Applying Six Sigma to Marketing
Marketing professionals want to avoid suppressing creativity with tools and structure. Process-centric work may at first seem slow, routine, and burdensome. Moreover, marketing may think statistical analysis can dampen spontaneity and innovation. But our experience suggests that the opposite is true. The Six Sigma model described in this book plans for innovation and creativity to occur. If implemented correctly, a proven methodology averts rework (caused by mistakes), ensures completeness, and reinforces quality standards. A well-constructed method that requires improvement should plan for innovation and identify the appropriate participants. Moreover, Six Sigma can help tackle the new, the unique, and the difficult.
Few dispute the value of measurement. However, that which is easily measured rarely produces real or optimal value. Real value comes from measuring what others cannot or will not measure. This brings to mind a lesson from history. In 1726, Benjamin Franklin wondered if that warm swath of water he noticed crossing the North Atlantic had anything to do with the longer times it took to sail from England to the U.S. Franklin's cousin, Tim Folger, a whaler, knew that sailing around the current as if it were a mountain was much faster than sailing directly through the current to Philadelphia. In 1769, Franklin sold charts in London on "how to avoid the Gulph [sic] Stream" that cut westbound travel time up to 50%. To this day, Folger's map is surprisingly accurate. These measures gave Folger's whaling business a competitive advantage and higher revenue margins.
The benefit of integrating Six Sigma into your marketing processes includes better information (management by fact) to make better decisions. Using the more robust approach reduces the uncertainty inherent in marketing—a creative, dynamic discipline. Go-to-market processes with Six Sigma embedded in them can better sustain growth. One way to maintain growth over time is to focus on "leading" indicators of your desired goal. Leading indicators are factors that precede the occurrence of a desired result. Let's say you are concerned about dealing with a weight-induced disease such as a heart attack or diabetes. You could be reactive by regularly getting on the scale to see how much you weigh. Or you could be proactive by monitoring your caloric intake and burn rate. The latter approach of watching what you eat and how much energy you expend during exercise is harder than simply getting on the scale. The latter approach monitors "leading" indicators—critical activities that occur before weight gain. The "lagging" indicator takes a snapshot after the occurrence of an event. Lagging indicators force you into a reactive response if the results fail to meet the target. The act of losing weight may be more difficult than measuring the leading indicators of caloric intake and burn rate. The advice of "pay me now or pay me later" comes to mind.
Business lagging indicators involve measuring defects, failures, and time. Lagging indicators can include functional performance measures such as Unit Manufacturing Cost (UMC), quality measures such as Defects Per Million Opportunities (DPMO), and time-based measures of reliability such as Mean Time Between Failures (MTBF). Lagging indicators for marketing include market share and revenue—common performance metrics. A powerful leading indicator is customer satisfaction before a sales transaction (such as satisfaction with an information meeting or advertising piece). Another leading indicator may be the distribution channel's satisfaction with a product (or samples), whereby the salespeople want to use it themselves. Leading indicators help you anticipate whether you will hit the target. Since leading indicators occur before the desired result, you can be proactive in "correcting" poor performance. Armed with this knowledge, marketing can examine initiatives from a different perspective. To drive and sustain growth, performance and quality metrics need to be proactive rather than reactive. (Examples of continuous data include cycle time, profit, mass, and rank [customer satisfaction scores on a scale of 1 to 10]. Continuous variables are more informative and describe a process better than discrete or attribute data. Examples of discrete or attribute data include binary [yes/no, pass/fail] and counts [the number of defects].) Leading-indicator data, when established as a continuous variable, requires far fewer data samples to draw conclusions and make a decision as opposed to discrete-failure data.
