ACCA P3 Business Analysis - 2010 - Study text - Emile Woolf Publishing
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Chapter 13: Business strategy and quality initiatives
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Plan the move from current to desired levels.
The five capability/maturity levels
The five levels and their characteristics are as follows:
Level Characteristics
1
The process is
‘performed’
A performed process is one that meets the objective of the
process. For system development, Level 1 capability means
that the entity is capable of developing a new system.
However, the process is performed informally, without
following a documented standard specification. The rigour and
success in performing the process often depends on the special
efforts of individuals (‘heroes’). There is no consistent project
management and the quality of performance in the process is
variable.
2
The process is
‘managed’
A managed process is a performed process that is also planned
and implemented in accordance with defined procedures. The
process is planned, and management control is applied
through comparison of actual performance against the plan.
Corrective measures are taken when actual performance differs
significantly from the plan. In terms of ISD/IT system
development, capability at Level 2 will involve the use of a
planned project management methodology and records are
taken of time, cost and quality. Problems are identified and
dealt with as they occur, but problems are not anticipated in
advance.
3
The process is
‘defined’
The main distinction between a managed process (Level 2) and
a defined process (Level 3) is that at Level 3 there are many
more process standards and procedures. In terms of IS/IT
development, all aspects of software development (not just the
project management) are standardised and consistent. The
entity uses well-established standard processes for system
development that produce savings in terms of time and cost.
Problems are anticipated. Data collected about one project is
shared across others.
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Table continued
4
The process is
‘quantitatively
managed’
A process at Level 4 is a defined process that is also
controlled using statistical control measures and other
quantitative control techniques. Quantitative targets are
established for quality and process performance, and these
targets are used in the assessment of process performance.
At Level 3 a process is managed and controlled only in
qualitative terms. At Level 4 statistical analysis is used to
identify areas for process improvement. The measurement
of quality is therefore a key aspect of Level 4 process
capability.
5
The process is
‘optimising’
An optimising process is a qualitatively managed process
that is continuously improved and adapted to meet
developing business objectives. The process sis continually
improved by identifying causes of process defects or
process variation, and the process is then changed to
eliminate the defect or variation. There is strong teamwork
with all staff involved in process improvement
Using the CMMI process for IS/IT system development
The CMMI process can be used by entities that wish to improve their process of
developing new IS/IT systems, and introducing change successfully. Each level of
capability represents a different ability to manage and control the IS/IT
development process. An entity should try to improve their process by focussing on
how to move from their current level to the next level.
The CMM describes the practices that an entity must perform in order to
improve their IS/IT development process.
The CMM also provides a benchmark for measuring improvements in the
process.
The CMM also provides a framework within which efforts to improve the
process can be planned
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Six Sigma
Seeking ‘near perfection’
The basic approach in Six Sigma
Process improvement and process design
Process improvement: DMAIC
New process design or radical improvement: DMADV
Six Sigma roles
The significance of Six Sigma for process re-design
5 Six Sigma
5.1 Seeking ‘near perfection’
Six Sigma is an approach to eliminating defects from products and operations, and
achieving near perfection. Although it was originally applied to manufacturing
operations and defects in products, it can also be applied to any product, process or
transaction.
The term ‘Six Sigma’ comes from statistical analysis, but it is now generally accepted
as meaning that there should be no more than 3.4 defects in every 1 million items,
for any product or process to which the Six Sigma methodology is applied. The limit
of 3.4 defects per 1 million items can be seen as a target, and improvements in
existing products and processes and designs of new products and processes should
aim towards this target.
Six Sigma was originated in the US the 1980s, by Motorola. (Although the term ‘Six
Sigma’ is widely used, it is a registered trademark of Motorola.). Modern
technology was becoming more complex, and it was becoming apparent in some
manufacturing industries that old ideas about quality standards and quality control
no longer applied. Unless quality standards could be improved in component
production, for example, the quality of complex end-products would be much lower
than customers had a right to expect. In 1989, having experimented for several years
with its approach to quality y improvements, Motorola announced that within five
years it intended to achieve a defect rate of no more than 3.4 parts per million in its
products.
Example
A company might establish target specifications for the manufacture of a product,
and products should be manufactured to this exact specification, or within
acceptable tolerance limits. A Six Sigma approach should be to ensure that no more
than 3.4 items per 1 million produced will fail to meet the specification, or will be
manufactured outside the acceptable tolerance limits.
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The IT department of a company that writes software for other departments might
set a target for the programs that it writes of no more than 3.4 coding errors per 1
million lines of software code.
5.2 The basic approach in Six Sigma
A definition of Six Sigma will help to explain its key features. Six Sigma has been
defined as ‘a data-driven method for achieving near-perfect quality. Six Sigma
analysis can focus on any element of production or service, and has a strong
emphasis on statistical analysis in design, manufacturing and customer-oriented
activities’ (UK Department of Trade and Industry).
