1. Ottawa, Canada
2009
The Key
Principles behind
the Integrated
Enterprise
Excellence
Methodology
White Paper
A Knowledge Leadership
Publication By
Procurement Insights Author
Jon Hansen

2. The Key Principles behind the Integrated Enterprise Excellence Methodology
Table of Contents
INTERCHANGEABLE STRATEGIES . . ..................................................................................2
IS SIX SIGMA STILL RELEVANT? ………………………………………. . . . . ……………3
THE DEMING PHILOSOPHY . . . .............................................................................................4
TRANSFORMATIVE COMMUNICATION AND COLLABORATION ...............................6
REMAINING TRUE TO THE DEMING VISION.....................................................................7
A CASE IN POINT . . . .................................................................................................................9
A FINAL POINT . . . . . . . . . . . …………...……………………………….. …………………11
ABOUT SMARTER SOLUTIONS . . . ......................................................................................13
Appendices
APPENDIX A ...............................................................................................................................15
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3. The Key Principles behind the Integrated Enterprise Excellence Methodology
Is Six Sigma Still Relevant in a Dynamically Changing World?
With the growing level of dissatisfaction with programs such as Six Sigma,
the question that needs to be asked is quite simply this . . . what are the key
elements of a successful process improvement initiative?
This white paper, authored by critically acclaimed business writer Jon
Hansen, focuses on the possible reasons behind the alarming number of
failed or struggling programs, as well as providing insight into why
Deming’s System of Profound Knowledge establishes a meaningful
foundation upon which Forrest Breyfogle’s Integrated Enterprise Excellence
methodology consistently delivers superior results.
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4. The Key Principles behind the Integrated Enterprise Excellence Methodology
Interchangeable Strategies and the Attempt to Find the Right
Combination for Success
“Traditionally, Lean and Six Sigma have been viewed and utilized as
distinctly separate methodologies to analyze and improve processes. Rather
than employing them separately, many process gurus now advocate a
marriage of the two for more dramatic process improvement. While this
approach is valid, project leaders of process improvement efforts that
forcibly combine the two methodologies without understanding what they
are trying to improve will achieve limited success. Process Professionals
must first understand their level of process maturity to choose the
appropriate blend of Lean and Six Sigma methods and tools.”
Making the Marriage Work: Lean, Six Sigma, And the Business Process
Maturity Model
Forrester White Paper by Andy Salunga, Sharyn Leaver and Meghan
Donnely
November 21, 2007
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5. The Key Principles behind the Integrated Enterprise Excellence Methodology
Is Six Sigma Still Relevant in a Rapidly Changing World?
Like the over reliance on technology to deliver significant savings in areas
such as supply chain efficiencies has led to the continuously high rate of
costly initiative failures, the all encompassing, seemingly blind
embracement of the latest “mix” of business process methodology
improvement concepts do not fare much better.
A fact that is reflected by an increasingly cynical business community and
illustrated in a variety of venues including the Six Sigma Works: Fact or
Fiction Forum.
More telling than the results of an impromptu December 2008 forum survey
in which only 29.85 per cent of respondents claimed success (37.31 percent
indicated that their Six Sigma initiative was an outright failure, while 32.84
per cent indicated that they had achieved marginal success), were the
corresponding commentary from forum members. The following is an
example of just one of the many exchanges:
“I’ve lately come to realize that the current infatuation with SS stems from a
neophytes perception that the co-opted “core tools” of SS – understanding
variation, finding root causes, methodological problem solving – are valid
and valuable, is based their zeal to take the plunge and accept the fallacies
of the related 1.5 shift, the folly of 3.4 Defects Per Million Opportunities
(DPMO), and the ugly transmogrification of the simple PDCA into DMAIC
– at face value. In other words they see the tried-and-true-assets of SS and
assume that the garbage must be OK too. However, when you strip away
the garbage and the ridiculous caste system you discover that in reality you
have relatively simple concepts that have been with us for a long time.”
Rather than being viewed as a seditious ranting of an isolated and
uninformed malcontent, the response to this highly critical assessment of Six
Sigma was generally met with approval.
One response that stood out in particular came from Australia, where the
member expressed the belief that by “stripping away the garbage and the
ridiculous caste system to return to a Deming-based model, would cost many
consultants a great deal of revenue and cause great embarrassment to
managers who have blindly jumped onto the bandwagon.
