a study of knowledge creation in six sigma dmaic …eprints.usm.my/31615/1/ang_boon_sin.pdf ·...
TRANSCRIPT
A STUDY OF KNOWLEDGE CREATION IN SIX
SIGMA DMAIC PROJECT SUCCESS AND ITS
IMPACT ON ORGANIZATIONAL
PERFORMANCE
by
ANG BOON SIN
Thesis submitted in fulfillment of the requirements
for the degree of
Doctor of Philosophy
Jun 2015
ii
ACKNOWLEDGEMENT
The path taken to complete this piece of works was longer, bumpier and curvier that I initially
anticipated. Along the way, I was fortunate to receive guidance, insights, and support from a
large group of people. Their helps were not limited to my dissertation work but often touched
other aspect of my life. With a grateful heart and sincere appreciation, I take this time and
opportunity to say thank to all of them.
My dissertation committee members have assisted me in numerous ways. First and
foremost, I must thank my both supervisors, Prof. Suhaiza Hanim Dato Mohamad Zailani and
Prof. Ramayah, has been my endless source of support and guidance. Their sharp mind,
compassion, nurturing and constant encouragement buoyed me many time, and provided me a
much-needed anchor during time of uncertainty.
In addition, I am very grateful to the directors, managers and Six Sigma professional
from my anonymous case study research sites, who opened many kinds of doors for me, let me
join into their Six Sigma project meetings and lives unstintingly. They spent countless hours
sharing with me on the Six Sigma project activities and patiently answering my questions. I
consider it an honor and a privilege to have worked together with them. Special thanks also go
to all the Six Sigma firms who participate in the survey and make this research success.
Last, but most certainly not least, I thank my family and friends. To my father, Ang
Swee Seng, you are a man of few words, but such a big heart. I absolutely appreciate your
prayers, your humor, and your loving kindness. To my mother, Teoh Kim Hooi, you are the one
that kept me grounded, inspired me, prayed for me, and helped me until the very end. All you
have done for me in my life, and during the studying for and writing of this dissertation, will
never be forgotten.
iii
To my marvelous friends for insisting I get out of the house to have some fun so that I
could relax, refocus, and continue. Of course, I had also learned a lot from my PhD friends.
They were always being very helpful and willing to share her experiences in doing good
research.
All…..Thank you so much! I will always remember, with a humble spirit, the
continuous guidance, help and support you have given as I continue my journey of life. I am
thankful for that and I thank God for putting all of you in my journey of life.
iv
DEDICATION
To my beloved parents Teoh Kim Hooi and Ang Swee Seng
whose loves and supports continue to be my inspiration
v
TABLE OF CONTENTS
Page
Acknowledgement
Dedication
Table of Contents
List of Tables
List of Figures
Abstrak
Abstract
CHAPTER 1 INTRODUCTION
1.1 Introduction
1.2 Background of the Study
1.2.1 Six Sigma Literature in Malaysia
1.2.2 Six Sigma Research Issue in Malaysia
1.3 Research Problems
1.4 Research Questions
1.5 Research Objectives
1.6 Scope of the Study
1.7 Significances of the Study
1.8 Definitions of Key Terms
1.9 Outline of the Thesis
CHAPTER 2 LITERATURE REVIEW AND THEORETICAL
RESEARCH MODEL DEVELOPMENT
2.1 Introduction
2.2 Six Sigma Basic and Concepts
2.2.1 What is Six Sigma?
2.2.2 Six Sigma Roles Structure
2.2.3 Six Sigma Project
2.2.4 Six Sigma Methodology
2.2.5 Benefits of Six Sigma
2.3 Six Sigma DMAIC Methodology
2.3.1 Define Phase
ii
iv
v
xvi
xviii
xx
xxi
1
4
4
7
7
11
11
12
13
16
18
21
21
21
24
25
26
28
31
31
vi
2.3.1.1 Project Charter
2.3.1.2 Voice of the Customer Data Analysis
2.3.1.3 Determine Critical to Quality
2.3.1.4 Create High Level Process Mapping
2.3.1.5 Tollgate Review
2.3.1.6 Tools and techniques
2.3.2 Measure Phase
2.3.2.1 Determine Process Output Measures
2.3.2.2 Develop Data Collection Plan
2.3.2.3 Measurement System Analysis
2.3.2.4 Process Baseline Performance Analysis
2.3.2.5 Tollgate Review
2.3.2.6 Tools and techniques
2.3.3 Analyze Phase
2.2.3.1 Identify potential root cause
2.2.3.2 Validate potential root cause
2.2.3.3 Tollgate Review
2.2.3.4 Tools and techniques
2.3.4 Improve Phase
2.2.5.1 Generate Potential Solutions
2.2.5.2 Select Best Solution
2.2.5.3 Develop Pilot Plan
2.2.5.4 Pilot Implementation
2.2.5.5 Pilot Data Analysis
2.2.5.6 Tollgate Review
2.2.5.7 Tools and techniques
2.3.5 Control Phase
2.2.5.1 Develop Process Control Plan
2.2.5.2 Develop Solution Implementation Plan
2.2.5.3 Training on New Process
2.2.5.4 Implement Final Solution
2.2.5.5 Tollgate Review
2.2.5.6 Tools and techniques
Page
32
33
33
33
34
34
36
36
36
37
37
37
38
39
40
40
40
41
42
42
43
43
44
44
44
45
46
46
47
47
47
47
48
vii
2.4 Resource-Based View of the Firm
2.5 The Knowledge in Knowledge Management
2.5.1 Definition of Knowledge
2.5.2 Classification of Knowledge
2.5.3 Tacit and Explicit Knowledge
2.5.4 Knowledge-Based Theory of the Firm
2.5.5 Organizational Knowledge Creation Theory
2.5.5.1 Socialization
2.5.5.2 Externalization
2.5.5.3 Combination
2.5.5.4 Internalization
2.5.5.5 Knowledge as Outcome of Knowledge Creation Process
2.6 Six Sigma Project Success
2.6.1 Project and Project Management
2.6.2 Six Sigma Project
2.6.3 Six Sigma Project Success
2.6.4 Knowledge and Six Sigma Project Success
2.7 Organizational Performance
2.7.1 Organizational Performance
2.7.2 Six Sigma and Organizational Performance
2.7.3 Six Sigma Project Success and Organizational Performance
2.7.4 Knowledge and Organizational Performance
2.7.5 Knowledge, Six Sigma Project Success and Organizational
Performance
2.8 Theoretical Research Models Development
2.9 Summary of the Chapter
CHAPTER 3 RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design Strategy
3.3 Case Study and Qualitative Analysis
3.3.1 Unit of Analysis
3.3.2 Case Selection
Page
50
51
51
52
53
56
57
59
60
60
61
62
62
62
64
66
67
69
69
70
74
75
77
78
86
87
87
89
89
89
viii
3.3.3 Data Collection Procedure
3.3.4 Research Protocol
3.3.5 Data Analysis Process
3.3.6 Validity and Reliability
3.3.6.1 Construct Validity
3.3.6.2 Internal Validity
3.3.6.3 External Validity
3.3.6.4 Reliability
3.4 Survey and Quantitative Analysis
3.4.1 Survey Settings and Sampling Procedure
3.4.1.1 Target Population and Sample
3.4.1.2 Sampling Method and Sample Size
3.4.2 Operationalization of Variables and Measurement Scale
3.4.2.1 Organizational Knowledge Creation Process
(a) Socialization
(b) Externalization
(c) Combination
(d) Internalization
3.4.2.2 Knowledge
3.4.2.3 Six Sigma Project Success
3.4.2.4 Organizational Performance
3.4.3 Survey Questionnaire Design and Pilot test
3.4.3.1 Survey Questionnaire Refinement
3.4.3.2 Expert Panel Review
3.4.3.3 Survey Pilot Test
3.4.3.4 Survey Package
3.4.4 Data Collection Procedure
3.4.5 Data Screening and Cleaning
3.4.5.1 Missing Data Analysis
3.4.5.2 Multivariate Outlier
3.4.5.3 Multivariate Normality
3.4.6 Data Analysis Process
3.4.6.1 Descriptive Analysis
Page
89
90
92
92
92
93
93
93
93
94
94
94
96
96
96
97
98
98
99
99
100
100
100
100
101
101
102
103
103
104
104
105
105
ix
3.4.6.2 Non Response Bias Test
3.4.6.3 Structural Equation Model Analysis
(a) Measurement Model Analysis
(i) Overall Model Fit
(ii) Reliability and Validity Assessment
(b) Structural Model Analysis
(i) Overall Model Fit
(ii) Model Path Analysis
3.5 Summary of the Chapter
CHAPTER 4 CASE STUDY FINDINGS AND ANALYSES
4.1 Introduction
4.2 Individual Case Findings and Analysis
4.2.1 Case A – Six Sigma DMAIC and Knowledge creation process
