The Kaizen Paradox: How Incremental Improvements Impede Innovation

Kaizen and Kaikaku

Kaizen. It is a word synonymous with improvement in organizations around the world. While the Japanese word literally means ‘improvement’, in industry and business the focus is on small, continuous steps to better processes. It is embedded in the management thinking of many organisations.

Japanese businesses developed Kaizen practices around the 1950s, most notably Toyota as part of their Toyota Production System. After studying why the company was so successful at high-volume production of high-quality vehicles in the 1960s, Masaaki Imai wrote several books on Kaizen and formed the Kaizen Institute, spreading the knowledge and practice around the globe.

However, there are times when Kaizen is not enough. Worse still, a small improvement can often hold an organization back, perhaps even stifling significant development.

This is the Kaizen Paradox.

Kaikaku is a less famous but equally important concept that describes revolutionary change or major reform/transformation.

The Kaizen Paradox and the issues it creates

By focusing exclusively on small improvements, an organisation may miss an opportunity to gain a competitive advantage in costs and customer service. If competitors take a big leap, an organization will be left behind, still making candles in a light bulb market.

Small improvements also commit resources that could be better spent toward a larger step forward in performance, or with more strategic planning, could have contributed to a major change.

It is important to note that ROI limits for investment are contributing to the Kaizen Paradox that companies are experiencing. To solve this pitfall, companies should review their ROI restrictions for warehouses with existing mechanized systems already in place.

Paradox in practice

A while ago I was invited to a well-established global company that was seeking to identify a solution for an automated ‘goods-to-person’ warehouse in a bid to achieve a significantly higher level of business performance.  However, a year earlier the company had invested in a mechanized ‘zone–to-zone order picking’ solution, consisting of conveyers and carton storage shelving.

Although the project was still in the commissioning phase, senior management could see that the solution wasn't going to meet their long-term requirements. Fortunately, the mechanised solution didn’t occupy the entire warehouse, making it possible for me to provide an automated goods-to-person solution on the same site.

Developing a business case for a goods-to-person automated solution, the company gathered quotes to either move the zone–to-zone solution, redesign it or scrap it altogether.  It soon became clear that the mechanised system made it much harder for them to proceed with the automation they required, as the business had invested a large sum on now largely redundant equipment that occupied a prime position in the warehouse. Unless the mechanised system could become part of the fully automated solution, the company also faced the cost and embarrassment of scrapping the new installation.

While the mechanised system improved productivity from 50 to 150 order lines per hour per person, the automated goods-to-person system would deliver 500 order lines per hour per person. As a result, almost a third of the productivity gain that would have been realised in going from a manual to an automated operation was being delivered by the mechanised system. In a simple accounting approach this worsened the business case, extending the ROI of the desired automated system by an extra year. Because the mechanised system could not be incorporated in the automated solution, there was no reduction in the cost of the required automation.

The Kaizen Paradox is a common predicament for many businesses. Investments are made to achieve productivity gains, but in doing so they dilute the business case for a better investment, causing them to plateau at a lower level of productivity. Once organisations are aware of the potential for investments that create a Kaizen Paradox, they are better able to consider potential improvements as part of a bigger, longer-term picture.  If you would like to learn more about the Kaizen Paradox, please download our whitepaper, ‘The Kaizen Paradox: How Incremental Improvements Impede Innovation.’