Spotlight #5: Link Projects to Value Drivers
As described in the previous chapter, a lot of considerations go into selecting projects. One of the most important factors, especially when you are relying on Lean Six Sigma projects to improve your cost position, is to have a deep understanding of what drives value for your company. That includes determining just how much measurable gain you can expect in business metrics from productivity gains within a given work area, function, or process.
In this spotlight, we'll walk through three types of financial analyses you can use to identify goals for potential Lean Six Sigma projects.
Option 1: Value Driver Trees
Throughout this book we have been emphasizing the concept of value— what customers value, what will improve shareholder value. To understand what will create or drive value for your company, you need to have a clear strategy and recent and reliable information on what customers need (as covered in Chapter 3); and you need to know how well your processes are operating (see Chapters 4 and 5) and which factors have the biggest effect on the financial metrics of your company (see Figure SP5.1).
A tool called a value driver tree (Figure SP5.2) is a good way to use financial information to feed into your project identification and selection processes.
The purpose of creating a value driver tree is to understand where the money lives and understand if you can get to that money via:
Closing competitive gaps, if you lag behind your industry; ...