4.2.1.1 Define Phase
4.2.1.2 Measure Phase
4.2.1.3 Analyze Phase
4.2.1.4 Improve Phase
4.2.1.5 Control Phase
4.2.2 Case B – Six Sigma DMAIC and Knowledge creation process
4.2.2.1 Define Phase
4.2.2.2 Measure Phase
4.2.2.3 Analyze Phase
4.2.2.4 Improve Phase
4.2.2.5 Control Phase
4.2.3 Case C – Six Sigma DMAIC and Knowledge creation process
4.2.3.1 Define Phase
4.2.3.2 Measure Phase
4.2.3.3 Analyze Phase
4.2.3.4 Improve Phase
4.2.3.5 Control Phase
4.2.4 Case D – Six Sigma DMAIC and Knowledge creation process
4.2.4.1 Define Phase
Page
106
106
107
108
110
113
113
114
114
115
116
116
117
122
126
129
134
140
141
146
149
152
157
164
164
170
173
176
181
187
187
x
4.2.4.2 Measure Phase
4.2.4.3 Analyze Phase
4.2.4.4 Improve Phase
4.2.4.5 Control Phase
4.3 Cross-Case Findings and Analysis
4.3.1 Socialization and Six Sigma DMAIC
4.3.2 Externalization and Six Sigma DMAIC
4.3.3 Combination and Six Sigma DMAIC
4.3.4 Internalization and Six Sigma DMAIC
4.3.5 Knowledge Outcome and Six Sigma DMAIC
4.4 Summary of the Case Study Findings
CHAPTER 5 RESEARCH MODELS AND HYPOTHESES
5.1 Introduction
5.2 Research Models and Hypotheses
5.2.1 Research Model 1 and Hypothesis
5.2.1.1 Socialization and Knowledge in Six Sigma in DMAIC Project
5.2.1.2 Externalization and Knowledge in Six Sigma DMAIC Project
5.2.1.3 Combination and Knowledge in Six Sigma DMAIC Project
5.2.1.4 Internalization and Knowledge in Six Sigma DMAIC Project
5.2.1.5 Knowledge and Six Sigma Project Success in Six Sigma
DMAIC Project
5.2.1.6 Six Sigma Project Success and Organizational Performance in
Six Sigma DMAIC Project
5.2.2 Research Model 2 and Hypothesis
5.2.2.1 Socialization and Knowledge in Six Sigma Define Phase
5.2.2.2 Externalization and Knowledge in Six Sigma Define Phase
5.2.2.5 Combination and Knowledge in Six Sigma Define Phase
5.2.2.4 Internalization and Knowledge in Six Sigma Define Phase
5.2.3 Research Model 3 and Hypothesis
5.2.3.1 Socialization and Knowledge in Six Sigma Measure Phase
5.2.3.2 Externalization and Knowledge in Six Sigma Measure Phase
5.2.3.3 Combination and Knowledge in Six Sigma Measure Phase
Page
193
197
200
205
212
212
213
214
215
216
217
219
219
219
219
222
223
224
225
226
227
227
228
229
230
231
231
232
233
xi
5.2.3.4 Internalization and Knowledge in Six Sigma Measure Phase
5.2.4 Research Model 4 and Hypothesis
5.2.4.1 Socialization and Knowledge in Six Sigma Analyze Phase
5.2.4.2 Externalization and Knowledge in Six Sigma Analyze Phase
5.2.4.3 Combination and Knowledge in Six Sigma Analyze Phase
5.2.4.4 Internalization and Knowledge in Six Sigma Analyze Phase
5.2.5 Research Model 5 and Hypothesis
5.2.5.1 Socialization and Knowledge in Six Sigma Improve Phase
5.2.5.2 Externalization and Knowledge in Six Sigma Improve Phase
5.2.5.3 Combination and Knowledge in Six Sigma Improve Phase
5.2.5.4 Internalization and Knowledge in Six Sigma Improve Phase
5.2.6 Research Model 6 and Hypothesis
5.2.6.1 Socialization and Knowledge in Six Sigma Control Phase
5.2.6.2 Externalization and Knowledge in Six Sigma Control Phase
5.2.6.3 Combination and Knowledge in Sigma Control Phase
5.2.6.4 Internalization and Knowledge in Sigma Control Phase
5.3 Summary of the Chapter
CHAPTER 6 SURVEY STUDY FINDINGS AND ANALYSES
6.1 Introduction
6.2 Sample Description and Response Rate
6.2.1 Response Rate
6.2.2 Characteristics of the Survey Respondents
6.2.2.1 Business Characteristics
6.2.2.2 Six Sigma Experiences
6.3 Data Screening and Cleaning
6.3.1 Missing / Incomplete Data
6.3.2 Multivariate Outlier
6.3.3 Multivariate Normality
6.4 Testing for Non-response Bias Result
6.5 Research Model 1
6.5.1 Measurement Model Analysis
Page
234
235
235
236
237
238
240
240
241
242
243
244
245
245
246
247
248
249
249
249
250
250
251
253
253
254
254
255
255
256
xii
6.5.1.1 Overall Measurement Model Fit
6.5.1.2 Reliability and Validity Assessment
6.5.2 Structural Model Analysis
6.5.2.1 Overall Structural Model Fit
6.5.2.2 Model Path Analysis and Hypotheses Testing
6.5.3 Post Hoc Model Modification
6.6 Research Model 2
6.6.1 Measurement Model Analysis
6.6.1.1 Overall Measurement Model Fit
6.6.1.2 Reliability and Validity Assessment
6.6.2 Structural Model Analysis
6.6.2.1 Overall Structural Model Fit
6.6.2.2 Model Path Analysis and Hypotheses Testing
6.7 Research Model 3
6.7.1 Measurement Model Analysis
6.7.1.1 Overall Measurement Model Fit
6.7.1.2 Reliability and Validity Assessment
6.7.2 Structural Model Analysis
6.7.2.1 Overall Structural Model Fit
6.7.2.2 Model Path Analysis and Hypotheses Testing
6.8 Research Model 4
6.8.1 Measurement Model Analysis
6.8.1.1 Overall Measurement Model Fit
6.8.1.2 Reliability and Validity Assessment
6.8.2 Structural Model Analysis
6.8.2.1 Overall Structural Model Fit
6.8.2.2 Model Path Analysis and Hypotheses Testing
6.9 Research Model 5
6.9.1 Measurement Model Analysis
6.9.1.1 Overall Measurement Model Fit
6.9.1.2 Reliability and Validity Assessment
6.9.2 Structural Model Analysis
6.9.2.1 Overall Structural Model Fit
Page
260
260
261
262
264
265
268
268
269
272
272
274
274
275
276
276
279
279
281
281
282
283
283
286
286
288
288
289
290
290
293
293
295
xiii
6.9.2.2 Model Path Analysis and Hypotheses Testing
6.10 Research Model 6
6.10.1 Measurement Model Analysis
6.10.1.1 Overall Measurement Model Fit
6.10.1.2 Reliability and Validity Assessment
6.10.2 Structural Model Analysis
6.10.2.1 Overall Structural Model Fit
6.10.2.2 Model Path Analysis and Hypotheses Testing
6.11 Summary of the Chapter
CHAPTER 7 DISSCUSION, CONCLUSION AND IMPLICATION
7.1 Introduction
7.2 Discussion of Case Study Results
7.2.1 Individual Case Analysis Results
7.2.2 Cross-Case Analysis Results
7.3 Discussion of Survey Study Results and Research Questions
7.3.1 Respondents Characteristics Analysis Results
7.3.2 Hypothesis Testing Results and Research Question 1
7.3.3 Hypothesis Testing Results and Research Question 2
7.3.4 Hypothesis Testing Results and Research Question 3
7.3.5 Hypothesis Testing Results and Research Question 4(a)
7.3.6 Hypothesis Testing Results and Research Question 4(b)
7.3.7 Hypothesis Testing Results and Research Question 4(c)
7.3.8 Hypothesis Testing Results and Research Question 4(d)
7.3.9 Hypothesis Testing Results and Research Question 4(e)
7.4 Discussion of Mixed Method Research and Challenges
7.4.1 Procedural and Philosophical Assumption and Data Collection
7.4.2 Extensive Time for Data Collection and Impact to Study Results
7.5 Implication for Theory
7.5.1 The Knowledge-based Theory of Firms
7.5.2 The Theory of Organizational Knowledge Creation
7.5.3 Knowledge and Six Sigma Project Success
7.5.4 Knowledge and Organizational Performance
Page
295
296
297
297
300
300
302
302
303
305
305
305
307
309
309
310
314
315
316
319
322
326
330
332
332
333
334
334
335
336
336
xiv
7.5.5 Knowledge, Six Sigma Project Success and Organizational
Performance
7.5.6 Knowledge and Quality Improvement
7.5.7 Dimensions of constructs of knowledge creation processes in Six
Sigma DMAIC context
7.6 Implication for Practice
7.6.1 Knowledge Creation in Six Sigma DMAIC Project
7.6.1.1 Knowledge Creation in Define Phase
7.6.1.2 Knowledge Creation in Measure Phase
7.6.1.3 Knowledge Creation in Analyze Phase
7.6.1.4 Knowledge Creation in Improve Phase
7.6.1.5 Knowledge Creation in Control Phase
7.6.2 Knowledge and Six Sigma Project Success
7.6.3 Six Sigma Project Success and Organizational Performance
7.7 Limitation
7.8 Direction for Future Research
7.9 Conclusion
REFERENCES
APPENDICES
Appendix A: Case Study Protocol and Observation Data
Appendix A1: Case Study Protocol Checklist
