Six Sigma and ‘Customer Capitalism’

In the latest edition of Harvard Business Review (Jan-Feb 2010), an article titled “The Age of Customer Capitalism” by Roger Martin is both thought-provoking and exciting. You may be questioning how I could consider such a topic exciting, but it truly is. This article provides support and maybe even vindication for the fundamental message that has been preached by me and other Six Sigma professionals for 15 years now: that the ultimate focus of any process improvement endeavor must be to ‘satisfy customers profitably’. Mr. Martin provides an historical context for capitalism that begins in the early part of the 20th century with a call for ‘professional’ business management, then shifts in the 1970’s to a mandate for ‘shareholder value capitalism’: the premise that the primary purpose of a corporation is to maximize shareholder wealth. This is what I learned in business school in the 1980’s, and what an entire generation has been brought up to believe. The Six Sigma methodology ran somewhat counter to the ‘maximize shareholder wealth’ philosophy, because it required the improvement team to start with the Voice of the Customer and establish effectiveness criteria before moving into efficiency improvements. I saw the incongruity when I began working in the Sales organization, where the number one customer requirement was ‘on time delivery’. However, we were not initially allowed to work on improvement projects in this area because better delivery performance could not be validated by Finance as improving the ‘bottom line’ (i.e., cost reduction). It was a frustrating time.
The HBR article claims that we are on the verge of a new business era in which customer value must be the top priority, with shareholder value as a sub-tier deliverable. By revising management philosophies in this way, the oft-repeated scenarios where CEOs make decisions that hurt the business in pursuit of ‘shareholder value’ would be avoided. In this new era, business leaders would first be rewarded on how well they met customer needs, then on the financial metrics. What an amazing future awaits, if this message is taken seriously. Dr. Deming, Peter Drucker and the other visionaries will finally have their concepts put into practice. Improvement projects will finally be prioritized and aligned to customer needs. This is why I’m excited!

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