Recall that a marketing methodology should facilitate the customer-product-financial linkages. This requirement seeks a comprehensive scope of marketing's responsibilities from offering inception, through offering development, to the customer experience. This comprehensive scope encompasses a business's strategic, tactical, and operational aspects. Marketing's role in each of these three business areas can be defined by the work it performs in each. This work can be characterized by a process unique to each. These three processes define how marketing's work links the strategic, tactical, and operational areas in a closed-loop fashion, as shown in Figure 1.3.
Figure 1.3 The strategic-tactical-operational triangle.
Let's examine the process that resides in each area. The Strategic Planning and Portfolio Renewal process defines a business's set of marketplace offerings. This strategic activity is fundamental for an enterprise, because it refreshes its offerings to sustain its existence over time. Multiple functional disciplines may be involved in this process, or the enterprise may limit this work to a small set of corporate officers, depending on the size of the enterprise and the scope of its offerings. This process generally calls for a cross-functional team composed of finance, strategic planning, and marketing, and sometimes research, engineering, sales, service, and customer support. A business with a unique strategic planning department may use it as a surrogate for the other various functional areas. If this is the case, the strategy office typically includes people with various backgrounds (research, finance, and marketing). This process can span a year and should get updated on a regular basis. Portfolio planning and management are the foundation from which to build and grow a business. Our experience tells us that successful businesses have marketing play a key role in the Strategic Planning and Portfolio Renewal process. In his book Winning at New Products, Robert G. Cooper states
There are two ways to win at new products. One is to do projects right—building in Voice of the Customer, doing the necessary up-front homework, using cross-functional teams . . . The other way is by doing the right projects—namely, astute project selection and portfolio management.
Six Sigma can help improve performance in this area.
The Product and/or Services Commercialization process defines the tactical aspects of a business. This process defines, develops, and readies a business's offering for the marketplace. The industry, market segment, and size/scale/complexity of the offering dictate the number of functional disciplines involved in this process and the amount of time it spans. The time frame ranges from several months to several years. A business usually manages this process by establishing a unique project team to develop a single product or services from the portfolio of opportunities. At a minimum, two types of disciplines are needed—technical functions to drive content and customer-facing functions. The technical experts develop the offering and may include engineering, research, and manufacturing. The customer-facing disciplines represent roles along the value chain that interface with a business's customer or client, such as marketing, sales, services, and customer support. In the Commercialization process, marketing may represent the customer-facing touch points throughout the process and may bring in the other functional areas toward the conclusion of the process in preparation for handoff to ongoing operations.
The Post-Launch Operational Management process unifies the operational aspects of a business across the value chain. This process represents long time frames (often years), depending on the life cycle of a given offering (product or service). The offering and go-to-market strategy dictate the variety of functional disciplines involved across the value chain. Again, marketing may play a representative role, integrating multiple functional areas as it manages the product line (or offering) throughout its life cycle.
Marketing professionals typically view their function as a set of activities or projects rather than a set of processes. It may seem unnatural at first to think about marketing work in terms of a process. However, process thinking provides an easily communicated road map that can describe interactivity with other processes. For example, marketing's tactical Product Commercialization process can cleanly map to the technical community's Product Design and Development process. By creating this linkage, the two functions better understand their interdependency with one another and can speak a common language as the output of one process becomes the input of the other's process. This book is a guide for leaders in the design of Six Sigma-enabled marketing processes.
The book The Innovator's Solution, by C. Christensen and M. Raynor, addresses the importance of process thinking. Similar to a business executive forecasting next quarter's performance, the authors ask the reader to predict the next two numbers in two different sequences. The first sequence of numbers is 3, 5, 7, 11, 13, 17, ___, ___. The second sequence of numbers is 75, 28, 41, 26, 38, 64, ___, ___. Do you know the answers? Without knowing the process that describes the sequence, you can only guess with little or no certainty. The answers for the first sequence are 42 and 6. This sequence was determined by tumbling balls in a drum being selected for an eight-number lottery winning. The answers for the second sequence are 2 and 122. They were determined by the sequence of state and county roads found along a scenic route in northern Michigan, heading toward Wisconsin. Christensen and Raynor point out that "results alone cannot predict future outcomes. The process itself must be understood to predict outcomes." Imagine the increased value that marketing could provide if it could improve its ability to predict the results of its work.