Appendix B: Survey Study Letters and Questionnaire
Appendix B1: Survey Study Cover Letter
Appendix B2: Survey Questionnaire
Appendix B3: Reminder Letter
Appendix C: SPSS Data Analysis Outputs
Appendix C1: Survey Pilot Test
Appendix C2: Extreme Value Analysis
Appendix C3: Normality Assessment
Appendix C4: MANOVA Test for Non Response Bias
Appendix C5: Structure Equation Model Analysis – Research Model 1
Page
337
338
339
339
339
342
342
343
343
344
344
345
346
347
348
350
381
382
383
391
392
399
402
408
414
xv
Appendix C6: Structure Equation Model Analysis – Alternative Model 1
Appendix C7: Structure Equation Model Analysis – Research Model 2
Appendix C8: Structure Equation Model Analysis – Research Model 3
Appendix C9: Structure Equation Model Analysis – Research Model 4
Appendix C10: Structure Equation Model Analysis – Research Model 5
Appendix C11: Structure Equation Model Analysis – Research Model 6
Appendix C12: Average Variance Extracted and Composite Reliability
Calculation
Page
423
426
434
442
450
458
466
xvi
LIST OF TABLES
Table 2.1 Reported Benefits and Savings from Six Sigma Companies.
Table 2.2 Six Sigma DMAIC Phase and Tools/Techniques
Table 2.3 Summary of past studies of Six Sigma and organizational performance
Table 3.1 Research Protocol Checklist
Table 3.2: Measurement Items for Socialization
Table 3.3: Measurement Items for Externalization
Table 3.4: Measurement Items for Combination
Table 3.5: Measurement Items for Internalization
Table 3.6: Measurement Items for Knowledge
Table 3.7: Measurement Items for Six Sigma Project Success
Table 3.8: Measurement Items for Organizational Performance
Table 4.1 Case A Findings and Analysis
Table 4.2 Case B Findings and Analysis
Table 4.3 Case C Findings and Analysis
Table 4.4 Case D Findings and Analysis
Table 4.5 Socialization Process – A Cross Case Analysis
Table 4.6 Externalization Process – A Cross Case Analysis
Table 4.7 Combination Process – A Cross Case Analysis
Table 4.8 Internalization Process – A Cross Case Analysis
Table 4.9 Knowledge Outcome – A Cross Case Analysis
Table 6.1 Sample Response Rate
Table 6.2 Business Characteristics of Survey Respondents
Table 6.3 Six Sigma Experiences
Table 6.4 Measurement Model 1 Analysis Result
Table 6.5 Discriminant Validity Analysis for Measurement Model 1
Table 6.6 Structural Model 1 Analysis Result
Table 6.7: Summary of Hypotheses Testing Result for Model 1
Table 6.8: Alternative Structural Model 1 Analysis Result
Table 6.9 Measurement Model 2 Analysis Result
Table 6.10 Discriminant Validity Analysis for Measurement Model 2
Page
30
49
74
91
97
97
98
98
99
99
100
139
163
186
211
213
214
215
216
217
249
251
252
259
260
262
265
266
271
271
xvii
LIST OF TABLES
Table 6.11 Structural Model2 Analysis Result
Table 6.12: Summary of Hypotheses Testing Result for Model 2
Table 6.13 Measurement Model 3 Analysis Result
Table 6.14 Discriminant Validity Analysis for Measurement Model 3
Table 6.15 Structural Model 3 Analysis Result
Table 6.16: Summary of Hypotheses Testing Result for Model 3
Table 6.17 Measurement Model 4 Analysis Result
Table 6.18 Discriminant Validity Analysis for Measurement Model 4
Table 6.19 Structural Model 4 Analysis Result
Table 6.20: Summary of Hypotheses Testing Result for Model 4
Table 6.21: Measurement Model 5 Analysis Result
Table 6.22: Discriminant Validity Analysis for Measurement Model 5
Table 6.23 Structural Model 5 Analysis Result
Table 6.24: Summary of Hypotheses Testing Result for Model 5
Table 6.25: Measurement Model 6 Analysis Result 390
Table 6.26: Discriminant Validity Analysis for Measurement Model 6 391
Table 6.27: Structural Model 6 Analysis Result 393
Table 6.28: Summary of Hypotheses Testing Result for Model 6
Page
273
275
278
278
280
282
285
285
287
289
292
292
294
296
299
299
301
303
xviii
LIST OF FIGURES
Figure 2.1 Six Sigma Quality Level 6
Figure 2.2 Sigma Level vs Cost of Quality 7
Figure 2.3: Six Sigma DMAIC Methodology Phase 38
Figure 2.4: Six Sigma DMAIC - Define Phase 39
Figure 2.5: Six Sigma DMAIC - Measure Phase 45
Figure 2.6: Six Sigma DMAIC- Analyze Phase 50
Figure 2.7: Six Sigma DMAIC- Improve Phase 54
Figure 2.8: Six Sigma DMAIC- Control Phase 59
Figure 2.9 The Spiral Model 71
Figure 2.10 The SECI Model 71
Figure 2.11 Past studies research framework of Six Sigma and organization 95
Performance
Figure 2.12 Research Model 1 101
Figure 2.13: Research Model 2 102
Figure 2.14: Research Model 3 102
Figure 2.15: Research Model 4 103
Figure 2.16: Research Model 5 103
Figure 2.17: Research Model 6 104
Figure 5.1: Research Model 1 and Hypotheses
Figure 5.2: Research Model 2 and Hypotheses
Figure 5.3: Research Model 3 and Hypotheses
Figure 5.4: Research Model 4 and Hypotheses
Figure 5.5: Research Model 5 and Hypotheses
Figure 5.6: Research Model 6 and Hypotheses
Figure 6.1 Research Model 1
Figure 6.2 Hypothesized Measurement Model 1(Standardized Estimate)
Figure 6.3 Path Diagram Structural Model 1
Figure 6.4 Alternative Structural Model 1
Figure 6.5 Research Model 2
Figure 6.6 Hypothesized Measurement Model 2 (Standardized Estimate)
Figure 6.7 Path Diagram Structural Model 2
Page
22
23
31
31
36
39
42
46
58
58
78
83
84
84
84
85
85
221
227
231
235
240
244
257
258
263
267
268
270
273
xix
LIST OF FIGURES
Figure 6.8 Research Model 3
Figure 6.9 Hypothesized Measurement Model 3 (Standardized Estimate)
Figure 6.10 Path Diagram Structural Model 3
Figure 6.11 Research Model 4
Figure 6.12 Hypothesized Measurement Model 4 (Standardized Estimate)
Figure 6.13 Path Diagram Structural Model 4
Figure 6.14 Research Model 5
Figure 6.15 Hypothesized Measurement Model 5 (Standardized Estimate)
Figure 6.16 Path Diagram Structural Model 5
Figure 6.17 Research Model 6
Figure 6.18 Hypothesized Measurement Model 6 (Standardized Estimate)
Figure 6.19 Path Diagram Structural Model 6
Page
275
277
280
282
284
287
289
291
294
296
298
301
xx
SATU KAJIAN PENCIPTAAN PENGETAHUAN DALAM
KEJAYAAN PROJEK SIX SIGMA DMAIC DAN KESANNYA
TERHADAP PRESTASI ORGANISASI
ABSTRAK
Terdapat banyak penyelidikan empirikal yang mengkaji hubungan antara Six Sigma dan
prestasi organisasi. Walau bagaimanapun, kebanyakan penyelidikan ini memberi
tumpuan kepada hubungan terus antara Six Sigma dan prestasi organisasi. Tidak ada
siasatan terperinci bagaimana Six Sigma boleh menyebabkan peningkatan prestasi
organisasi. Kajian ini mencadangkan bahawa dengan mengintegrasikan proses
penciptaan pengetahuan organisasi, hubungan antara Six Sigma dan prestasi organisasi
dapat dijelaskan dan dibangunkan. Kajian ini mengkaji kewujudan hubungan antara
proses penciptaan pengetahuan organisasi dalam projek Six Sigma DMAIC,
pengetahuan, Six Sigma kejayaan projek dan prestasi organisasi. Penyelidikan ini
dijalankan terlebih dahulu dengan menggunakan kaedah kajian kes dan diikuti oleh
kaedah kajian selidik. Empat kajian kes telah dijalankan untuk mengesahkan sama ada
terdapat bukti-bukti process penciptaan pengetahuan organisasi wujud dalam projek Six
Sigma DMAIC. Hasil kajian kes menunjukkan bahawa terdapat bukti-bukti yang
berkaitan dengan proses penciptaan pengetahuan organisasi wujud dalam setiap fasa Six
Sigma DMAIC. Kajian selidik dijalankan untuk menguji model-model penyelidikan
dengan menganalisis data daripada 225 syarikat Six Sigma elektrik / elektronik di
Malaysia. Hasil kajian selidik menunjukkan bahawa proses penciptaan pengetahuan
organisasi mempunyai kesan positif ke atas pengetahuan. Pengetahuan mempunyai
kesan positif ke atas kejayaan projek Six Sigma dan kejayaan projek Six Sigma
membawa kesan kepada peningkatan prestasi organisasi.
