There are often times when incremental improvements, within a continuous improvement framework, are not enough. Incremental improvement can leave assumptions unchallenged. You might find yourself improving something that belongs in the history books. It can hold back your organization, perhaps even stifle significant development. Not everything that exists could have been developed by continuous improvement alone.

“The electric light did not come from the continuous improvement of candles,” noted Oren Harari, a former author and business professor at the University of San Francisco.

Some of us recognized, earlier than others, that changes are coming — changes necessary to our continued business success. It’s what I often describe as “doing the right things — and doing things right.” It usually involves the introduction of new knowledge, new strategies, and new approaches. It is triggered by external factors such as market conditions or new technology — or pandemics.

We are in one of those times now, one of radical change — and not only because COVID-19 has turbo-charged us, accelerated the need (kicked us in the rear) for the adoption of different thinking as it relates to our business operations and technology adoption. 

Even before the pandemic, we were already on that journey, weren’t we? We were looking for “revolutionary things” that would provide higher productivity and customer-experience impact. And we developed and sharpened our change-management skills to focus on every node in a company’s value stream: labor, order fulfillment, optimal space needs, inside and outside sales processes, mining data, adjusting to the needs of e-commerce, etc.

Some companies are better than others in correctly identifying, internally, these innovation and change needs, but make the assumption they need to start small — yet the interim investment is meant to be part of something larger. The risk is the final product may end up as an unsuccessful attempt to make real changes. It’s often called the Kaizen Paradox, or the Improvement Paradox. In doing so, the business case can get diluted from what could have been a more productive investment, causing a plateau at a lower level of performance. 

So, our discussion here is not about innovation or process — it’s about both! As Jon Miller at the Gemba Academy writes: “But large, complex, holistic messages are not as easy to sell to the fad-driven management audiences as are the one-note sambas such as innovation, maverick or lean. So, we fragment the discussion and return to the bits we’ve missed at a later decade.”

Kaizen and Kaikaku

The Kaizen approach — a Japanese word meaning continuous improvement, an improvement over the current condition — goes back to the 1950s. Many companies, such as Toyota, flourished using the methods synonymous with the concept. The knowledge and continuous improvement practices soon spread around the globe to all kinds of companies, not just capital-intensive industries such as auto manufacturing or manufacturing in general. 

Kaizen reached into every conceivable type of company — distribution and service companies included.

So, this brings us to kaikaku, which means radical change or transformation. It implies a redesign of business processes that reaches across the organization — the entire value-stream. It fulfills the need for a more radical step change.

Let’s go back to our candle vs. light bulb analogy. “While kaizen improves upon the candle, kaikaku is the installation of electric light,” writes Paul Stringleman at Manufacturing.net.

So, let’s describe the paradox again; maybe it makes more sense now.

“Both kaizen and kaikaku are essential strategies,” Miller notes; they cannot succeed on their own. Although you must understand the tenets of kaizen as a series of short-term improvement success opportunities, the engagement of employees and a bias toward practical improvement, they may not align with the longer-term direction of the business to deliver bottom-line results.

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

The risk is a lack of re-imagining of what is possible through new technologies and new operational models. 

Where a kaikaku opportunity exists, the kaizen path weakens the potential kaikaku ROI, Stringleman notes; it can end up costing more, extending the pay-back time, and plateauing productivity at a lower level.

A Strategic Approach

For many companies, kaikaku investments are made before kaizen improvement. “Strategic improvement plans are more robust when they consider costs that could have been avoided,” Stringleman explains. These include the impact on buildings, land, equipment, labor, technology and the cost of service.

Even kaikaku may be achievable in phases if it is planned that way. Yes, it can be modular.

A more strategic approach such as kaikaku — optimizing ROI, avoiding plateauing and avoiding future costs — can protect an organization from focusing on low-performance operations.

Once organizations 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,” Stringleman writes.

Kaizen may even make it more difficult to take the leap to transformation. The ROI is now extended, a redesign is necessary and portions may need to be scrapped.

So, don’t get caught in the trap of halfway. You don’t want to just catch up or keep pace with competitors; instead, leap past them and take new ground!

Don’t allow radical change, kaikaku, to build real resistance to change.

So, as you lean forward on your journey, “Gambatte!” In English: “Do your best!”

If you have any questions along the way, we’re always happy to help.