Monday Mornings with Madison

To Develop the Most Successful Business, Embrace Kaizen – Part 2

Word Count: 1,653
Estimated Read Time: 6 ½ min.

Change happens. Change happens in every business or organization, and those changes can either be controlled and guided by the company or are controlled from outside the company.   Of course, it is far better if the company is controlling the changes occurring whenever possible.  Therefore, businesses should not look at change as a negative to endure, but rather a positive to embrace. When a company chooses the changes it makes, and implements them according to their own best interests, it improves and grows the company.  In that way, change is a tool for improvement.

The Japanese word for ‘Improvement’ is Kaizen.  Kai means change and zen means good or better.  But, it actually translates roughly into ‘to break apart and investigate’ and ‘to improve upon the existing situation’.  At its core, the Kaizen philosophy believes that all things can be improved in small, incremental ways, and that tiny changes made today ripple out and have a profound long-term impact. The goal is make everything perform better or more efficiently by identifying waste, variation/ inconsistency and strain/ burden on people and machines.

Guiding principles include:

  1. Good processes bring good results.
  2. Go see for yourself to grasp the current situation.
  3. Speak with data, manage by facts.
  4. Take action to contain and correct root causes of problems.
  5. Work as a team.
  6. Kaizen is everybody’s business.

In Kaizen, big results come from many small changes accumulated over time.  But, it does not mean that kaizen equals small changes.  Kaizen actually means everyone is involved in making improvements. The greatest impact come from big Kaizen events led by senior management as transformational projects or by cross-functional teams.

The Impact of Kaizen on Various Business Sectors

In the last MMWM, we looked at how Kaizen was adopted by Toyota.  The Kaizen concept, however, has since been used in a variety of businesses across many industries as diverse as banking, healthcare and logistics.  Each company experienced a significant increase in success as defined by a variety of measures.

Case Study 1 – Great Western Bank, Finance Industry

As businesses in many industries try to remain competitive and profitable, they have sought to streamline operations.  Great Western Bank was no exception.  After the financial crisis of 2008-2009, banks were struggling to survive.  Great Western decided to implement the Kaizen approach in banking.[1] They became involved in Kaizen through their parent company, National Australia Bank Ltd., which had already implemented the Kaizen philosophy for several years.

“The misnomer about Kaizen is that it’s about cutting costs,” said Ken Karels, who became Great Western’s President CEO starting in 2010 and is currently Chairman of the Board.  “But actually it’s about providing better service to our customers.  Kaizen is really about simplicity,” he said. “How do you make it simpler to do business with us? Where do we confuse the customer?  Where do we make the customer duplicate efforts?  Where are we asking unnecessary questions?”[2]

Those were the kinds of questions to ask.  In the case of Great Western Bank, it used to take 34 steps for a customer to open a checking account. After implementing Kaizen, they reduced it to 24 steps.  That is a nearly 30% reduction in the process.  The company pulled apart the process, analyzing each action and evaluating what to change. Banking is a highly regulated industry, so there’s always a reason to add steps.  But, when Great Western focused on the steps the customer cared about, they realized how many steps were not only unnecessary but also added to both cost and time.  “By improving our process, we provide better service at a lower cost,” Karels said.[3]

Case Study 2 – Herman Miller, Furniture Creator

Herman Miller is an American office furniture company best known for producing the Aeron chair, one of the most well-known task chairs in the world.  Seen in movies, television shows, and commercial offices everywhere, Herman Miller was hoping to bring down costs in order to stay competitive across the world.  To do that, they decided to pursue a Kaizen approach to manufacturing furniture in 1998.

Their EVP of Operations, Ken Goodson, talked Toyota into making Herman Miller one of the first American companies in their pilot program to learn Japanese manufacturing techniques.[4] Toyota sent Hajime Oba, a legendary manufacturing genius, to be their Sensai or coach.  Like most Kaizen changes, the improvements were tiny.  At Herman Miller, adjustments included something as minute as the placement of a bin of washers a mere six inches closer so the employee needed to move a bit less to reach for one.  It involved changing the height of the assembly line so that people would have to bend over, losing a fraction of a second.  Kaizen pushed the company to embrace the beauty of ergonomics.