xxi
A STUDY OF KNOWLEDGE CREATION IN SIX SIGMA DMAIC
PROJECT SUCCESS AND ITS IMPACT ON ORGANIZATIONAL
PERFORMANCE
ABSTRACT
There are number of empirical researches that are studying the relationship of Six
Sigma and organizational performance. However, most of them are focusing on direct
relationship of Six Sigma and organizational performance. There is no detail
investigation how Six Sigma can lead to the improved organizational performance. This
research suggests that by integrating organizational knowledge creation processes the
link between Six Sigma and organizational performance can be explained and
developed. This study investigates the existence of a relationship between
organizational knowledge creation processes in Six Sigma DMAIC project, knowledge,
Six Sigma project success and organizational performance. The research is conducted
by using case study first then followed by the survey study. Four case studies are
conducted to validate if there are evidences of the theoretical construct of organizational
knowledge creation processes exist in Six Sigma DMAIC project. The case study finds
relevant evidences of organizational knowledge creation processes exist in Six Sigma
DMAIC phases. The survey study tests the theoretical research models by analyzing
data from 225 Six Sigma manufacturing companies in Malaysia. The findings reveal
that organizational knowledge creation processes has positive effect on knowledge. In
turn, the knowledge has positive impact on Six Sigma project success and Six Sigma
project success leads to improve organizational performance.
1
CHAPTER 1 INTRODUCTION
1.1 Introduction
In today’s competitive business environment leaves no room for error. Businesses are not only
to provide high quality and innovative products and services at competitive prices (Souza et al.,
2013; Slack et al, 2010; Jugulum & Samuel, 2008; Chinho & Chang, 2006; O'Rourke, 2005;
Ahmed, Yang, & Dale, 2003). They must delight customers and relentlessly look for new ways
to exceed customer’s expectations (Sarkar et al., 2013; Van Der Wiele et al., 2010; Abas &
Yaacob, 2006; McAdam & Lafferty, 2004; Huarng & Chen, 2002; Li & Collier, 2000). The
ability to reach to these challenges is crucial not only to remain relevant in the marketplace but
the adverse impact that these changes could have on business performance if they failed to
respond accordingly (Souza et al, 2013; Garza-Reyes et al. 2010; Dale et al., 2007; Ho &
Chuang, 2006; Mahanti & Antony, 2005; McAdam, Hazlett, & Henderson, 2005; Gowen &
Tallon, 2005). Many organizations are increasingly aware and concerned about these challenges.
The challenging question is: how a company should improve business processes efficiency, cost
reduction, improved bottom lines benefits and still remain competitive players in the stressful
environment. For many companies, Six Sigma is one of the initiatives that can help organization
to meet these challenges and deliver those results (Pyzdek & Keller, 2009; Garza-Reyes et al.
2010; Van Der Wiele et al., 2010; Kumar et al., 2008; Dale et al., 2007;Brue & Howes, 2006;
Banuelas et al., 2005; McAdam, Hazlett, & Henderson, 2005)
Six Sigma has emerged as one of the most successful business improvement model of
the latter 21st century (Padhy and Sahu, 2011; Garza-Reyes et al. 2010; Basu, 2009). Six Sigma
process is customer-oriented, structured, systematic, proactive and quantitative approach for
continuous process improvement in the business processes of an organization to ensure
improved quality, low cost and fast delivery and drive out waste from business processes using
statistical tools and techniques (Laureani et al., 2013; Harry et al., 2010; Naslund, 2008; Van
2
Der Wiele et al., 2010; Chiarini, 2011). After Motorola’s creation of Six Sigma, AlliedSignal
and GE popularized it in the 1990s. Today it has become widely recognized as an effective
method for improving business performance. These successes have encouraged many other
companies such as Ford, DuPont, 3M, Dow Chemical, etc to undertake Six Sigma initiatives.
Many small and mid-size companies are also using the Six Sigma approach. Six Sigma has its
roots in manufacturing and has been very successfully applied in manufacturing. Today Six
Sigma has proved to be successful in marketing, finance, healthcare, banking and many other
business process (Souza et al, 2013; Falcon et al., 2012; Gijo et al., 2011; Firka, 2010; Mahanti
& Antony, 2009; Markarian, 2004)
Most company today, view Six Sigma as a business strategy and methodology for
improving process performance in such a way that customer satisfaction is increased and the
bottom line is improved (Laureani et al., 2013; Snee, 2010; Nonthaleerak & Hendry, 2008; Wu
& Lin, 2009). The bottom line focus attracts the attention and support of corporate executives
and financial analysts, and makes Six Sigma different from many earlier improvement
approaches, such as statistical process control (SPC), total quality management (TQM), and ISO
9000, none of which have the explicit bottom line focus (Chiarini, 2011; Schroeder et al., 2005;
Wu & Lin, 2009 ). Success stories of big corporations that have adopted Six Sigma, such as
Motorola, General Electric (GE), and Allied Signal/Honeywell have been reported in various
papers claiming that Six Sigma implementation result in high financial saving (Hendricks &
Kelbaugh, 1998). For instance, in 1999, GE spent $600 million and saved over $2 billion
(Watson, 2003). Allied Signal, from 1992 through 1996, reduced costs by $1.4 billion (Brue &
Howes, 2006).
Success stories of big corporations that have adopted Six Sigma, such as Motorola,
General Electric (GE), and Allied Signal/Honeywell have been reported in various papers
claiming that Six Sigma implementation result in high financial saving (Keller, 2010; Brue &
Howes, 2006; Aghili, 2009; Antony, 2007). Many industries have an increased interest in Six
3
Sigma. There is a wider acceptance, growth and investment of Six Sigma in industries. There
are many publications such as articles and books about Six Sigma. Current concepts in the field
of Six Sigma are largely descriptive and based upon the prescription of leading ‘gurus’ who
worked in major companies using Six Sigma, such GE, Motorola, Honeywell, etc (Pyzdek &
Keller, 2009; Zu et al., 2008). It provides detailed about Six Sigma concepts, methodology,
tools and techniques and implementation strategy. The practitioner literatures primarily provide
prescriptive guideline and procedures needed for Six Sigma implementation. There is little on
theory development. In spite of considerable discussion of Six Sigma and organizational
performance, there is no detail empirical discussion on the phenomenon how Six Sigma leads to
the organizational performance.