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6. The Key Principles behind the Integrated Enterprise Excellence Methodology
3.4 DPMO might be as much nonsense as Iraq’s WMD or McCarthy’s Cold
War “reds under the bed” rantings, but that didn’t stop the pursuit of such
phantoms.
As long as managers can claim results from a bit of brainstorming or
looking for root causes, they will hail Six Sigma. No one seems concerned
that billions have been wasted along the way, teaching about non-existent
normal distributions, using enumerative tools in analytical studies, the
aforementioned absurdity of the 3.4 DPMO and the remaining elements of
the Six Sigma panoply.
Industry has once again reached a time of great crisis. There is a need to
return to the fundamentals of sound process management. To this end,
managers would find great benefit in reading (or re-reading) Deming’s
classic text “Out of the Crisis.”
The Deming Philosophy
The reference to W. Edwards Deming is interesting in that it touches on one
of the seemingly contentious elements of the Six Sigma program relating to
3.4 DPMO, and in particular the importance of quality.
Deming’s philosophy has been summarized as follows: “Dr. W. Edwards
Deming taught that by adopting appropriate principles of management,
organizations can increase quality and simultaneously reduce costs.” The
key to the Deming approach was the emphasis on practicing “continual
improvement and to think of manufacturing as a system, and not as bits and
pieces.”
This viewpoint was reflected in another Six Sigma Works: Fact or Fiction
Forum member’s response to the expressed concerns regarding the validity
of 3.4 DPMO.
“3.4 DPMO is exactly what it is. How you define the defect is up to you. If
someone makes a determination that customers say it is OK for a gas pump
to be off by 1 gallon in 10 gallons pumped, one could say that gas pumps
operate at a Six Sigma level in that for everyone who visits a pump, only 3.4
people in every million visits will have more or less than an extra gallon of
gas for 10 gallons pumped on the meter. We did not say that you could have
3.4 people with an extra gallon and another 3.4 people short more than a
gallon. A defect is either a defect or not a defect.
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7. The Key Principles behind the Integrated Enterprise Excellence Methodology
When you look at specification limit, such as the tolerance between two
mechanical parts, you can define that the pieces need to be between .005
inches and .025 inches. If you are less than the .005, that would be a defect
and if you were greater than .025, that would also be a defect. If you say
that .004 inches is really acceptable, then your lower specification is not set
correctly at .005.
Therefore, when you look at a control chart, a process that is in control will
have most of the points between the upper and lower Control Limits. These
are different from specification limits. A process can be in control, but be at
a very low Sigma number as the target you consistently hit does not meet
customer expectations. If you put a rifle on a stand, aim with a scope, and
shoot 10 rounds, the process can be very much in control with all 10 shots
hitting in a small grouping, but if the grouping is 5 inches to the right of the
target, you also have 10 defects out of 10 shots.”
Interestingly enough, the following excerpt from a Deming case reference
involving the automotive industry would seem to support the forum
member’s position.
“The Ford Motor Company was simultaneously manufacturing a car model
with transmissions made in Japan and the United States. (Note: Deming and
his methodologies were widely accepted and hailed in Japan long before the
United States recognized the validity of his work.)
Soon after the car model was on the market, Ford customers began
requesting the model with the Japanese transmission over the USA-made
transmission, and were willing to wait for the Japanese model. As both
transmissions were made to the same specifications, Ford engineers could
not understand the reasoning behind the customers’ preference. What they
discovered was that the Japanese model delivered smoother performance
with a lower defect rate.”
Based on this feedback, Ford’s engineers decided to take apart the two
transmissions to ascertain the root cause of the different results.
After an extensive analysis, in which it was determined that the American-
made parts were all within the specified tolerance levels, the engineers
discovered that the Japanese parts “had much closer tolerances than the
USA-made parts.” Specifically, “if a part was supposed to be one foot long,
plus or minus 1/8 of an inch, then the Japanese parts were within 1/16 of an
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8. The Key Principles behind the Integrated Enterprise Excellence Methodology
inch.” The result is that the Japanese-made cars ran smoother with less
problems than their American-made counterpart.
