Six Sigma Better Known As y = f(x) + e

9 replies
Hi Warriors I hope you find this post useful and that it gets you to thinking.

I've been working more and more on my business processes and such lately so as to not leave anything to chance and to leverage my ability to make money online by finding the optimal processes to work with.

In my search I came across a for dummies book on a subject that I skimmed when I was a machine operator for a manufacturing company. The dummies book is about a strategy called Six Sigma.

For those of you who haven't heard of Six Sigma, it's sorta like all the online metrics programs (Google included) put on steroids, really.

Anyway, I've been reading the Six Sigma for Dummies book that I ordered from Ebay and the idea struck me that online processes seem ideal for this tactic.

As a brief overview of my thinking, let me state the core principle of Six Sigma, which is called determinism and is represented by the following expression of: y = f(x) + e

In the expression: y = f(x) + e

Y stands for the outputs or results of a process. F stands for a transformation process and X stands for the input variables of the process. Last but most importantly, E represents the error or potential for variation in each process.

Basically put (without the variation) if you have X input and transform it with F process you will get Y result.

The E comes in when you realize that the Y is not the same each time the process is run and this is what Six Sigma is mostly based on as far as I understand it, meaning, eliminating as much variation in a viable process to control the inputs better which in effect makes the transformation process more effective, thus increasing the probability of you hitting your desired output, within a certain median of error.

I hope everyone is following me so far. If not, don't worry, I'm having a headache thinking like this and I just started reading this book today an am only on page 41 - Chapter 3.

After getting this far in the book, I started thinking in terms of my online business ventures and how the y = f(x) + e has been affecting it.

After twiddling around for a bit, I came up with the following which I hope will help others looking to create processes understand just how important it is to understand each and every measurable aspect of their online business.

Here Goes...

[{y this is your sales} = {f this is your market presentation (x) this is your product} + {e} this is your costs]

How do you like that so far?

Okay, from the top down.

Y - Your Sales is affected by the following variation:

1. Your initial offering which is usually a loss leader
2. Your front end product
3. Your OTO
4. Your Backend product
5. Your continuity program
6. Your product length
7. Your product breadth

F - Your Market presentation is affected by the following variation:

1. Short copy
2. Long copy
3. Price point
4. Social proof
5. Perceived value
6. Marketing efforts
7. Leverage
8. Trust issues
9. Guarantees

X - Your product is affected by the following variation:

1. Need
2. Market research
3. Whether your product is an information product or a solution
4. Whether your product is digital or physical

E - Your initial variation per process is affected by the following variate costs

1. Time
2. Knowledge
3. Capital

After I finished writing this, I sat back a took a look and all I could think was that this is a lot of stuff to be running metrics on and we haven't even covered VOC or the voice of the customer which will tell you what to create and how much to sell it for.

I hope everyone found this an interesting exercise in thinking metrically about their business and I truly look forward to all comments, especially from those who are experts in this field that I have realized, we all need to learn about in order to truly be successful with our online ventures.
#online business process #sigma #six sigma #variation
  • Profile picture of the author MichaelHiles
    Hey Andrew, I use Six Sigma and other Lean concepts in my marketing consulting work with bricks and mortar businesses. I am a Six Sigma black belt, and have an employee who is one of Jeffrey Liker's former Lean consultants. Jeff Liker wrote the Toyota Way after being a hitter at the Georgetown, KY, Toyota plant.

    I was working on a training program (Kaizen Marketing Blueprint) this past summer and fall that would help offline marketing folks learn these concepts and be able to apply the entire consulting program to their own client business efforts - but it tested out to be far, far too complex for the average offline marketing consultant, and would be way too expensive of a program for the average internet marketer who is more interested in making a quick buck selling a website and some SEO. So I backed off of the entire project for now.

    The idea of "manufacturing leads" as part of a value-adding production process is the core basis of what I do and how I do it. By adopting a production view of the entire marketing and sales process, we can work to develop continuous improvement processes that will constantly improve conversions at each stage in the marketing and sales system.

    I would suggest that before you dive headlong into Six Sigma as a process improvement strategy, you explore the Lean Kaizen approach to stabilizing and standardizing work flow process.

    Once that has been successfully achieved, then you can implement Six Sigma principles to pursue "zero defect" within the framework of your system.
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    • Profile picture of the author andrew_writes
      Thanks for that, where do I get the Kaizen approach? Also, does it seem that I am understanding the basic concept is Six Sigma so far?
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      • Profile picture of the author MichaelHiles
        Originally Posted by andrew_writes View Post

        Thanks for that, where do I get the Kaizen approach? Also, does it seem that I am understanding the basic concept is Six Sigma so far?
        There's also a Lean for Dummies book by Natalie Sayer and Bruce Williams. You might find it used on Amazon.

        As for Six Sigma, it sounds like you're getting it. As a machine operator, you would understand the importance of not deviating from the exact tolerances and specifications of a particular production process to create an exact part.

        In manufacturing, variation is very bad.

        In marketing and sales, variation is perpetual because of human factors (each person and their situation is unique). Therefore it has to be planned into the system. But because of the dynamic nature of marketing and sales, all the textbook tools of Six Sigma cannot possibly apply to a marketing and sales environment.

        On the other hand, traditional sales has always been a "personality" game - or at least viewed that way. Traditional sales training will try to teach sales professionals how to be charismatic, etc... leaving the concept of process completely out of the picture - which is 100% wrong. It's the informal process that a sales dynamo goes through to become successful.