Given this situations, Six Sigma and organizational performance is an interesting issue
to study. This study proposes that the knowledge-based theory of the firm and Nonaka’s (1994)
organizational knowledge creation theory are useful approach in explaining the phenomenon
Six Sigma leads to the organizational performance. According to the knowledge-based theory of
the firm, knowledge is a strategic resource that the firm uses to develop sustained competitive
capability (Davenport & Prusak, 1998; Grant, 1996; Kogut & Zander, 1996; Spender, 1996) and
the firm’s practices that toward the generation of knowledge can have substantial effects on the
organization performance. According to Nonaka’s (1994) organizational knowledge creation
theory, the conversion between tacit and explicit knowledge allow knowledge to be created
through socialization, externalization, combination and internalization processes. From these
two theoretical perspectives, if Six Sigma practices lead to knowledge creation then the link
between Six Sigma and firm performance can be explained. That is, Six Sigma becomes a
source of knowledge creation that results in a competitive advantage that leads to the improved
organizational performance.
4
1.2 Background of the Study
1.2.1 Six Sigma Literature in Malaysia
There are seven Six Sigma empirical researches found in the literature. Majority of the research
are focused on identifying critical success factors for Six Sigma implementation as
(Supremanian & Muthusamy, 2011; Zailani & Sasthriyar; 2011; Jayaraman, et al., 2012; Leong
& Teh, 2012; Nurul & Sha’ri, 2013) do. There are two studies that investigate the impact of Six
Sigma to organizational performance as (Ang, et al., 2010; Yusra, et al., 2012) do.
Supremanian and Muthusamy (2011) study examined Critical Success Factors (CSFs)
of Six Sigma methodology implementation in Malaysian Multinational Corporations (MNCs).
This research used the method of exploratory survey conducted via online questionnaire. Five
CSFs identified: management commitment, absorption, project /process assessment, training&
awareness, cultural influence. The study results concluded that CSFs that have direct impact in
Six Sigma implementation are management commitment, absorption, project/process
assessment and training & awareness. Cultural influence does not have significant impact on
Six Sigma implementation.
Zailani and Sasthriyar (2011) performed correlation study to examine critical success
factors of Six Sigma towards Six Sigma success to the organizations. Ten CSFs are identified:
management involvement and commitment, project prioritization and selection, reviews and
tracking, understanding the Six Sigma methodology tools and techniques, linking Six Sigma to
business strategy, linking Six Sigma to suppliers, training, company infrastructure, project
management skills, linking Six Sigma to human resources and linking Six Sigma to customers.
The study also reveals that all ten dimensions of critical success factors of Six Sigma
(independent variable) as a group explained 45%, in order to perceive Six Sigma success. This
reveals that there must be more these 10 independent critical success factors. So, it can be
concluded that all the independent effects of critical success factors of Six Sigma were
collectively predicting the perceived Six Sigma success. However, individually somehow,
5
factors for management involvement and commitment, and linking with supplier management
could not explain the relationship with perceived Six Sigma success at the significance level of
p < .05.
Jayaraman, et al. (2012) conducted research to analyze the critical success factors
(CSFs) for Lean Six Sigma (LSS) implementation and its impacts towards company
performance in multinational electronic manufacturing service (EMS) industries. The study
identified nine CSFs: management engagement and commitment, reward and recognition
system, competency of Master Black Belt / Black Belt, company financial capability, frequent
communication and assessment on LSS result, project selection, review and tracking, sharing of
project success stories and best practices, effective LSS training program and establishment of
LSS dashboard. The results indicated that out of these CSFs, management engagement and
commitment, effective LSS training program, established LSS dashboard, frequent
communication and assessment on LSS results were found to be statistically significant and
they affect operational performance and organizational performance.
Leong and Teh (2012) study examined the five critical success factors (i.e., top
management involvement and commitment, training and education, teamwork, cultural change,
and organizational infrastructure) on Six Sigma implementation in the Original Equipment
Manufacturer (OEM) industry. The results show that top management involvement and
commitment, as well as training and education are independent and positively related to six
sigma implementation. However, teamwork has a negative relationship with Six Sigma
implementation.
Nurul and Sha’ri (2012) study identify and evaluate the critical success factors (CSFs)
affecting Lean Six Sigma (LSS) implementation in the Malaysian automotive industry. The
study identified seven CSFs: Leadership, Structured improvement procedure, Quality
information and analysis, Supplier relationship, Just in time, Customer focus and Focus in
metric. Data for the study were collected from a sample of 252 Malaysian automotive suppliers
6
and the research model was tested using SEM. Based on the empirical data survey, the two
factors of “leadership” and “customer focus” have been shown to be the extremely important
factors for LSS implementation in Malaysian automotive industry.
Ang, et al. (2010) had conducted the first empirical research in Malaysia that is linking
Six Sigma to knowledge creation and organizational performance. This study focuses on the
antecedents and outcomes of organizational knowledge creation in Six Sigma organization.
Specifically, the study focuses on how Six Sigma practices can lead to organizational
knowledge creation capability and how this capability can lead to improved organizational
performance. Six Sigma practices included in the study were top management involvement &
support, customer focus, role structure, use of metrics, project selection, tools & technique,
team, DMAIC, DFSS, process management and training. The organizational performance was
measured in four balanced scorecard perspective which were customer satisfaction, internal
business process performance, employee learning & growth and financial performance. Overall,
the study’s results show that process improvement through Six Sigma practices involves the
creation of knowledge, knowledge creation has direct positive impact on customer, internal
business process, employee learning and growth and indirect positive impact on financial.
Overall, this study provides a more comprehensive understanding of how Six Sigma practices
can lead to improved organizational performance and enhancing organizational capabilities.
Yusra, et al. (2012) study attempted to figure out the relationship between Six Sigma
and innovation performance, and examine the mediating role of absorptive capacity (AC) in this
relationship. The findings of the analysis show that Six Sigma has a significant and positive
influence absorptive capacity. Also, the results indicate that absorptive capacity positively
affects innovation performance. The mediating effect of absorptive capacity has also been
proved by the findings of this study, where 73% of the effect of Six Sigma on innovation
performance is explained through absorptive capacity. However, the direct relationship between
Six Sigma and innovation performance was substantially reduced to be insignificant when the
7
mediating relationship was introduced, which refers to the full mediating effect of absorptive
capacity in the relationship between Six Sigma and innovation. Therefore, it can be concluded
that absorptive capacity as capabilities are very crucial to enhance and develop innovation
performance. Hence, companies which tend to be innovative are recommended to build its
absorptive capabilities as the basis or first step towards innovation. Further studies should be
done to determine the factors that affect on absorptive capacity in order to get more
understanding regarding how to improve the absorptive capabilities in the organization level.
1.2.2 Six Sigma Research Issue in Malaysia
Six Sigma research territories in literature are mostly focus in United States and Europe
(Nonthaleerak & Hendry, 2006; Ang et al., 2010). Ang et al. (2010) highlighted that empirical
research of Six Sigma in Malaysia context is limited. Majority of the research done in Malaysia
are focused on identifying critical success factors for Six Sigma implementation. There is no
any research been done for studying the relationship of Six Sigma and organizational
performance in Malaysia context. As a result, there is not much solution offers to Six Sigma
companies in Malaysia in explaining how the Six Sigma can lead to improved organizational
performance. Therefore, there is a need to investigate the relationship of Six Sigma and
organizational performance.
1.3 Research Problems
There are number of empirical researches study on the relationship between Six Sigma and
organizational performance in the literatures. However, the research has yielded mixed results.
Some empirical researches as done by Lee (2002); Ayeni (2003); Lee & Choi (2006); Zu et al.
(2008) and Braunscheidel et al. (2011) found that Six Sigma has positive effects on
organizational performance. Others as done by Goh et al. (2003); Foster (2007) and Gutierrez et
al. (2009) found that there is no significant relationship of Six Sigma to organizational
8
performance. Thus, this topic needs further investigation. For those studies that found that Six
Sigma has positive effects on organizational performance, the studies were focused on direct
relationship between Six Sigma and organizational performance (Lee, 2002; Ayeni, 2003; Lee
& Choi, 2006; Zu et al., 2008; and Braunscheidel et al., 2011). There is no detail discussion on
the phenomenon how Six Sigma leads to the organizational performance. The link between Six
Sigma and organizational performance has not been clearly explained and fully developed.