Outcomes such as the Ford example clearly demonstrate that “tangible
results cannot be achieved through a simplistic application or adherence to a
formulaic mix of the right specifications or guidelines.”
If this is in fact true, and the steadily increasing level of dissatisfaction with
programs like Six Sigma would tend to support this position, then we need
to ask “what are the key elements of a successful business process
improvement program?” Fortunately, Deming’s System of Profound
Knowledge provides the answer. An answer which also explains why
Forrest Breyfogle’s Integrated Enterprise Excellence program is achieving
outstanding results in a market that is desperately looking for answers given
the current economic environment.
Transformative Communication and Collaboration
Deming’s System of Profound Knowledge contends that “the prevailing
style of management must undergo transformation.” However, Deming
concluded that a “system cannot understand itself,” and therefore requires
“a view from the outside.”
In this outward looking in process, true discontinuous transformation begins
at the “individual level,” and comes from an “understanding of the system of
profound knowledge.”
Once transformed, Deming believed that the individual will “perceive new
meaning to his life, to events, to numbers, to interactions between people.”
And based on this new found understanding or insight, the individual will
“apply the principles in every kind of relationship with other people.” In
essence, the individual will have a “basis for judgment on his or her own
decisions as well as for the transformation of the organization to which he or
she belongs.”
As a result, the individual will be able to a) set an example, b) be a good
listener, but will not compromise, c) continually teach other people, and d)
help people to pull away from their current practices and beliefs and move
into the new philosophy without a feeling of guilt about the past.
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9. The Key Principles behind the Integrated Enterprise Excellence Methodology
Based on this transformation principle, Deming deemed that it was critical
for managers to fully understand the following four key elements or parts of
the system:
1. Appreciation of a system: understanding the overall processes
involving suppliers, producers, and customers;
2. Knowledge of variation: the range and causes of variation in quality,
and use of statistical sampling in measurements;
3. Theory of knowledge: the concepts explaining knowledge and the
limits of what can be known;
4. Knowledge of psychology: concepts of human nature
With the exception of the second element, points 1, 3 and 4 are directly
linked to an effective communication/collaboration mechanism.
What the Integrated Enterprise Excellence system delivers is a methodology
that not only provides the framework or model for success, but also equips
key internal as well as external stakeholders with the tools to establish and
manage the critical communication channels that are necessary to maximize
both knowledge and collaboration and therefore effect positive and
sustainable results at the collective enterprise level.
Results, which according to a senior executive, whose company’s success
with the Integrated Enterprise Excellence system is a featured white paper
case study, are unique to Breyfogle’s Smarter Solutions organization.
Specifically, the executive stated that “we have had a lot of outside
consulting work all the way from financial to operational, and the best value
and certainly most successful help has been through Smarter Solutions.”
Remaining True to the Deming Vision
On September 29, 2008 Smarter Solutions’ Forrest Breyfogle was
nominated for the Deming Medal.
Citing his “proven knowledge” relating to the foundational principles behind
Deming’s concepts, Breyfogle’s Integrated Enterprise Excellence
methodology reflects the natural and effective evolution of the Deming
System. This is an important distinction in that while many best practice or
business process improvement models have their origins tied to the Deming
thought process, very few have successfully maintained the difficult balance
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10. The Key Principles behind the Integrated Enterprise Excellence Methodology
between innovative adaptation to the current market while remianing true to
the core elements of the Deming model.
This ability reflects Breyfogle’s unique insight into the complex inner
workings of the modern, global enterprise. And by adhering to the “14 key
management principles” for effective business transformation that was first
introduced in Deming’s book “Out of the Crisis (p. 23, 24), Breyfogle
provides his clients with a strategically sound, historically proven road map
to process understanding and redefinition that is in line with the realities of
doing business in a rapidly changing world.
That said it would be a mistake to think that the Integrated Enterprise
Excellence methodology is a simple duplication of the Deming System.
While the principles associated with the 14 points remain valid, the fact is
that the world has dramatically changed since Deming’s time. And as Colin
Powell once stated in a well known speech that even though “it is important
to seek the input of experts,” it is equally important to recognize the fact that
the experts “may have hit their plateau in terms of current day relevancy and
effectiveness,” Breyfogle’s approach represents both an innovative and
important breathrough in business process improvement methodology.
