Kaizen, The Japanese Art of Continuous Improvement
It seems I've been thinking a lot lately about my time in Japan. Usually it comes about when I'm thinking about technology or gadgets. But lately, I've been reflecting a bit more on Japanese culture and specifically the culture of the workplace.
In the early 1980s, Japanese business was the dominant global player, easily trouncing the US and its western brethren on profits and efficiency. The seemingly impossible advances and pace set by the Japanese automotive industry and electronics manufacturers became the blueprint that many companies tried desperately to duplicate.
In fact, many modern practices in business find their roots during this period of business growth and change. During our current period of economic difficulty, business uncertainty, and low employee morale, I've been thinking about one practice in particular:
kaizen (改善) - Japanese for improvement; comes from the words kai, meaning to change or break and zen, meaning good or better Kaizen is a system of employee-driven suggestions to improve every aspect of the business. But even this definition falls short. Kaizen is a state of mind, it is ingrained in Japanese business culture. It asserts that all employees are responsible for the quality and profitability of a company. Masaaki Imai is known as the father of Continuous Improvement (CI) in the workplace and recognized as the inventor of kaizen. This practice of employee suggestions dates back much further though, when in 1721 the shogun Yoshimuni Tokugawa issued the following proclamation: "Make your idea known. Rewards are given for those that are accepted."
Focus on the word "accepted." In the West, we tend to reward ideas that are "implemented." In Japan, merely making a suggestion is met with a reward, albeit a very small financial one (something like $5 per idea). A large reason why suggestion programs tend to fail or are ineffective is this emphasis only on ideas that are implemented. Management has the most significant impact on whether an idea is actually implemented, and yet the individual employee only gets recognized (rewarded) if Management actually does something with the idea. Pretty soon, you train the employee to not bother.
Yes, yes, we can talk about establishing programs that empower the employee to take action, but that will be the subject for another article. I leave it for now with the assertion that such an approach is all well and good, but it has to start from the top, from defining the system, allocating the budget and time, and actively engaging in the program. This is one instance where "delegating" or "empowering" downwards is a bit of a cop out.
The National Association of Suggestion Systems (NASS), now known as the Employee Involvement Association (EIA), reports that the average employee suggestion returns about $7000 to the company in profit or savings. In the US, the implementation rate for employee suggestions is about 35%. In Japan that number is more than 70%. The total savings/earnings for companies and state agencies which have employee suggestion programs is in the billions. That's billions with a "b." Yet only 3% of companies in the US even have a suggestion program. Successful and sustainable ones are a fraction of that.
There are many spectacular stories of employee suggestions--American Airlines bought a Boeing 757 from the $55M in savings its annual IdeAAs in Flight program delivered--but thinking small in this instance has another positive effect...it creates access. From the Managing Director all the way down to the housekeeping and maintenance staff, anyone can submit an idea. A Managing Director may not be bothered with $5, but a janitor will submit tons of ideas if it means it'll pay for lunch. Shoot, I'd submit an idea every single day!
Consider what just a few of the following ideas might save your company:
- switch to mugs instead of disposable coffee cups
- change to long-life lightbulbs
- change printer defaults to double-sided printing
- meeting moratorium Fridays
- onsite car wash (vaccinations, oil change, etc)
- workplace dry cleaning and laundry delivery services
- onsite child daycare
Do any of these ideas directly impact your product or service? Probably not. But ask your COO or CFO if they care about their impact on operating margins (they will). Also consider that these handful of suggestions alone mean employees can focus on their work instead, which does impact your product or service. It also instills a culture that every employee has a chance to make a difference and it encourages creativity, which will translate in the way your employees approach their work.
Estimating the impact of such a program on morale and employee retention is extremely tricky and not likely to convince Management on the value of the program. So let's say such a program retains just one employee. One single employee. I don't think you're asking anyone to make too much of a mental leap in accepting that this sort of program could save one employee. Estimating very conservatively, the cost of interviewing, hiring, and training an employee would easily be $50,000. For $50,000, you could fund 10,000 ideas (at $5 each). If ideas average about $7000 back to the company, that's an additional $70,000. That's already $120,000 right there.
Here's my proposal, start an employee suggestion program at $5 an idea. Reward implemented ideas with an additional 0.5% of the total return back to the originating employee. Don't be greedy, give a half percent back to the employee. You'd rather have 100% of 0? (that's still zero) Or would you rather have 99.5% of the more than $2B which came from employee suggestions last year? (that's still $1.99B).
For more reading on kaizen, check out these presentations:
--- This post was inspired by an article forwarded to me by one of my team members. Thanks for jogging my memory, K.
Proteus Part Three: 3rd Party Content and Services
Be sure to read Proteus Part One and Proteus Part Two. Last time I wrote about the eBay Commerce Engine pushing content and services from the eBay Inc. family. The value of the ecosystem grows further when you start inviting third party apps and services back in.
Here's the beauty...plug any of these apps or services once into The Cloud and EVERY eBay Inc. property plugged in has instant access.
eBay Motors starts offering CarFAX and Experian reports? Now so can Mobile.de, Bilbasen, and Marktplaats Autos (contracts pending, of course). Muze can now provide music catalog content for all eBay Classifieds media categories. UPS pickup and ship services are available for all Sellers no matter what eBay Inc. site you're on.
