Kaizen & Abracadabra Innovation

 

There are more things in heaven & earth, Horatio, than are dreamt of in your philosophy.

There are two kinds of innovation: incremental improvement (aka Kaizen) and ‘create-something-new-seemingly-out-of-nothing – ‘Abracadabra’. Both are magic and essential to sustained prosperity. Our challenge is to understand the very different methods & mindsets that underlie them. Indeed, this is an essential leadership skill, and the basis for what I call ambidexterity.

Kaizen is Like Compound Interest

Kaizen is magic the way compound interest is magic.  Imagine we’re able to engage all team members in finding & implementing small improvements that contribute 1% per month for an entire year. Where are we at year-end?[1]

Doing Nothing: Year End = (1 + 0.00)¹²  = 1     

Kaizen (1% per month): Year End = (1 + 0.01)¹² = 1.127    

At year-end we’re 12.7% better than if we had done nothing.

Now imagine we sustain this for then years.

Kaizen (12.7% per month): Year End = (1 + 0.127)¹⁰ = 3.30

After ten years, we’re better by 330%

An astonishing result, no? As with compound interest, benefits compound. Skill builds upon skill, confidence & teamwork build upon the same. The power of Kaizen blew me away. When you’ve lived it, you never forget it. I remember looking around our Toyota factory, seeing the intense focus and continuous improvement, and feeling sorry for our competitors. And our competitors were smart, capable & hardworking.  But they had yet to discover and apply the power of Kaizen.

There is a rich literature describing Kaizen culture, and more importantly, its blockers. Let me add that the long latency period is an insidious blocker. Like compound interest, incremental improvements are invisible in the short term.  ‘We had a 1% improvement last month – ho hum…’  And so, most Kaizen efforts run out of gas, or more common, we get a new leader who doesn’t understand or care about Kaizen.

Perhaps the most famous practitioner of the 1% improvement principle is Tom Brady, who turned continuous incremental gains into massive competitive moats.

Creating Something Out of Nothing is a Different Kind of Magic

People love ‘Abracadabra’ innovation – creating something new (seemingly) out of thin air. Innovation masters like Steve Jobs are akin to magicians. Nothing up my sleeve, he tells us, and then Presto! - an iPhone or iPad appear.

At first I confess I was suspicious. Apple quality is not so hot, I muttered to myself, missing the magic. In an odd way, my kaizen experience was a blocker! Then I went to Singapore and began the next phase in my apprenticeship. I learned that Kaizen was necessary – but not sufficient. 

Creating something new out of nothing is the key to igniting new Growth. So-called 'exponential' technologies, of which AI is the latest & likely most powerful, expand our ability to innovate, but the underlying mindsets & methods are essentially unchanged. How do these differ from those of Kaizen? Are there any synergies?  Do you need both types of innovation? If so, what’s the leader’s role in developing them? Stay tuned. 

Best wishes,

Pascal Dennis         E: pascal.dennis@leansystems.org

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