The implication here is not to disparage the innovators who have come
before us, but is instead intended to point out the fact that with time
circumstances and conditions change. Therefore, what worked in the past
may not necessarily carry the same degree of relevance and applicability in
today’s world. In essence, and in the spirit of Powell’s military background,
the biggest mistake a commander can make is to fight yesterday’s war today.
And as alluded to earlier, this is one of the primary differences between
Breyfogle’s approach and those of his contemporaries, as he has effectively
achieved the balance being extracting and leveraging the critical Deming
attributes while simultaneously incorporating the unique perspectives that
reflects the reality of doing business in today’s diverse and challenging
corporate climate. This is truly relevancy without redundancy.
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11. The Key Principles behind the Integrated Enterprise Excellence Methodology
A Case In Point
The Smarter Solutions Case Study of North Carolina-based Oracle
Packaging tells a compelling story in the opening few minutes by stating
that “board members, investors, regulators, employees, suppliers and
customers can present conflicting priorities.”
One such example of the how these apparently competing demands within a
single enterprise create a conflict occurred when Smarter Solutions focused
on Oracle’s Working Capital.
While it was never quantified, there was a general awareness within the
company that a large amount of material completed for the internal
customer was not being shipped. This led to the obvious question “why
would an internal customer place an order for something that was not
needed in the immediate future?”
It took the Integrated Enterprise Excellence methodology to uncover the
existence of several internal policies that while intending to optimize
divisional performance, simultaneously had a negative impact on Working
Capital as valuable cash resources were tied up in inventory that had an
unconfirmed future delivery date.
Similar to the Information Technology service sector’s practice of setting
aside and assigning inventory for the future requirements associated with
meeting a contractually demanding Service Level Agreement, the Oracle
policy addressed the interests of only one area of the business. And like the
IT example, while the certainty of future usage was relatively guaranteed
this belt and suspenders practice impeded critical process improvements in
other areas of the operation such as planning and scheduling.
Through a proper alignment of enterprise-wide policies with operational
imperatives that resulted from reviewing the organization’s practices an
Integrated Enterprise Excellence analyses enabled Oracle to increase
throughput by 30 per cent, while simultaneously reducing Work In Progress
(WIP) inventory levels in half.
As a means of providing some context relative to the impact of this
breakthrough on the company’s Working Capital, prior to introducing
Integrated Enterprise Excellence Oracle’s practice was to maintain 400 coils
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12. The Key Principles behind the Integrated Enterprise Excellence Methodology
of aluminium (re WIP inventory) worth an estimated $3 million dollars. By
reducing WIP inventory by 50 per cent through the utilization of Integrated
Enterprise Excellence advanced metrics, tangible bottom line savings were
achieved within the first three months.
And rather than having a negative impact on production requirements, the
Integrated Enterprise Excellence process improvements provided the added
benefit of reducing lead times from as much as five weeks to as little as
eighteen days. According to Oracle Packaging Supervisor Kenny Hanna,
the company is actually “running more production out the back door now”
that at any other time.
Based on the success of the process improvements to date, company Vice
President Hank Bird expressed his belief that the Integrated Enterprise
Excellence methodology is “more of a business system than a project driven
deal,” which in his estimation is one of its greatest benefits. In short
according to Bird, Integrated Enterprise Excellence “is the way to run a
business.”
The true testimony to Integrated Enterprise Excellence’s effectiveness
however is reflected in the general belief that the proper alignment of
performance measurement with operational metrics through a meaningful
collaborative process will ultimately touch all areas of the business.
Ernest Holley, Oracle’s Vice President of Operations confirmed this broader
vision for Integrated Enterprise Excellence impact when he stated that,
“with what we’ve learned from Integrated Enterprise Excellence we can
look at any system, any type of process and we now have the tools that we
can say hey let’s take this thing apart – how can we improve on it, how can
we really build for the future and build something that is long lasting and
sustainable.”
And according to Oracle CEO Scott Dickman, Integrated Enterprise
Excellence’s impact is not just confined to the here and now. Specifically,
the CEO believes that Integrated Enterprise Excellence also “gives us an
opportunity to develop our strategic plan as it evolves.” As a result, having
critical data as well as “understanding what the data is telling us, definitely
will help us to keep our strategic plan up to date and current.”