Those changes added up, but that’s not what had the biggest impact.  The key was that the individual employees on the assembly line were ones suggesting the improvements.  Employees at Herman Miller were to encouraged to make changes.  And they did.  They averaged 1,200 “plan-do-check acts” every year – tiny changes to the assembly process. Under Oba’s tutelage, they realized that the biggest thing was to empower people to change the work in ways that mattered to them,” said Eric VanDam, Herman Miller’s director of operations in seating.[5]

Thanks to this approach of trying to make tiny improvements to every part of the process, the company experienced a 500% increase in productivity and 1,000% increase in quality by 2012.  The Aeron chairs, which used to take 82 seconds to produce, were manufactured in just 17 seconds after the improvements made through their Kaizen approach.  Those improvements resulted in direct gain to the bottom line without costing the company anything except the time it takes staff to discuss and implement the changes.

Case Study 3 – Lockheed Martin, Aero Space Technology

Headquartered in Bethesda, MD, Lockheed Martin is a global security and aerospace company that employs approximately 100,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.  In the last year, Lockheed Martin has received three Edison Awards for ground-breaking innovations in autonomy, satellite technology and directed energy.

But, the company is also known as a dedicated proponent of Kaizen. Lockheed Martin was selected as one Industry Week’s “Top 10 Plants” in 1998.  And, in 2000, using the application of Kaizen methodologies to further implement lean manufacturing, the plant was awarded the Shingo Prize for Excellence in Manufacturing.[6]

Improvements over the last two decades include:

  • A 38% reduction in manufacturing costs, despite volume reductions
  • A 50% inventory reduction
  • Reduction in “Order-to-delivery” time from 42 months to 21.5 months
  • Reduction in the time to move parts from receiving to stock from 30 days to four hours

Case Study 4 – Mayo Clinic, Healthcare Leader

Most would agree that healthcare is about as far away as a industry can be from automobile manufacturing.  Hospitals don’t manufacture or make anything.  But, the leadership at the Mayo Clinic believed that if a company like Toyota could use Kaizen, they could do it as well by adapting the philosophy to health care.

 

In their view, they saw innumerable advances in medicine and technology over the last half century, while the health care system continued to perform far below acceptable levels in the areas of ensuring patient safety and addressing patient needs.  The publication To Err is Human from the Institute of Medicine galvanized the need for change when it brought to light that medical errors caused 44,000 to 98,000 deaths annually.  The abyss between what physicians knew should be done for patients and what was actually being done accounted for more than $9 billion per year in lost productivity and nearly $2 billion per year in hospital costs.[7]

Despite a complex medical environment, physicians still relied primarily on paper tools, memory, and hard work to improve the care given to patients.  Creation of reliable and sustained improvement in health care was difficult, however, when using traditional methods.  Improvement required deliberate redesign of processes based on knowledge of human factors –how people interact with products and processes — and tools known to assist improvement.  There was a clear ethical imperative to enhance the quality and safety of care and meet external accreditation requirements and consumer expectations.  They needed physicians to address quality-of-care issues systematically.  They saw that they many moving parts of the healthcare system could benefit from Kaizen, including methods, waiting times, handling of patient records and the best use of resources.

Mayo Clinic used Kaizen to improve quality in[8]:

  • Outcomes achieved such as mortality rates and surgical infections
  • Compliance with evidence-based processes known to enhance care
  • Volume of patients with complex diagnoses and procedures successfully treated
  • The safety record of the institution
  • The amount of time spent with each patient
  • Making sure each patient is treated with respect, kindness and dignity by every member of the Mayo team
  • Making sure appointments are on time
  • Ensuring all test results and other patient information are available to every doctor whenever they are needed

Mayo Clinic strives to be in the top 10 percent of performance for all quality measures.

Ultimately, Kaizen says let us not be satisfied to stay as we are.  In any business or organization, we should always be grateful for what we have and what we have accomplished but not complacent or smug.  Instead, strive always to be better and do more.  It is in careful, thoughtful and deliberate change that we find growth and excellence.

Quote of the Week

“Conformity is the jailer of freedom and the enemy of growth.” U.S. President John F. Kennedy

 


[1] Fall, 2013, Actually top executives at Ford say TQM was a light bulb idea from Henry Ford, Course Hero, University of Notre Dame, https://www.coursehero.com/file/p2siuhd/Actually-top-executives-at-Ford-say-TQM-was-a-light-bulb-idea-from-Henry-Ford/

[2] Ibid

[3] Ibid

[5] Ibid

[6] June 18, 2017, Global Six Sigma Blog, Military Aircraft Company Lockheed Martin Uses Kaizen, https://6sigma.com/military-aircraft-company-lockheed-martin-uses-kaizen/

[8] About Mayo Clinic, Quality and the Mayo Clinic, https://www.mayoclinic.org/about-mayo-clinic/quality/quality-measures

 

© 2018, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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