To recap, process thinking is used throughout this book. We explore applying Six Sigma concepts to the work of marketing. Marketing professionals' work environment on a day-to-day basis is not a DMAIC-based workflow structure. Marketing's work breaks down into the fundamental process of three key business arenas:
- Strategic area: The Portfolio Renewal process.
- Tactical area: The Commercialization process (commercializing a specific product and/or service).
- Operational area: The Post-Launch Line Management process (managing the launched portfolio) and its go-to-market resources throughout its life cycle, across the value chain.
The natural flow of marketing work starts with strategic renewal of the offering portfolios, to the tactical work of commercializing new offerings, and finally to the operational work of managing the product and services lines in the post-launch sales, support, and service environment. Marketing professionals frequently overlook the fact that their contributions are part of a process (or a set of related processes). They view their work as part of a program or project. However, marketing work can be repeated. The time frame for repetitiveness may extend over a year or more, but nonetheless, the work is procedural in nature. (The American Society for Quality [ASQ] defines a process as "a set of interrelated work activities characterized by a set of specific inputs and value-added tasks that make up a procedure for a set of specific outputs.") Most marketers would agree that "strategic planning" and "launching a product" meet this "process" definition. The Six Sigma approach embraces a process view to communicate its structure and flow of interrelated tasks. Although it may seem unnatural to marketing professionals, the best way to describe Six Sigma for Growth is through a process lens.
The strategic and tactical areas are internally focused; hence, we refer to them as inbound marketing areas. External data is critical to successful portfolio definition and development, and product commercialization. However, the output of those processes is intended for internal use. These process outputs are not yet ready for external consumption. The outputs that are ready for prime-time market exposure are part of outbound marketing . The operational processes involving post-launch product marketing, sales, services, and support are customer-facing activities. Given the different customers of inbound and outbound marketing, the requirements for each differ. These requirements ultimately define the success (or failure) of the deliverables.
Problems can be prevented in inbound as well as outbound marketing processes. Inbound marketing focuses on strategic product portfolio definition and development, and tactical product commercialization. Inbound marketing can cause problems by underdeveloping the right data needed to renew product portfolios. The data is needed to define specific new product requirements, thereby directing commercialization activities. And inbound marketing data defines launch plans, which determine downstream operational success. You can design and launch the wrong mix of products and hence miss the growth numbers promised in the business cases that were supposed to support the company's long-term financial targets.
Outbound marketing is focused on customer-facing operations. It encompasses post-launch product line management across the value chain (sales and services, including customer support). Outbound marketing can create problems and waste by failing to develop the right data to make key decisions about managing, adapting, and discontinuing the various elements of the existing product and service lines. Outbound marketing also could fail to get the right information back upstream to the product portfolio renewal teams. They need to renew the portfolio based on real, up-to-date data and lessons learned from customer feedback and the marketing and sales experts in the field.
The importance of the comprehensive, closed-loop strategic-tactical-operational scope provided the structural underpinnings used to create the unique Six Sigma methods for marketing. Each of these arenas has a flow of repeatable work—a process context that is quite different from the steps found in the traditional Six Sigma methods. However, the fundamental Six Sigma elements from the classic approaches have been maintained: tool-task linkage, project structure, and result metrics. This new work is made up of specific tasks that are enabled by flexible, designable sets of tools, methods, and best practices. The strategic, tactical, and operational processes within an enterprise align with phases that can be designed to prevent problems—to limit the accrual of risk and enable the right kind and amount of data to help make key decisions. The traditional methods help you improve and redesign your processes and get them under control. If the objective is to renew portfolios, commercialize products, or manage product lines, a different approach is required that employs a different set of steps we call phases.