Lean Machine

It’s rigid. It’s process-driven. It’s Lean Six Sigma, and Xerox has embraced the approach to save millions, improve operations and grow the business.

By Rob O’Regan

The revolution began quietly enough, with a project in August 2003 to revamp a quarterly newsletter that Xerox CEO Anne Mulcahy sent out to members of the sales force and select customers following every earnings report.

At the time, Xerox was two years into its long climb back to financial and corporate respectability, so providing a regular message to soothe potential angst in the field was critical to the company’s turnaround efforts.

Revising a procedure for newsletter distribution is not exactly the stuff of legend, but it was a milestone nevertheless, as it represented the marketing group’s first official Lean Six Sigma project. Using a Six Sigma framework called DMAIC (define, measure, analyze, improve and control), the marketing team revised the process for developing and delivering these communiqués to the field—using e-mail instead of hard copy, for example, and providing more than just financial news—and then measured how effectively they were being used by sales teams handling the company’s major accounts.

“The project wasn’t necessarily the strongest way to apply DMAIC,” says Valerie Mason Cunningham, Xerox’s VP of corporate marketing services, who oversaw the project. “But to marketing people who didn’t think they needed [Lean Six Sigma] at all, it was a way to get people to understand that marketing does have processes and that we can get better at defining and tracking them.”

Now, nearly two and a half years later, Xerox’s corporate marketing group (known as Global Accounts and Marketing Operations, or GAMO) has fully embraced Lean Six Sigma, a set of principles that combines two organizational improvement methods whose roots are far removed from the marketing function: lean manufacturing, which espouses efficiency, and Six Sigma, which focuses on quality. To date, Xerox has deployed 1,800 Lean Six Sigma projects to improve everything from press release distribution to the group’s marketing dashboard. Xerox’s success has even convinced its global ad agency, Young & Rubicam, to embrace Lean Six Sigma, not just for its client work with Xerox but for its own internal operations.

GAMO President Michael Mac Donald expects Lean Six Sigma projects to save his group “multiple millions” this year. GAMO shaved nearly half a million dollars in marketing spend last year despite a heavy investment in Lean Six Sigma training during the initial development and deployment of the programs. Across the company, Xerox generated $120 million in economic profit from Lean Six Sigma projects in 2004 alone.

To Lean Six Sigma’s proponents, the frameworks and concepts are critical drivers of improved profitability and business performance throughout an entire organization. And it’s not just about cost-cutting; Mac Donald and others in his group believe Lean Six Sigma improvements help Xerox better serve customers and partners as well.

To the cynics, Lean Six Sigma methodologies are overly rigid, jargon-filled time-sinks that may work fine on the factory floor but can’t possibly help functions such as marketing that are less process-driven. But in an environment where ROI and cost containment are increasingly paramount, more executive teams are ignoring the naysayers and putting those principles to work across their companies. And that includes the marketing organization.

“Almost every place we go, we’re seeing Six Sigma people coming into [marketing] meetings,” says Kevin J. Clancy, chairman and CEO of Copernicus Marketing Consulting. That’s a good thing, he maintains, because of the raging inefficiency of most marketing initiatives. “The data is in, and it is unequivocal: Most marketing programs don’t work,” he says. “That’s what Six Sigma people are charged with—fixing those processes.”

Frameworks and Black Belts

Motorola is credited with pioneering Six Sigma techniques in the 1980s as a way to improve its manufacturing processes and the quality of its products. Lean manufacturing derives from Toyota’s legendary Production System (for which Toyota engineers borrowed heavily from earlier practices pioneered by Ford in the early 1900s). Both concepts comprise a dizzying set of frameworks and requisite jargon, and a significant investment in training or outside help to develop the expertise required to manage improvement projects. (With a head-scratching nod to the martial arts, Six Sigma experts are designated as yellow, green or black belts, depending on their level of training and project experience, with the highest honor given to “master black belts,” whose primary mission is coaching Six Sigma teams.)

Over the past decade, companies such as General Electric have extended Six Sigma and lean manufacturing practices into other corporate functions, including operations, finance and, increasingly, marketing. Some, such as Xerox, are combining the two practices for a two-pronged attack on quality and efficiency.

Xerox embraced Lean Six Sigma in its manufacturing and supply chain operations in the 1990s as part of its ongoing efforts to improve efficiencies. In late 2002, however, with the company saddled with sinking revenue and billions of dollars in debt, Lean Six Sigma became a corporatewide strategy. Pockets of marketing—beginning with the newsletter project—were slowly brought into the fold.

The come-to-Jesus moment came when Mac Donald, a 28-year Xerox sales and marketing veteran, took the helm of GAMO in October 2004, replacing departed CMO Diane McGarry. Prior to this post, Mac Donald had served as president of Xerox’s North American Solutions Group, which saved $65 million in 2004 using Six Sigma processes. He saw no reason that the marketing function couldn’t realize similar gains. “Lean Six Sigma is a process that eliminates waste—so it’s something you can use in anything,” says Mac Donald.