        Most companies have it completely backwards, and that's where I spend a lot of my consulting effort - teaching companies how to implement an end-to-end marketing and sales system with standards and metrics. THEN they can bring in sales folks and train them in the system - taking variation out of the entire process.

        Standardizing the process is essential.
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        • Profile picture of the author andrew_writes
          I agree and I do understand that the most variation will come from my targeted markets. Things like creating standard templates for landing pages and such is a means to standardizing all my efforts and processes.
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  • Profile picture of the author Suthan M
    Ditto what Micheal said: Go with lean first. Frankly, I used to be a grean belt novice and the whole project was something that i used to go bonkers doing..

    I used to work in the manufacturing industry too (Flextronics anyone?) and they are really in love with improvements .. Lean Manufacturing/Six sigma/Kaizen (famous with Japan factories)

    That said, I still think this is a interesting approach.. I was looking into standardization/stabilization of processes in how I run my online biz, and think that this is a interesting method to try for 2010 :-D

    Thanks guys !

    Whats the latest movie you watched? Anything good?

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    • Profile picture of the author andrew_writes

      Yep interesting indeed. By the way, the video where you and your bud were out in the cold this holdiay ( it seemed cold to you) wicked crazy guy. Wear a coat next time.
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      • Profile picture of the author JohnMcCabe
        Andrew, you might also want to get hold of a book called "The Goal" by Eli Goldratt. Once you see the connections between his tale and sales and marketing, it will blow your mind...
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        • Profile picture of the author andrew_writes
          Originally Posted by JohnMcCabe View Post

          Andrew, you might also want to get hold of a book called "The Goal" by Eli Goldratt. Once you see the connections between his tale and sales and marketing, it will blow your mind...
          I found this and I think I may buy the book... thanks

          The Goal by Eliyahu Goldratt

          "The Goal" (of a manufacturing company) - to make money; everything else is a means to achieving the goal (i.e. produce products to make money)

          Reworded: The goal is to increase net profit, while simultaneously increasing both ROI and cash flow

          Measurements which express the Goal (pgs 60-61):

          1. Throughput - the rate at which the system generates money through sales
          2. Inventory - all the money that the system has invested in purchasing things which it intends to sell
          3. Operational Expense - all the money the system spends in order to turn inventory into throughput

          *Ideal Situation Throughput increases simultaneously with decreasing Inventory and O.E.

          Two phenomena in a plant (pgs 87-88):

          1. Dependent Events - an event or a series of events must take place before another can begin...the subsequent event depends upon the ones prior to it
          2. Statistical Fluctuations - when information changes from one instance to the next

          Two types of plant resources (pgs 138-139):

          1. Bottleneck Resource - any resource whose capacity is equal to or less than the demand placed upon it
          2. Non-bottleneck Resource - any resource whose capacity is greater than the demand placed on it

          *BALANCE FLOW, NOT CAPACITY make flow through a bottleneck equal (a little less than) to market demand

          "The capacity of the plant is equal to the capacity of its bottlenecks."

          To optimize bottlenecks, you must (pgs 158-159):

          1. Make sure bottleneck time is not wasted
            1. Sitting idle during lunch
            2. Working on defective parts
            3. Work only on the parts you need
          2. Take the load off of bottlenecks and give it to non-bottlenecks
            1. Outsource to another company
            2. Other machines can do it

          "A plant in which everyone is working all the time is very inefficient." (pg. 205)

          Four elements of time a material spends in a plant (pgs 231-232):
          1. Setup
          2. Process
          3. Queue (large)
          4. Wait (large)

          Process of on-going improvement (pg 307):

          Step 1 - Identify the system's constraint(s)
          Step 2 - Decide how to exploit the system's constraint(s)
          Step 3 - Subordinate everything else to the above decision
          Step 4 - Elevate the system's constraint(s)
          Step 5 - Warning!! If in the previous steps a constraint has been broken, go back to Step 1, but do not allow inertia to cause a system's constraint

          E Relieve stress from bottlenecks and increase productivity of bottlenecks
          xample from "The Goal"

          Define Goal
          Define Measurements
          Determine Bottlenecks
          Increase Sales
          Cut batch sizes in half
          Reduce lead times

          "If...Then" relationship based from science research (pgs 317-318):

          1. If the hypothesis is right, then logically another fact must exist
          2. Verify whether or not the predicted effects do exist
          3. Order is built on chaos
          4. Socratic method

          A good manager needs to be able to answer 3 questions (pg 337):

          1. "What to change?"
          2. "What to change to?"
          3. "How to cause the change?"

          The layers of resistance to change (pgs 349-350):

          Layer 1 - raising problems have one thing in's out of our hands
          Layer 2 - arguing that the proposed solution cannot possibly yield the desired outcome
          Layer 3 - arguing that the proposed solution will lead to negative effects ("yes, but...")
          Layer 4 - raising obstacles that will prevent the implementation
          Layer 5 - raising doubts about the collaboration of others (or worse, not raising their doubts)

          ** Peeling, in sequence, all these layers turns resistance **
          to change into the enthusiasm of an inventor

          The importance of not neglecting a relationship

          "Nothing neglected will remain as it was or is, or will fail to deteriorate. All things need attention, care and concern, and especially so in this most sensitive of all relationships of life."
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  • Profile picture of the author ProEFI
    I agree with Michael. The power is in Lean in terms of applying it to what we do.

    I too am a Lean Six Sigma Black Belt... incredibly powerful methods to improving speed/efficiency and quality.

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