performance. To do so, the founda- tion of Six Sigma and its underlying assumptions will be discussed. In addition, the role of Six Sigma projects in addressing both incremental change (exploitation) and rad- ical change (exploration) will be addressed. Finally, the paper provides insight on the external variables that can influence the effect of Six Sigma programs on firm performance.
2. Quality management and project management
The principles and premises of project management have been evolved over time. Traditionally, project man- agement has been conceived as an organized plan to achieve pre-determined goals within a specified timeline (Laszlo, 1994). In this viewpoint, trade-offs among time, cost, and quality are inevitable (Khang and Myint, 1999). Recent thinking in project management treats projects as sets of practices aiming at providing better quality products and/or services to customers through integration with other organizational practices and effective utilizations of resources (Cicmil, 2000).
Project management principles, guidelines and tech- niques can contribute to the success of quality-related pro- jects (Somasundaram and Badiru, 1992). This suggests a link between quality management and project management since customer satisfaction is regarded as one of the key principles in quality management (Dean and Bowen, 1994). Antilla (1992) suggests that utilizing the concepts proposed by quality standards and quality systems (e.g. ISO-9000) is significant in establishing the quality of pro- jects. In that regard, research in the relationship between quality management and project management will provide insight on how quality concepts can be effectively utilized in project management.
Research on quality management and project manage- ment is surprisingly rare. Cicmil (2000) addresses the lack of research in project quality, and stresses the need to con- duct more research to integrate quality concept with project management. It is suggested that a multi-perspective approach to project management will result is better project outcomes (Cicmil and Terziowski, 1999). This view suggests integration and inclusion of multiple, multi-level quality concerns in project management through balancing the expectation of different project stakeholders. Utilizing the project management multiple perspective (PM-MP) frame- work, Cicmil (2000) identifies three key areas for successful project management: project context, project content and organizational behavior. Project context deals with the organizational context, specific industrial settings, and orga- nizational or business strategies. The primary focus of pro- ject content is to make sure project objectives and methods of achieving them have been properly defined in the early project stages (Turner and Cochrane, 1993). The organiza- tional behavior aspect is concerned with designing an effec- tive project structure, dealing primarily with human element of project management (Anderson, 1992). Attention to these characteristics will ensure that a project can achieve its desired objectives and will lead to higher quality projects.
While previous studies have revealed key determinants of project success and sharpened our insight on how to design and plan effective projects, quality and innovation issues in project management have received little attention. Furthermore, the link between organizational processes and project management has been overlooked in previous studies. To fill this gap in the literature, To fill this gap in the literature, this paper focuses on Six Sigma projects. Six Sigma projects are primarily improvement projects try- ing to enhance improvement in organizational processes and routines thorough focusing on pre-determined and specific goals. This paper is primarily focused on the effect of Six Sigma projects on firm innovation and performance. Since Six Sigma projects are characterized under quality management, the focus on Six Sigma projects can contrib- ute to our understanding of the link between quality, inno- vation and project management. Therefore, it is believed that looking at Six Sigma projects can enhance our under- standing of effective implementation of project manage- ment and project outcome.
3. What is special about Six Sigma?
The fundamental difference between Six Sigma and other process improvement programs (such as TQM, Lean, and the Baldrige model) is related to the ability of Six Sigma in providing an organizational context that facili- tates problem solving and exploration across the organiza- tion. While Six Sigma programs have their roots in the quality movement, they are different from other quality programs (e.g. lean systems or ISO-9000) due to their lim- ited time-frame, measurable and quantifiable goals and the project structure (Andersson et al., 2006; Dahlgaard and Dahlgaard-Park, 2006).
It has been claimed that Six Sigma enables organizations to become more ambidextrous by switching structure, act organically when being challenged by new ideas and operate mechanically in focusing on efficiency (Schroeder et al., 2008). Ambidextrous organizations manage trade-odd between conflicting goals (alignment and adaptation) through utilizing and implementing “dual structures”. In these forms of organizations while some of the business units are focusing on efficiency, other business units empha- size innovation and change (Duncan, 1976; Gibson and Birkinshaw, 2004). This dual structure enables organizations to focus on both exploitation and exploration, addressing both efficiency and innovation (March, 1991). However, the ability of Six Sigma for achieving both effi- ciency and innovation has been challenged from different perspectives.
First, Six Sigma is characterized under the family of pro- cess management programs (Hammer, 2002; Benner and Tushman, 2003; Evans and Lindsay, 2005). Benner and Tushman (2003) argue that the utilization of process man- agement methodologies favors incremental (exploitative) innovation at the expenses of eliminating radical (explor- ative) innovation. Programs such as TQM, Business Pro- cess Reengineering and Six Sigma all focus on improving, rationalizing, and enhancing organizational processes (Hammer and Champy, 1993; Powel, 1995; Harry and Schroeder, 2000). With emphasis on process improvement and variance-reduction Six Sigma would impede product innovation and radical change.
Second, Six Sigma projects focus primarily on under- standing and identification of critical characteristics to the existing customers (Harry, 1998; Dasgupta, 2003; Linderman et al., 2003; Evans and Lindsay, 2005). This specific attention to the existing customers, coupled with focus on continuous improvement efforts in organizational processes and routines may be achieved at the expense of threatening the ability of the firm to identify new customers and introduce new products and/or services. As evidenced by Benner and Tushman (2003) incremental process inno- vation (such as Six Sigma) are fundamentally designed to meet the needs of existing customers.
Third, as a spin-off of quality management, Six Sigma maintains a strong emphasis on setting specific goals (Linderman et al., 2003). According to Pande et al. (2000) setting a clear goal is central to Six Sigma. Customer requirements are translated into the development of Six Sigma project goals (Schroeder et al., 2008). However, this focus on specifying measurable goals for Six Sigma is in contrast with the viewpoints of the founders of quality man- agement (Deming, 1986; Linderman et al., 2003). In that regards, one could argue that Six Sigma programs can not initiate, develop, and maintain sustainable quality systems, and can not address the core principles of quality manage- ment such as a culture of learning, continuous improvement of processes, and a system view of the organization.
Accordingly there is a need to investigate the scope, lim- itations, and premises of Six Sigma projects, and determine their effect on firm performance. Since Six Sigma has been categorized under process improvement programs, It is believed that looking at Six Sigma from the process man- agement perspective could provide insight on how Six Sigma programs improve organizational processes and firm performance.
10. Conclusion
Six Sigma programs have been utilized as a structured methodology to improve organizational processes. With their focus on the viewpoint of customers, they systemat- ically translate critical-to-quality characteristics into improvement projects. While it has been argued that Six Sigma programs enable firms to become more ambi- dextrous through their dual focus on efficiency (exploita- tion) and innovation (exploration) review of the literature on process management reveals that they may impede the ability of the firm for radical innovation, forcing the firm to pursue the current technological trajectory. In addi- tion, as firms heavily capitalize on their Six Sigma pro- grams, their ability in indentifying, monitoring, and understanding the needs of their future customers may be paralyzed.
To get the best out of Six Sigma programs, organiza- tions need to carefully address the needs of their current customers while monitoring the formation of new markets and/or customers. In its current form, Six Sigma programs do not guarantee a sustainable competitive advantage for the firms due to their focus on existing processes, products, and customers. This is due to the fact that they have not been developed to address radical improvement in organi- zational processes and routines. There is no doubt that organizations can benefit from Six Sigma programs; how- ever, such benefits are not sustainable until Six Sigma pro- grams develop mechanisms to address product innovation, pattern of change in customer base, and environmental uncertainty while improving organizational processes.