Linderman et al. (2003) and Antony (2004) remark that theory about the link of Six Sigma lead
to organizational performance is lacking and the academic community lags behind in
understanding this relationship. Nonthaleerak and Hendry (2006) comment that theory
development of Six Sigma lead to organizational performance that is of use to academic
scholars and business organization is required. Therefore, systematic and rigorous research is
needed to determine components that make up of Six Sigma can lead to organizational
performance.
In existing literature, there is no empirical research being done on how application of
Six Sigma DMAIC methodology can lead to knowledge creation. However, there are few
empirical researches that relate and study knowledge creation in Six Sigma as Choo et al.(2007);
Chuni & Chinho (2009); Anand et al.(2010) and Ang et al.(2010) do. Choo et al. (2007)
developed method and context perspectives of learning and knowledge creation for quality
improvement program such as Six Sigma. These two perspectives reflect the dual emphasis of
quality practices as technical and social that can complement each other in maintaining
sustainability of quality advantage that finally lead to learning and knowledge creation. Chuni
and Chinho (2009) conducted interview case study in two manufacturing companies in Taiwan
to identify how the Six Sigma program facilitates the knowledge creation process. The focus of
their study was on general Six Sigma program practices. Both research even though related to
knowledge creation in general Six Sigma program but none of them focus on the relationship of
Six Sigma DMAIC methodology and knowledge creation. Anand et al. (2010) developed a
9
conceptual model for predicting success of Six Sigma process improvement projects as a result
of knowledge-creation practices employed in the projects. The study was focused on the
relationship of knowledge-creation practices on the Six Sigma project performances. Ang et al.
(2010) had conducted the first empirical research in Malaysia that is linking Six Sigma practices
(e.g. top management involvement & support, customer focus, role structure, use of metrics,
project selection, tools & technique, team, process management and training) to knowledge
creation and organizational performance. Both studies focus on general Six Sigma practices and
knowledge creation. However, there is no investigation of Six Sigma DMAIC methodology lead
to knowledge creation. Above review of the literature suggested that previous studies for
instance (Choo et al., 2007; Chuni & Chinho, 2009; Anand et al., 2010; Ang et al., 2010) did
not only show little interest in examining the relationship of Six Sigma DMAIC methodology
and knowledge creation.
To the researcher knowledge there is no empirical research being done on the
relationship of knowledge created in Six Sigma DMAIC methodology and Six Sigma project
success. However, there is one empirical work noted in the extant literature that relates the
relationship of knowledge creation process and Six Sigma project performance in Six Sigma
context. Anand et at. (2010) developed a conceptual model for predicting success of Six Sigma
process improvement projects as a result of knowledge-creation practices employed in the
projects. In this study Anand classified Six Sigma practices into Nonaka’s four knowledge
creation mechanism: socialization, externalization, combination and internalization. The model
was empirically examined in the context of Six Sigma black belt projects. Data was collected
from 98 projects from five companies. The results support the notion that knowledge-creation
practices influence the success of process improvement projects. The research done by Anand et
at. (2010) was focused on the relationship of knowledge creation practice on the Six Sigma
project performances. However, there is no investigation if the knowledge creation process lead
to knowledge creation and finally knowledge creation leads to Six Sigma project performances.
10
Therefore, this study tries to find out the relationship if the knowledge created in Six Sigma
DMAIC methodology would have an effect on Six Sigma project performances.
Six Sigma is project driven approach to process and product quality improvement (Ray
& Das, 2010; Gitlow et al., 2006). Projects are the means by which Six Sigma converts quality
improvements into bottom line financial benefits (Gulcin & Demet, 2010; Kubiak & Benbow,
2009). Six Sigma projects must be linked with business strategy, meet the requirements of the
customer and provide maximum financial benefits to the organization (Breyfogle, 2010; Ray &
Das, 2010; Russell & Tippett, 2008; Sanchez, Benoit, & Pellerin, 2008). In the literatures, there
is also limited empirical research that investigates the relationship between Six Sigma project
success and organizational performance. Although scholars and practitioners cite numerous
examples on the positive effect of Six Sigma projects on firm performance (e.g. Foster, 2007;
Johnson, 2005; Roberts, 2004; Hoerl, 1998; Rucker, 2000), there is little theoretical support on
the effectiveness of Six Sigma projects on organizational performance. The existent literatures
are mostly employs descriptive research method based upon anecdotal evidence (Brady, 2005).
There is one conceptual paper by Mahour (2011) identified in the literatures that discuss the
effect of Six Sigma projects organizational performance. Mahour (2011) developed a theoretical
base framework for the effect of Six Sigma projects on innovation and firm performance. The
framework was built upon theories from process management and quality management. The
paper proposes several propositions to address the effect of Six Sigma projects on innovation
and firm performance. However, empirical research is needed to further validate the
propositions.
Six Sigma research in Malaysia context is rather limited. Ang et al. (2010) highlighted
that Six Sigma research territories in literature are mostly focus in United States and Europe.
There is little research done in Malaysia context. Majority of the research done in Malaysia are
focused on identifying critical success factors for Six Sigma implementation (e.g. Supremanian
& Muthusamy, 2011; Zailani & Sasthriyar; 2011; Jayaraman, et al., 2012; Leong & Teh, 2012;
11
Nurul et al., 2012). There is limited research been done for studying the relationship of Six
Sigma and organizational performance in Malaysia context. As a result, there is not much
solution offers to Six Sigma companies in Malaysia in explaining how the Six Sigma can lead to
improved organizational performance. Therefore, there is a need to investigate the relationship
of Six Sigma and organizational performance.
1.4 Research Questions
The problems identified in the literature has lead to the development of a several research
questions that are worthy of investigation.
1. Does application of Six Sigma DMAIC methodology for business process improvement
facilitates knowledge creation?
2. Does knowledge created in Six Sigma DMAIC methodology has an effect on Six Sigma
project success?
3. Does Six Sigma project success has an effect on organizational performance?
4. Does each of the Six Sigma DMAIC phases (e.g. Define, Measure, Analyze, Improve, and
Control) facilitate knowledge creation?
(a) Does Define phase facilitate knowledge creation?
(b) Does Measure phase facilitate knowledge creation?
(c) Does Analyze phase facilitate knowledge creation?
(d) Does Improve phase facilitate knowledge creation?
(e) Does Control phase facilitate knowledge creation?
1.5 Research Objectives
This study will be conducted at Six Sigma electrical/electronic companies in Malaysia. The
objectives of this study are as below.
1. To examine if application of Six Sigma methodology facilitate knowledge creation
12
2. To examine if knowledge created in application of Six Sigma methodology have an effect on
Six Sigma project success.
3. To examine if Six Sigma project success have an effect on organizational performance.
4. To examine if each of the Six Sigma DMAIC phases facilitate knowledge creation in
business process improvement.
(a) To examine if Define phase facilitate knowledge creation.
(b) To examine if Measure phase facilitate knowledge creation.
(c) To examine if Analyze phase facilitate knowledge creation.
(d) To examine if Improve phase facilitate knowledge creation.
(e) To examine if Control phase facilitate knowledge creation.
1.6 Scope of the Study
The study focus on electrical and electronic manufacturing companies that has implemented Six
Sigma program in Malaysia. The manufacturing sector was selected because majority of Six
Sigma companies in Malaysia are from electrical and electronic manufacturing companies (Ang,
et al, 2010). According Ang, et al. (2010), 96.7% of Six Sigma companies in Malaysia are from
electrical and electronic manufacturing companies and the remaining 3.3% represent services
industries. This is understandable, since Six Sigma started in manufacturing and is strongly
embraced by this sector. The manufacturing sector was selected also because it is the largest
sector in terms of sales, employment and contribution to the economy (MIDA, 2011;
Department of Statistic Malaysia, 2011). Thereby, any effort to improve the performance of this
sector can produce substantial benefits. Since the research studies knowledge creation in Six
Sigma organizations, the companies selected must with knowledge intensive activities. Based
on this goal, manufacturing companies is selected because these companies tend to have a
greater intensive of knowledge work due to their emphasis on process improvement as their key
source of competitive advantage.
