Cost benefit analysis
To decide between alternative solutions, cost-benefit analysis can help you make the right decision. It can be challenging to quantify the effect. It requires the ability to see the complete picture and how the change affect the overall business.
Six Sigma focus on gathering neutral information and make fact-based decisions. Six Sigma's problem-solving method DMAIC follows these steps:
- Define: Select the right projects and collect data to understand the problem
- Measure: Map the current situation and baseline the process
- Analyze: Identify root causes and analyze data to prove / disprove them
- Improve the process by implementing and verifying the best solution
- Control the new process by maintaining the solution.
The improve phase of Six Sigma identifies different solutions and calculate the effect of the different alternatives. To make the right decision it is important to evaluate pros and cons and calculate the cost-benefit effect of the various alternatives.
It does not need to be 100% correct, 90% is usually more than enough to make the right decision. Six Sigma includes prioritizing tools and is well suited for cost-benefit analysis.