Excerpts from GE Annual Report 1997
The centerpiece of our dreams and aspirations "the drive for Six Sigma quality.
“Six Sigma” is a disciplined methodology, led and taught by highly trained GE employees
called “Master Black Belts” and “Black Belts,” that focuses on moving every process that touches our
customers — every product and service — toward near-perfect quality.
Six sigma projects usually focus on improving our customers’ productivity and reducing their capital outlays,
while increasing the quality, speed and efﬁciency of our operations.
We didn’t invent Six Sigma — we learned it.
Motorola pioneered it and AlliedSignal successfully embraced it. The experiences of these two
companies, which they shared with us, made the launch of our initiative much simpler and faster.
GE had another huge advantage that accelerated our quality effort: we had a Company that was
open to change, hungry to learn and anxious to move quickly on a good idea.
At GE today —finding the better way, the best idea, from whomever will share it with us, has become our central focus.
Nowhere has this learning environment, this search for the better idea, been more powerfully
demonstrated than in our drive for Six Sigma quality. Twenty-eight months ago, we became con-
vinced that Six Sigma quality could play a central role in GE’s future; but we believed, as well, that it
would take years of consistent communication, relentless emphasis and impassioned leadership
move this big Company on this bold new course.
We were wrong!
Projections of our progress in Six Sigma, no matter how optimistic, have had to be junked every few months as gross underestimates. Six Sigma has spread like wildﬁre across the
Company, and it is transforming everything we do.
We had our annual Operating Managers Meeting — 500 of our senior business leaders
from around the globe — during the ﬁrst week of January 1998, and it turned out to be a wonderful
snapshot of the way this learning Company — this new GE — has come to behave; and now, with Six Sigma, how it has come to work.
Today, in the uncountable number of business meetings across GE — both organized and “in-
the-hall” — the gates are open to the largest ﬂood of innovative ideas in world business. These ideas
are generated, improved upon and shared by 350 business segments — or, as we think of them, 350
business laboratories. Today, these ideas center on spreading Six Sigma “best practices” across our
At this particular Operating Managers Meeting, about 25 speakers, from across the Company and
around the world, excitedly described how Six Sigma is transforming the way their businesses work.
They shared what they had learned from projects such as streamlining the back room of a credit card
operation, or improving turnaround time in a jet engine overhaul shop, or “hit-rate” improvements
in commercial ﬁnance transactions. Most of the presenters focused on how their process improve-
ments were making their customers more competitive and productive:
• Medical Systems described how Six Sigma designs have produced a 10-fold increase in the life of CT scanner x-ray tubes — increasing the “uptime” of these machines and the profitability and level of patient care given by hospitals and other health care providers.
• Superabrasives — our industrial diamond business — described how Six Sigma quadrupled
its return on investment and, by improving yields, is giving it a full decadeÕs worth of capacity despite growing volume — without spending a nickel on plant and equipment capacity.
• Our railcar leasing business described a 62% reduction in turnaround time at its repair shops: an enormous productivity gain for our railroad and shipper customers and for a business that’s now two to three times faster than its nearest rival because of Six Sigma improvements. In the next phase, spread across the entire shop network, Black Belts and Green Belts, working with their teams, redesigned the overhaul process, resulting in a 50% further reduction in cycle time.
• The plastics business, through rigorous Six Sigma process work, added 300 million pounds of new capacity (equivalent to a “free plant”), saved $400 million in investment and will save another $400 million by 2000.
At our meeting, zealot after zealot shared stories of customers made more competitive, of credit
card and mortgage application processes streamlined, of inventories reduced, and of whole facto-
ries and businesses performing at levels never believed possible.
The sharing process was repeated at another level two weeks later in Paris, as 150 Master Black
Belts and Black Belts, from every GE business throughout Europe, came together to share and
learn quality technology. This learning is done in the boundaryless, transcultural language of Six
Sigma, where “CTQ’s” (critical to quality characteristics) or “DPMO’s” (defects per million oppor-
tunities) or “SPC” (statistical process control) have exactly the same meaning at every GE operation
from Tokyo to Delhi and from Budapest to Cleveland and Shanghai.