The basic objective with Six Sigma is to focus on improvements in processes and a
reduction in variations. Perfection is achieved by reducing the amount of
variations in processes. For example, if a product is designed with a length of
exactly one metre, Six Sigma improvements might be aimed at reducing the
variation in the length of products actually manufactured to acceptable tolerance
limits of, say, plus or minus one millimetre.
The aim of Six Sigma is to improve customer satisfaction. Its approach is to apply a
standard approach (a structured methodology) to reduce and control the causes of
variation in a process, and to focus on reducing the standard deviation of actual
performance from the target specification.
The Six Sigma approach relies heavily on statistical measurements. Actual
performance is measured and compared with the target, and the number of ‘defects’
– products or processes that fail to meet acceptable standards – can be established,
to see whether the required quality standards have been achieved.
Another feature of Six Sigma is that project teams are established to achieve the
required improvements in processes or products. These project teams should consist
of representatives from every department or aspect of operations that might
contribute towards making the required improvements. The projects teams should
be led by individuals who are specially trained in Six Sigma methods, who are
commonly called Master Black Belts, Black Belts and Green Belts, according to their
level of skill and knowledge of Six Sigma.
General Electric Company, another US company that adopted Six Sigma methods,
has stated that Six Sigma is based on the following key concepts:
‘Critical to quality’. These are attributes or characteristics of a product or service
that are the most important to customers.
Defect. This is failing to deliver what the customer wants.
Process capability. This is the level of quality or performance that a process is
capable of achieving.
Variation. This refers to variations in quality that the customer can see or feel in
a product or service.
Stable operations. This means consistent and predictable processes and
operations that improve what customers see and feel.
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Design for Six Sigma. This refers to designing a product or process that meets
customer needs and achieves the level of process capability for doing this.
5.3 Process improvement and process design
Rather than the arbitrary application of a quality measure, some companies see Six
Sigma as the basis of a campaign to achieve ‘best-in-class’ status. As a long-term
business strategy:
waste and costs are reduced as quality improves, and
customer satisfaction is increased through the continuous improvement in
quality.
The Six Sigma approach differs slightly between:
making improvements in existing processes, where the required changes in the
process are fairly small (‘incremental improvements’), and
the design of a new process, or major re-design of an existing process.
Process improvements
The Six Sigma approach to making incremental improvements in existing processes
is in five steps, known as DMAIC.
Define an opportunity
Measure performance
Analyse the opportunity
Improve performance
Control performance.
New process design/process re-design
The Six Sigma approach to designing a new process or the major re-design of an
existing process is also in five steps, known as DMADV.
Define the goals for the new process
Match performance requirements with these goals
Analyse these performance requirements and produce an outline design (a
design, but not in detail) of a new process that will meet these requirements
Design and implement the process
Verify performance.
5.4 Process improvement: DMAIC
The five steps in process improvement using the Six Sigma method are explained in
more detail below.
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Define
A serious problem with quality is identified.
A problem statement is prepared. This describes the nature of the problem,
which must be defined specific, measurable terms. What is the visible evidence
of the problem? What are the symptoms of the problem? (A ‘symptom’ is
something that is going wrong in the process, expressed as a quantified
measurement of output from the process).
A ‘mission statement’ is then prepared. This is a statement of what will be done
to deal with the problem. The mission statement should also be expressed as a
quantified measurement, using the same units of measurement or symptoms
that are used in the problem statement. For example, the problem statement may
be that the number of defects in a particular process is 1 in 1,000. The mission
statement may then be that the aim should be to reduce the number of defects to
no more than 1 in 100,000
A project team is set up. This team is given the responsibility and the resources
to solve the problem and make an improvement. It should be a ‘cross-functional’
team consisting of members from all the departments or functions that will be
affected by the improvement project.
Measure
Data is obtained about the current process, and the ‘symptoms’ of the problem are
measured in detail. At this stage in the project, the project team should measure
how the process is working, and obtain data that can be analysed in order to
identify what seems to be causing the problem. Where there are several causes of a
‘symptom’, the project team should concentrate on those problems that are the main
causes.
This is a preliminary analysis. The project team will not make a final decision
about the main causes of the problem until it has carried out a more extensive
analysis.
Measures of process performance are critical to the success of a Six Sigma
programme.
Analyse
The preliminary ideas about what might be causing the problem are investigated in
more detail. Different theories are tested, until the project team believes that it has
discovered the main cause (or causes) of the problem.
The project team formulate different theories about the main causes of the
problem, and documents these theories.
Each theory is then tested, to establish whether it might be correct. Theories are
rejected when it is decided that they cannot be correct.
The ‘root’ cause (or causes) of the problem is identified when the testing of the
theories has been completed.
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Improve
The cause (or causes) of the problem are removed by means of re-designing and
improving the process that is causing the problem.
Several different alternative methods of improving the process should be
evaluated, to decide which will be the most effective in achieving the ‘mission
statement’ for the project.