13
Six Sigma methodologies being established by Motorola is amongst the popular
business improvement strategies today. Six Sigma methodologies are one of the highly
controlled management approaches that enable companies to increase their profitability and
reduce costs (Brussee, 2010; Karbasian & Aghadaee, 2006). As a result, they are able to deliver
best products and services, higher profits and retain happier customers (Owens, 2011; Jacob et
al, 2009; Trusko et al., 2007). There are two types of methodologies followed in all six sigma
projects. These are Six Sigma DMAIC methodology and DMADV methodology (Mehrjerdi,
2013; Yang & El-Haik, 2008; Gitlow et al, 2006). The DMAIC methodology is used for those
projects that are targeted to improve the existing business processes (Keller, 2010; Reidenbach,
2009; Goldsby & Martichenko, 2005). The DMADV type of Six Sigma methodology is also
known as Design For Six Sigma (DFSS), it targets those projects in an organization that creates
new products or process designs (Ginn & Varner, 2011; Yang & El-Haik, 2008; Watson, 2005).
According Ang, et al. (2010), 88.9% of Six Sigma companies in Malaysia are using Six Sigma
DMAIC methodology as their process improvement initiative. It is appropriate that the study
focuses on manufacturing companies that adopted Six Sigma DMAIC methodology as their
process improvement initiative.
1.7 Significance of the Study
This research is significance in several ways and makes a meaningful contribution for research
as well as for practice.
There are number of empirical researches study on the relationship between Six Sigma
and organizational performance in the literatures. However, the research has yielded mixed
results. For those studies that found that Six Sigma has positive effects on organizational
performance, the studies were focused on direct relationship between Six Sigma and
organizational performance (Lee, 2002; Ayeni, 2003; Lee & Choi, 2006; Zu et al., 2008; and
Braunscheidel et al., 2011). There is no detail discussion on the phenomenon how Six Sigma
14
leads to the organizational performance. The study results make a significance contribution to
the literature on explaining empirically the phenomenon of how Six Sigma can lead to
organizational performance. The research findings reveal that application of Six Sigma DMAIC
methodology facilitate knowledge creation through knowledge creation processes and
knowledge created has positive effect on Six Sigma project success and finally Six Sigma
project success leads to improve organizational performance.
There are few empirical researches that study knowledge creation in Six Sigma quality
improvement program such as Choo et al. (2007) and Chuni and Chinho (2009) do. Both
research even though related to knowledge creation in Six Sigma but none of them focus on the
relationship of Six Sigma DMAIC methodology and knowledge creation. The results of the
study contribute to Six Sigma body of knowledge that integrating knowledge creation processes
such as Socialization, Externalization, Combination and Internalization (SECI) can lead to
knowledge creation. From a practical point of view, the study results reveal that the important
role of knowledge creation processes in the relationship of Six Sigma and organizational
performance. Awareness of this finding can help Six Sigma project leaders target appropriate
points to facilitate the spiral of knowledge creation by taking a leading role in managing the
SECI processes. Each process of knowledge conversion requires different approaches for
organizational members to create and share knowledge effectively (Nonaka and Konno, 1998;
Nonaka et al., 2000b; Becerra-Fernandez and Sabherwal, 2001; Anand et al., 2010; Ang et al.,
2010).
Based on existing literature, there is no empirical research being done to study the
relationship of knowledge created in Six Sigma DMAIC methodology and Six Sigma project
success. The results of this study add in the body of knowledge that application of knowledge
creation processes in Six Sigma DMAIC methodology allows knowledge to be created and
knowledge created has positive effect on Six Sigma project success. In practice, the result
implies that knowledge of Six Sigma project team member is critical and forming an effective
15
Six Sigma project team for driving improvement projects is essential to Six Sigma project
success. Six Sigma project team should comprise of a diverse group of individuals with diverse,
complementary skills and knowledge. Interaction among Six Sigma project team members with
multidiscipline knowledge and experience can create organizational knowledge more efficiently
and effectively (Ang et al, 2010; Linderman, 2004; Sabherwal & Becerra-Fernandez, 2003;
Anand, et al., 2010).
In the literatures, there is also limited empirical research that investigates the
relationship between Six Sigma project success and organizational performance. The existent
literatures are mostly employs descriptive research method based upon anecdotal evidence
(Brady, 2005). This research studies the relationship between Six Sigma project success and
organizational performance empirically. The result of the study adds in the body of knowledge
in Six Sigma literature that Six Sigma project success has positive effect on organizational
performance. In practice, the result of the study can help organization to understand that Six
Sigma project selection is critical. Six Sigma project selections must be aligned with the
business strategies, organization’s goal /objectives and meet customers’ requirements. Six
Sigma projects will not likely be supported if they do not simultaneously provide greater
customer satisfaction and make progress toward achieving the organization’s strategic goals.
Six Sigma projects must be prioritized which provide maximum financial benefits to the
organization.
There is little research done in Malaysia context. Majority of the research done in
Malaysia are focused on identifying critical success factors for Six Sigma. There is little
research been done for studying the relationship of Six Sigma and organizational performance
in Malaysia context. As a result, there is not much solution offers to Six Sigma companies in
Malaysia on how the Six Sigma can lead to improved organizational performance. The results
of this study will help organizations to understand that the important role of knowledge creation
processes (Socialization, Externalization, Combination, Internalization or SECI) in the
16
relationship of Six Sigma and organizational performance. Awareness of this finding can help
Six Sigma project leaders target appropriate points to facilitate the spiral of knowledge creation
by taking a leading role in managing the SECI processes. Each process of knowledge
conversion requires different approaches for organizational members to create and share
knowledge effectively.
1.8 Definitions of Key Terms
Six Sigma: Six Sigma is defined as a structured management system to continuously improve
organizational processes to achieve the strategic business goal of increasing bottom line benefits
and enhancing customer satisfaction through collaboration of the organization’s employees,
customers and suppliers (Zul et al., 2008).
DMAIC: The systematic approach to reducing process variation and achieving improvement
utilized in Six Sigma. DMAIC is an acronym for Define, Measure, Analyze, Improve, and
Control – the five phases of a Six Sigma improvement project (Pyzdek & Keller, 2009).
Design for Six Sigma (DFSS): The approach used to design a new process rather than
improving an existing process (Pyzdek & Keller, 2009).
Black Belts (BB): Specially trained individuals responsible for leading Six Sigma team through
the DMAIC process. They usually occupy full-time positions. Training in statistical methods
and quality improvement techniques are prerequisite (Pyzdek & Keller, 2009).
Master Black Belts (MBB): Individual who train and mentor Black Belts. They are highly
trained in statistics and quantitative analyses, possess excellent leadership skills, and usually
occupy full-time position (Pyzdek & Keller, 2009).
Green Belts (GB): Similar to Black Belts; however, they may possess less statistical expertise
and usually occupy part-time positions (Pyzdek & Keller, 2009).
17
Defects per million opportunities (DPMO): The number of defects out of one million
opportunities for defects (Pyzdek & Keller, 2009).
Socialization: Process of conversion from tacit knowledge to tacit knowledge through share
experience and joint activities (Nonaka & Takeuchi, 1995).
Externalization: Process of conversion of tacit knowledge into explicit knowledge (Nonaka &
Takeuchi, 1995).
Combination: Process of conversion from explicit knowledge into more complex and
systematic sets of explicit knowledge (Nonaka & Takeuchi, 1995).
Internalization: Process of conversion from explicit knowledge into tacit knowledge through
learning by doing (Nonaka & Takeuchi, 1995).
Knowledge
Knowledge has been defined as “justified true belief” that increases an organization's capacity
for effective action (Nonaka, 1994; Nonaka & Takeushi, 1995).
Tacit Knowledge: Tacit knowledge is personal knowledge based on individual experience,
action, commitment, and involvement in a specific context ( Nonaka, 1994). It is difficult to
articulate, express, and formalize to others, so it is often transmitted to others in informal and
subtle ways.
Explicit Knowledge: Explicit knowledge is often categorized as codified or visualized
knowledge, which is transmitted in the form of formal and systematic language (Nonaka, 1994).
It is often referred to as information.
18
Six Sigma Project Success: The extent to which the improvement goals of the project were
achieved, performance of the process improved and project results to organizational benefits
Anand et al. (2010).
Organizational Performance: Organizational performance is an extensively utilized
dependent variable for organizational research. Arawati (2005) reported that customers
satisfaction, internal business processes, innovation and learning, and financial perspectives,
have been used to measure organizational performance.
1.9 Outline of the Thesis
The organization of the thesis follows the logic of the business research process. The thesis is
organized into seven chapters. Each of the chapter contents are briefly explained and provided.
It is summarized as below.
Chapter 1 Introduction
This chapter starts with introduction to the study which gives general idea about the research
topic under study. It provides an overview of the background of the research that includes Six
Sigma initiatives, its success stories and benefits of implementation. Then, it explains the scope
and problem of the study followed by research questions and objectives. Next, it portrays the
significance of the study and its expected contributions. The chapter ends with defining key
terms used in the study and outline of the thesis.
