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Six Sigma and Silicon Valley

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In some quarters, there seems to be a passionate argument against using Lean Six Sigma in the high-tech industry. You will see arguments about whether or not it stifles innovation, and whether a framework that grew out of manufacturing is in fact extensible into other types of industries, including the high-tech industry around San Francisco.

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Well, the short answer is yes. It seems almost ironic to be having a debate about the suitability of Six Sigma for high tech, given that it originated in Motorola in the 1980s before making it big with Jack Welch and GE. There are plenty of other examples where Six Sigma is in use in high-tech today – for example, National Semiconductor in the Bay Area relied heavily on Six Sigma prior to its acquisition by TI in 2011. Companies like IBM use Lean Six Sigma all the time, both internally – for instance within their process organizations – and when providing extensive consulting services around Six Sigma to their clients.

Where the misapprehension seems to lie is where exactly Lean Six Sigma should be applied. It’s important to remember that high-tech companies – especially large high-tech companies in the Bay Area – are structured very similarly to any other company, and they have similar expectations from their customers. They need to be able to reduce costs by continuously optimizing business processes using the fact-based, analytical processes that Lean Six Sigma espouses. They need to be able to deliver products that meet quality objectives which are every bit as strict – if not more so – than those in other industries. For all of these reasons and more, high-tech companies need Lean Six Sigma.

On the other hand, there is no point in implementing strict process methodologies in a small startup with 10 people. Here, the focus is on innovation. While some argue that Six Sigma actually improves innovation by stripping away activities that do not add value – and there is a very strong case to be made for this – the truth is that a startup of that size has neither the capacity nor the need to put this level of control in place. They are focused on things like securing funding from Silicon Valley venture capitalists such as Gabriel Venture Partners – which you can read about on Rick Bolander’s blog.

However, once a small startup has reached a level where it needs to look after customers en masse, rather than handholding them individually, it needs to take a different approach. In fact, making this transition from pure invention to scaling a business is one of the most difficult transitions that a startup can go through.

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This is why the Silicon Valley pact between large tech companies and venture capitalists works so well. Venture capitalists can afford to fund multiple startups with a full understanding that some of them are going to fail. When a company does succeed and reach the size that makes it an attractive acquisition target, it is already starting to need some of that process maturity that a large company can bring. On the other hand, many large companies find it difficult to create radical innovations internally – Apple aside – and benefit from bringing in innovation from startups. In effect, this business model delivers the best of both worlds.

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