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13. The Key Principles behind the Integrated Enterprise Excellence Methodology
A Final Point
What is ultimately the most important testimony to the effectiveness of the
Smarter Solutions’ Integrated Enterprise Excellence program is found in
comments from clients such as Oracle VP Hank Bird who said, “We have
had a lot of outside consulting work all the way from financial to
operational, and the best value and certainly most successful help has been
through Smarter Solutions”.
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14. The Key Principles behind the Integrated Enterprise Excellence Methodology
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15. The Key Principles behind the Integrated Enterprise Excellence Methodology
About Smarter Solutions
Forrest W. Breyfogle, III, is the CEO of Smarter Solutions Inc. and the
developer of the Integrated Enterprise Excellence system. In 2004 Mr.
Breyfogle received the American Society for Quality Crosby Medal for his
book, Implementing Six Sigma, 2nd edition. He is a professional Engineer,
an ASQ fellow, and a member of the board of advisors for the University of
Texas for Performing Excellence. He has authored over one hundred books
and articles on Integrating Enterprise Excellence, Six Sigma, and Lean
methods. Smarter Solutions is a world-class provider of training and
consulting with an excellent track record in the delivery and execution of
Executive, Champion, Black Belt, Green Belt and Master Black Belt
education and coaching. Mr. Breyfogle has conducted numerous workshop
sessions worldwide – serving a distinguished group of clients, including
BAMA, CIGNA, Dell, IBM, Oracle Packaging and TATA. He has a MSME
degree from the University of Texas and a BSME from the University of
Missouri at Rolla.
© Procurement Insights 2008-2009
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16. The Key Principles behind the Integrated Enterprise Excellence Methodology
About the Author
Jon Hansen has studied and written extensively about e-Procurement and the
changing face of procurement around the globe. In addition to being a
highly acclaimed international speaker, his Procurement Insights Blog
reaches 300,000 syndicated subscribers each month worldwide, and is
currently available in several languages. He has written more than 200
articles and papers on subjects ranging from supply chain optimization and
the utilization of agent-based modeling in the software development process
to the evolution of sustainable purchasing practices and the impact of
traditional ERP-centric implementation methodologies on the high rate of
supply chain initiative failures. Funded by the Government of Canada’s
Scientific Research and Experimental Development (SR&ED) program Mr.
Hansen’s work in both identifying the existence of Commodity
Characteristics as well as defining and recording their impact on “best
value” purchasing practices represented a seminal breakthrough that led to
the establishment of new theories surrounding the practical utilization of
synchronized platforms in achieving sustainable coordinated savings and
overall process efficiencies.
Other white papers by Jon Hansen:
The Greening of Procurement: How Social Consciousness is Re-Shaping
Procurement Practices
Talent Attraction and Retention in a Global Economy
SAP Procurement for the Public Sector
Strategic Sourcing Practices in Higher Education
Yes Virginia! A Profile in Excellence
To obtain copies of the above referenced white papers, or to inquire about
Jon’s availability to speak at your next conference or seminar contact
Jennifer Cameron at jenncameron@sympatico.ca, or 819-986-8953.
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17. The Key Principles behind the Integrated Enterprise Excellence Methodology
The Key Principles
behind the Integrated
Enterprise Excellence
Methodology
White Paper
Appendices
16

18. The Key Principles behind the Integrated Enterprise Excellence Methodology
APPENDIX A
Reference Links
Making the Marriage Work: Lean, Six Sigma, And the Business Process
Maturity Model
Forrester White Paper by Andy Salunga, Sharyn Leaver and Meghan
Donnely
November 21, 2007
http://www.forrester.com/Research/Document/Excerpt/0,7211,43634,00.htm
l
Six Sigma Works: Fact or Fiction Forum
http://elsmar.com/Forums/showthread.php?s=18083682b7d1658f98f1e2300
5373908&p=287191#post287191
W. Edwards Deming, Wikipedia Article (updated January 24, 2009)
http://en.wikipedia.org/wiki/W._Edwards_Deming
Forrest Breyfogle – Deming Medal Nomination Outline
http://www.slideshare.net/piblogger/deming-medal-nomination-forrest-
breyfogle-presentation
Oracle Case Reference (Video)
http://www.youtube.com/watch?v=EDQpxnMmbuU
17