Chapter 2 Literature Review and Theoretical Research Models Development
This chapter provides a theoretical basis of Six Sigma DMAIC methodology include activities,
tools and techniques of each phases. The next section discusses the literature on knowledge
management such as knowledge and it classification, knowledge-based view of the firm and
theory of organizational knowledge creation process. The literature of relationship of Six
19
Sigma, knowledge management and organizational performance are discussed. Finally,
theoretical research models are proposed based on literature review.
Chapter 3 Research Methodology
This chapter discusses the research design strategy and methodology employed in this research,
which consist of both qualitative (case study) and quantitative (survey study) methods. The next
section will describe the case study method which includes data collection, research protocol,
data analysis procedure and validity and reliability. The last section will detail the research
setting (population and sample size), questionnaire development and construction, data
collection and analysis procedures for survey study.
Chapter 4 Case Study Findings and Analyses
This chapter describes result of case study data collection and analysis. First, the individual case
study results are systematically reviewed according to each element of the research protocol.
Then, it will be presented, analyzed, and interpreted according to Six Sigma DMAIC
methodology sequence. A tabular presentation will be adopted to ease understanding at the end
of each case study analyses. Finally, a cross-case analysis will be presented to view the
differences and similarities between the cases.
Chapter 5 Research Model and Hypothesis
This chapter focuses on theoretical research models and its associated hypotheses. Research
hypotheses about relationship between the variables of research models are established. A brief
literature is also provided to support the formulated hypotheses.
Chapter 6 Survey Study Findings and Analyses
This chapter presents the results of survey data analysis. First section the sample description,
characteristics and response rate are discussed. Second section will share the survey data
screening and cleaning assessment results. Then, testing for non-response bias result is
20
presented. Next, measurement and structural model analysis for each research models are
discussed. The chapter ends with the analysis and result of hypothesis testing.
Chapter 7 Discussion, Conclusion and Implication
The purpose of this chapter is to discuss the results of the study. The organization of the chapter
will be as follows. The first section will discuss the results of the study, both case study and
survey study. The second section will identify theoretical and managerial implications of the
study. Next, limitation of the study and direction for future research will be discussed. Finally,
conclusion of the study will be presented.
21
CHAPTER 2 LITERATURE REVIEW AND THEORETICAL
RESEARCH MODEL DEVELOPMENT
2.1 Introduction
This chapter provides a theoretical basis of Six Sigma DMAIC methodology include activities,
tools and techniques of each phases. The next section discusses the literature on knowledge
management such as knowledge and it classification, knowledge-based view of the firm and
theory of organizational knowledge creation process. The literature of relationship of Six
Sigma, knowledge management and organizational performance are discussed. Finally,
theoretical research models are proposed based on literature review.
2.2 Six Sigma Basic and Concepts
2.2.1 What is Six Sigma?
Six Sigma concepts was pioneered by Motorola in the 1980s and boosted by the efforts of GE,
Allied Signal, and others in the late 1990s (Braunscheidel et al, 2011). Today Six Sigma is one
of the primary quality initiatives that have been billed as a critical business tools for the 21st
century (Pepper & Spedding, 2010; Mader, 2008). In a fast changing business environment,
companies have used Six Sigma initiatives to gain improvements in process and product quality
(Biranvand & Khasseh, 2013; Gulcin & Demet, 2010; Snee, 2010; Kwak & Anbari, 2006). The
success that companies have enjoyed is the results directly to improved customer satisfaction
ratings and bottom line savings (Tjahjono et al., 2010; Zu et al, 2008).
Brue (2006) views Six Sigma has three meaning depending on the context. It is a level
of quality (Pyzdek & Keller, 2009; Montgomery & Woodall, 2008); it is a problem solving
methodology (Tjahjono et al., 2010; Antony et al., 2008) and it is a management philosophy
(Summers, 2011; Kwak & Anbari, 2006; Antony & Banuelas, 2002). Sigma is Greek letter σ is
used as a statistical measure of variation in a process (Chakraborty & Leyer; 2013; Gillett et al.,
22
2010; Omachonu & Ross, 2004). A stated sigma level is used to describe how well the process
variation meets the customer’s requirements (Pyzdek & Keller, 2009). Achieving a six-sigma
level (6σ) of quality means that processes are producing only 3.4 defects per million
opportunities (DPMO) with 1.5σ allowable shift under the normal distribution or practically it is
corresponding to 99.999770% yield (Saghaei et al., 2012; ASQ, 2010; Raisinghani et al., 2005;
Antony, 2004), refer to Figure 1.1. In other words, they are working nearly perfectly.
Figure 2.1: Six Sigma Quality Level (Source: Breyfogle et al., 2003)
Most companies operate in three to four sigma ranges. As sigma level is increased, the
defect per million opportunities decreases exponentially (Souza et al., 2013; Summers, 2011).
For example, the sigma level is moving from three sigma (3σ) to four sigma (4σ), the DPMO
drops from 77810 to 7210, then to just over 233 at five sigma (5σ). At three to four sigma,
where most organizations operate, an organization spends about 15% to 25% of its sales on
fixing problem (Pyzdek & Keller, 2009; Shah et., 2008). This is known as the cost of poor
quality. As an organization moves to a five sigma level of performance, its cost of poor quality
23
drops to around 5% of sales (Pyzdek & Keller, 2009). The Six Sigma organization can expect to
spend between 1% and 2% of sales on non-value-added activities (Pyzdek & Keller, 2009).
Figure 2.2: Sigma Level vs Cost of Quality (source from Pyzdek, 2003).
The cost of poor quality also drops quickly as dollar that go to waste in a three sigma
organization (due to failure costs) go directly to the bottom line in a Six Sigma organization, to
be reinvented in value-added activities which boost revenue ( Souza et al., 2013; Garza-Reyes et
al. 2010; McCarty et al., 2004). This is where the cost savings come from.
From this concept and statistical underpinning, Six Sigma has been developed into a
disciplined and structured process problem solving methodology which is DMAIC (Dale et al.,
2007; McCarty et al., 2004). Within each phase of DMAIC are specific Six Sigma process
requirements and the deployment of various statistical tools and techniques (Garza-Reyes et al.
2010; Tang et al., 2007; Antony et al., 2005). DMAIC methodology is used to help an
organization to identify and evaluate a defect, analyze root causes, make improvement and then
control those improvements in order to deliver near-perfect products and services to customer
(Tjahjono et al., 2010; Pande et al., 2002).
24
Six Sigma concepts has then moved from concentrating on improving existing
manufacturing processes and services to design/redesign of product, process and services
(Aboelmaged, 2011; Watson & Deyong, 2010). This is a Design for Six Sigma (DFSS) concept.
In DFSS process the DMADV methodology is utilized with the aim is to design and engineer
Six Sigma quality into the product and process as a proactive approach to defect prevention and
elimination (Watson & Deyong, 2010; Antony et al., 2002).
Six Sigma has experienced an evolution since its inception at Motorola in the 1980s.
First used by Motorola as a tactical defect reduction quality tool kit, Six Sigma has evolved
through its application by other organizations (Hayler & Nichols, 2010; Magnusson et al., 2004).
It was AlliedSignal that first began to use Six Sigma as a strategic enabler to achieving business
objectives and also initiated the use of managing by process (Aboelmaged, M.G, 2011; Gulcin
& Demet, 2010 ). Finally it was GE that not only added the strategic element of Six Sigma but
also made it a cultural phenomenon (summers, 2011; Sarkar et al., 2013). Today, Six Sigma is a
management philosophy (Firka, 2010; Mahanti & Antony, 2009; Markarian, 2004). It is
customer-based approach that link and align the key business processes with the strategic
business objective of an organization to continuously drive business processes efficiency and
effectiveness and allow for innovation (Ray & Das, 2009; Kwak & Anbari, 2006).
2.2.2 Six Sigma Roles Structure
Six Sigma projects are at the heart of the Six Sigma methodology. These projects are carried out
by a group of improvement specialists, typically referred to as champions, master black belts,
black belts, and green belts (Morgan & Brenig, 2012; Gitlow, 2009; Schroeder et al., 2008;
Linderman et al., 2003). A champion is an executive who is acting as the sponsor of a Six
Sigma project and responsible to ensure that resources are available for training and projects;
participating in project selection, scoping and review (Evans & Lindsay, 2005). Master Black
Belts are the highest level of technical and organizational proficiency. They are technical