Don't need it? Don't use it. Simple.
Cloud Services can even help orchestrate long-latency service providers so you don't endanger each platform's SLA requirements. Asynchronous I/O makes The Cloud do all the work so each platform doesn't consume resources waiting for a response from the service provider.
---
P.S. Remember that "The Cloud" is my own poorly-chosen name for distributed computing that manages services federation and content syndication. Other low-level infrastructure components can also run in The Cloud so each eBay property can offload that work. Before you uber-Architects flay me for technical imprecision, I'm trying to explain this as simply as possible to my non-techie audience. Proteus Part Two: The eBay Digital Commerce Card
If you haven't read it, be sure to check out Proteus Part One. Imagine a device with the following features:- credit card sized
- embedded RSA ID security
- magnetic code stripe
- RFID token
- WiFi
- SIM slot
- LCD screen
- external speakers
- camera
Now imagine that device uses the eBay Commerce Engine to do the following:
- Find nearby items on my shopping list
- Snap barcode picture and quick purchase
- Process credit cards on the go
- Mobile pay with PayPal
- Sell my car using the license plate
- Watch the eBay Shopping Channel (and YouTube videos)
But, Serge, couldn't we just create an iPhone app to do all this? Sure. You'll build that iPhone app too. But launching an iPhone app for eBay will get about as much attention as MC Hammer's last album. How many of you--who don't work for Kijiji--know there's a Kijiji app? Search through any of the first 3 pages of Google/Bing/Yahoo search results for "top iPhone apps" and you won't find eBay's iPhone app in any of those lists except for one...148apps...and eBay's iPhone app is #135 (out of 148). PayPal doesn't make any of the lists.
I don't say this with any disrespect. These are all great apps. In fact, most people who use them really love them (myself included). But it doesn't matter how great your app is if no one knows about it.
Why did Amazon launch the Kindle? It contributes less than 3% of its total revenue according to Amazon's Q309 earnings report. Does Amazon want to get into the consumer electronics biz? Maybe, but I doubt it. Kindle is there to remind people that Amazon is a good business. That it anticipates the needs of its customer. That it is creative. The Kindle is there to enhance Amazon's media and electronics business, which does contribute over 80% of its revenue.
That's why eBay should build the eBay Digital Commerce Card. The point of the device is a launching vehicle for the eBay Commerce Engine. It demonstrates what the eBay Commerce Engine is capable of delivering. It changes perceptions on what eBay is and what eBay could be. It associates all the shopping activites a person does in real-life with the eBay Inc. brand and its properties.
The eBay Digital Commerce Card opens the door to push eBay Commerce Engine services to cell phones, airplane in-flight entertainment systems, shopping cart LCDs, digital billboard, your cable TV box, and so on and so on. Wherever there is commerce, eBay is there.
I'm not suggesting eBay should get into the electronics game. This is a promo. Limited-time only. You sell it at cost or at a loss. Shoot for $50, but no more than $100. Set aside 10,000 of them and send them to the top Power Buyers, Power Sellers, Tech Bloggers, and iPhone/Android/Facebook Developers. Then stand back and watch. The media attention alone will be worth it.
Don't want to build it? Fine, release the blueprints and provide a DIY toolkit. Partner with the component manufacturers and embed eBay services on the core chip. Will people hack it? Sure. But you only need enough to use it as its intended for it to serve its purpose. Do you really think Apple couldn't make its iPhone hack-proof or at least much more difficult to hack? Sure they could. They don't need or want to because it keeps the iPhone hot. It keeps them relevant. It lets Apple keep its exclusive deal with AT&T while not really locking-in the device.
The crazy part? You don't even have to have any intention to actually build the eBay Digital Commerce Card and it will still benefit you. What is the most talked about gadget in the past 3 years? The mythical Apple iTablet. It has dominated chat boards and fanboy forums for years. Apple has no official position. Last month, Microsoft's Courier concept leaked. In one swoop it dominated the news and set the bar for the iTablet, effectively displacing the iTablet as the next must-have item.
Now consider this...neither product actually exists.
This isn't science fiction. This isn't something that is 5 years away. There are products and prototypes on the market that already do some of these things.
This prototype is currently being shopped around by its designer.
Visa is experimenting with a smarter credit card.
These are being offered at a price between $17.50 - $35.00 per unit.
Of course, my concept goes much further so it will cost a bit more. But not as much as you think. Especially when you consider that eBay shouldn't try to make money off the product itself. I am guessing quite a bit here, but I would venture that you could find a manufacturer in China to put one together for you for less than $2M. Most of that money is going to be spent trying to find out how to put the right commodity components together to reach that $50-$100 price point. It starts setting up the right manufacturing equipment and supply chains to get it going. Yes, yes, you'll need to think about a sales force, customer support, returns, and so on. Put another $2M on it. That's about a minute of Super Bowl commercial air time. eBay generated $2.3B in free cash flow last quarter. I think it can manage.
Read more at Proteus Part Three. 