The meeting stories are anecdotal; big companies can make great presentations and impressive
charts. But the cumulative impact on the Company’s numbers is not anecdotal, nor a product of
charts. It is the product of 276,000 people executing ... and delivering the results of Six Sigma to our
Operating margin, a critical measure of business efﬁciency and proﬁtability, hovered around
the 10% level at GE for decades. With Six Sigma embedding itself deeper into Company operations, GE in 1997 went through the “impossible” 15% level — approaching 16% — and we are optimistic about the upside.
Six Sigma, even at this relatively early stage, delivered more than $300 million to our 1997
operating income. In 1998, returns will more than double this operating proﬁt impact.
Six Sigma is quickly becoming part of the genetic code of our future leadership. Six Sigma
training is now an ironclad prerequisite for promotion to any professional or managerial position
in the Company — and a requirement for any award of stock options.
Senior executive compensation is now heavily weighted toward Six Sigma commitment and suc-
cess — success now increasingly deﬁned as “eatable” ﬁnancial returns, for our customers and for us.
There are now nearly 4,000 full-time, fully trained Black Belts and Master Black Belts: Six
Sigma instructors, mentors and project leaders. There are more than 60,000 Green Belt part-time
project leaders who have completed at least one Six Sigma project.
Already, Black Belts and Master Black Belts who are ﬁnishing Six Sigma assignments have become
the most sought-after candidates for senior leadership jobs in the Company, including vice presidents and chief ﬁnancial ofﬁcers at some of our businesses. Hundreds have already moved upward
through the pipeline. They are true believers, speaking the language of the future, energized by
successful projects under their belts, and drawing other committed zealots upward with them.
In the early 1990s, we eﬁned ourselves as a company of boundaryless people with a thirst for learning and a compulsion to share
Now it is Six Sigma that is permeating much of what we do all day.
We are feverish on the subject of Six Sigma quality as it relates to products, services and people — maybe a bit unbalanced — because we see it as the ultimate way to make real our dreams of
what this great Company could become.
Six Sigma has turned up the voltage in every GE business across the globe, energizing and
exciting all of us and moving us closer than ever to what we have always wanted to become: more than a hundred-billion-dollar global enterprise with the agility, customer focus and ﬁre in the belly of a small company.
In our 1994 letter to you, we addressed the perennial question put to management teams, which is “how much more can be squeezed from the lemon?” We claimed, then, that there was in fact unlimited juice in this “lemon,” and that none of this had anything to do with “squeezing” at all.
We believed there was an ocean of creativity and passion and energy in GE people that had no bottom and no shores. We believed that then, and we are convinced of it today. And when we said that
there was an “inﬁnite capacity to improve everything,” we believed that as well — viscerally — but
there was no methodology or discipline attached to that belief. There is now. It’s Six Sigma quality,
along with a culture of learning, sharing and unending excitement.
SIX SIGMA PRINCIPLES
Six Sigma is based on the following basic principles.
1. Y=f(X) + ε: All outcomes and results, the dependent variable (the Y) are determined by inputs (the Xs) with some degree of uncertainty (ε).
2. To change or improve results (the Y), you have to focus on the inputs (the Xs), modify them. (In the six sigma method, values of different variables X are changed systematically and resulting output is recorded and analyzed to find the best combination of values.
3. Variation is everywhere, and it degrades consistent, good performance. Your job is to find it and minimize it!
4. You get minimum variation for a particular combination Xs for given set of X and some times by including more input variables.
5. Valid measurements and data are required foundations for consistent, breakthrough improvement.
6. Only a critical few inputs have significant effect on the output. Concentrate on the critical few. There is some effort involved in determining the set of Xs that have significant effect on the output.
Philosophy – Process inputs control the outputs and determine their level of quality.
Focus – An unending quest for improving business processes.
Methods – Known as DMAIC (define, measure, analyze, improve, and control) and DMADV (define, measure, analyze, design, verify).
Measure of Success – Ultimately reducing defects to 3.4 per one million opportunities, through iterative application of six sigma methodology to understand the process better.
Updated 24 August 2017, 3 March 2012