By last January, GAMO had begun its Lean Six Sigma efforts in full. Mac Donald brought in Brian Lloyd, one of the company’s first certified Lean Six Sigma black belts, with a charter to drive Lean Six Sigma changes throughout the group. “He’s not a sales guy; he’s a process guy,” says Mac Donald. “He has no fear. He really has helped drive this throughout the organization.”

Less than a year into the effort, Lloyd confidently ticks off a list of areas in which GAMO has benefited from Lean Six Sigma, including faster cycle times, faster response to market demands, less variability in processes and an improved customer experience. “I don’t think there’s any place within marketing where the methodology doesn’t work,” he says.

Pockets of Resistance

Not everyone on the marketing team was sold on the idea that something as process-oriented as Lean Six Sigma could apply to their creative-driven efforts. But those right-brainers weren’t given much of an opportunity to hold on to the old way of doing things. “You’re foolish to think there isn’t cultural resistance by people in any organization,” says Mac Donald. “But when they see that you’re determined and the CEO is determined to use it, they’ll follow suit and do it. There was not a whole lot of choice.”

Nancy Wiese was one of those executives who went kicking and screaming to her mandatory green belt training. “I sure didn’t put my hand up [to volunteer],” says Wiese, vice president of worldwide brand marketing and advertising and an 18-year Xerox veteran. “We knew we had to go through it, but I delayed it, rescheduled it, and delayed it some more. Because creative is so subjective, I didn’t think it would be something I could use.”

Wiese did her one week of training in May of last year; during an interview last September, five months into her Lean Six Sigma assimilation, she was still not completely convinced of its benefits—although she did see its potential in some areas of her group. “You really can’t use [Lean Six Sigma] for creative development,” she explains. “What we’re looking at are process improvements in the back end. [Lean Six Sigma] has certainly had us look at things differently, though I still feel it’s more of a manufacturing tool.”

The pockets of resistance haven’t kept Mac Donald and his team from pushing forward. He estimates that 80 percent of GAMO’s senior management team is green belt certified (including Mac Donald himself). Lloyd says that 95 percent of the full GAMO staff has completed yellow belt training, and at least 15 percent were due to become green belts by the end of 2005. (Across the company, approximately 2,500 executives have been trained as green belts, and more than 600 have been certified as black belts or master black belts.)

Some marketing executives have embraced the changes more quickly than others have. Mason Cunningham is on her fourth Lean Six Sigma project as she works toward her green belt certification. Her current project involves acquisition modeling—a big step up in sophistication from the 2003 newsletter initiative.

“The marketing community understands [Lean Six Sigma] is a way for us to start to get complexity out of the business,” says Mason Cunningham. “When you start, it looks like you’re adding more process instead of [eliminating] process. But that just shows that in some of your areas you hadn’t established good metrics or data points or processes. It gets you in control.”

Better control was what Ed Gala, VP of worldwide strategic public relations for Xerox, was seeking when he began using Lean Six Sigma to streamline some of his group’s PR processes. “We don’t use it to create better press releases,” he says. “But we are looking at ways to improve the dissemination of press releases in a more productive way so that they require less rework by people in multiple countries.”

Using DMAIC, the project team broke down the end-to-end lead generation and tracking processes and reduced or eliminated inefficient or redundant steps. “Once you have the robust process, you can concentrate on the front end and increase leads,” said Lloyd. “Now we have specific measures that help us identify what revenue is being generated from lead gen Process A compared with lead gen Process B. Once we know the critical things at impact, that’s where we can drive increased revenue.”

Measures of Success

Lean Six Sigma has emerged as a key element of Mac Donald’s efforts to take a more quantitative look at marketing’s impact on Xerox’s business. “Marketing has to be more operationally focused,” he says. “Are we getting return? Are we really contributing to the business?”

He admits that his group hasn’t completely nailed this yet. “The measurement processes around marketing still aren’t as good as they need to be, because you still have people who are using subjective views,” says Mac Donald. “That’s still an area that we’re working on. We’re refining the old marketing metrics, and we’re making progress.”

In fact, one recent Lean Six Sigma project took on the marketing dashboard itself (see “Lean Six Sigma in Action“). The old dashboard was hampered by a lack of marketing-specific metrics, opting instead for generic measures of business performance. “All we were doing was pulling information together that already exists around the company,” says Mason Cunningham. “There was really nothing saying that marketing was effective.”

Mason Cunningham and the rest of the project team looked at delivering a new Web-based marketing effectiveness dashboard that contained a concise set of metrics that track performance of different marketing efforts. The new dashboard, launched last June, provides a better view of the short-term impact of marketing programs and strategic improvement of marketing resource deployment. “It enables better measurement and analysis of marketing impact on company performance, as well as leading to better decision making,” says Lloyd. “At the end of the day it has increased long-term profitability.”

The new dashboard provides a few intangible benefits as well: an increased awareness among the senior management team of marketing performance, and the sharing of marketing best practices across business units and geographies.

Above all, Lean Six Sigma’s most important contribution to Xerox’s marketing group may be this: better alignment with the rest of the company. “Whether I’m going into marketing, supply chain, manufacturing, wherever it may be, we’re all speaking the same language,” says Lloyd. “That’s a huge benefit.”

From CMO magazine (a publication of CXO Media, Inc.), January 2006

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