The chosen improvement is then designed in detail.
If the improvements are likely to meet resistance to change from some
employees, plans should be developed for overcoming the expected resistance.
Before the improvement is implemented, it should be tested to prove that it will
be effective.
The improvement is then implemented.
Control
New controls are designed and implemented to prevent the problem from returning
and to make sure that the improvements are sustained.
Controls will include regular measurements of output from the process, and a
comparison of actual performance with the target.
The controls should be audited from time to time, to make sure that they are
effective.
5.5 New process design or radical improvement: DMADV
Sometimes, making improvements in existing processes is not sufficient to achieve
the required quality standard, and a completely different process must be designed.
The five steps in new process design using the Six Sigma method are explained in
more detail below.
Define. The goals and target quality standards of the new process must be
defined. Customer requirements and expectations should be taken into
consideration when defining these goals.
Match. The next step is to develop a set of performance measurements
(quantified performance targets) that will enable the goals for the process to be
achieved.
Analyse. These performance standards for the new process must be analysed.
Based on this analysis, a preliminary design for a new process is developed.
Design. The preliminary design for the new process is developed into a more
detailed design, and the new process is then implemented.
Verify. After the new process has been implemented, controls and checks
should be introduced to confirm that the required performance targets are met,
and that the goals of the process are successfully achieved.
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5.6 Six Sigma roles
Because a Six Sigma programme means seeking excellence, implementation requires
more than simply explaining to employees what Six Sigma means, and expecting
everyone to know what to do to achieve it. It is essential for entities to invest in
training selected staff in the appropriate methods, tools and techniques, and then to
enable them to manage the Six Sigma programme and guide improvement projects.
These selected and trained individuals, particularly those commonly referred to as
‘master black belts’, ‘black belts’ and ‘green belts’, are the core of the Six Sigma
programme.
Six Sigma identifies five key roles for its successful implementation.
Executive leadership. This includes the chief executive (CEO) and other key top
management team members. They are responsible for setting up a vision for Six
Sigma implementation and for allocating resources to the programme.
Champions are responsible for the Six Sigma implementation across the entity
in an integrated manner. They are senior managers in the organisation.
Champions also act as mentor to Black Belts.
Master Black Belts are identified act as the entity’s in-house expert coaches for
Six Sigma. They devote 100% of their time to Six Sigma. They assist champions
and guide Black Belts and Green Belts.
Black Belts operate under Master Black Belts to apply Six Sigma methodology to
specific projects. They devote 100% of their time to Six Sigma. They primarily
focus on Six Sigma project execution, whereas Champions and Master Black
Belts focus on identifying projects/functions for Six Sigma.
Green Belts are the employees who take up Six Sigma implementation along
with their other job responsibilities. They operate under the guidance of Black
Belts and support them in achieving the overall results.
5.7 The significance of Six Sigma for process redesign
A key feature of Six Sigma is the search for excellence and near-perfection. In
practice many processes fail to provide perfect quality and the scope for
improvements is enormous. However, to achieve near-perfection, it might be
necessary to introduce radical changes to systems and business methods.
Six Sigma improvements might be targeted for example at:
the replacement of traditional business methods with e-business methods
the replacement of traditional organisation structures with virtual organisations
introducing changes throughout the value chain
radical process re-design.
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Paper P3
Business analysis
CHAPTER
14
Project management
Contents
1 Identifying and initiating projects
2 Managing and leading projects
3 Monitoring, controlling and concluding projects
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Identifying and initiating projects
The nature of projects in business
Project constraints
Identifying projects
Project definition and initiation
Project plan
Project risk
User resistance to new systems and change
1 Identifying and initiating projects
1.1 The nature of projects in business
A project is a process with a clearly-defined start and a clearly-defined finish. It
consists of a set of tasks to achieve a goal or objective. Once the goal has been
achieved, the project is completed.
For example, an entity might have a project to develop and implement a new IT
system, or to develop and launch a new product. The project ends when the IT
system is operational or the product has been launched in the market. In some
industries, such as construction and IT systems, business entities undertake projects
to make their profits; good project management is essential to make sure that
projects are completed on time and to budget, and to the customer’s satisfaction.
The characteristics of a project are as follows.
A project has a specific purpose or goal which can be defined.
A project is unique, and will not be repeated again in exactly the same way as
before.
It has a beginning and a definable end.
It consists of a series of linked activities that contribute towards the desired goal.
A project has time constraints, with a target date for completion.
A project is often complex, bringing together a team of individuals with different
skills and from different functional backgrounds or departments. The project
team is led by a project manager who is responsible for ensuring that the
objectives of the project are achieved and the project reaches a successful
conclusion. The project manager should be accountable to the project sponsor.
Projects are often initiated with the purpose of achieving a specific end-result.
Typical projects involve:
introducing major changes to processes and systems (process re-design)
developing a new IS/IT system
introducing a new e-business initiative