The Catch-22 of #Lean & Kaizen: You Get More ROI by NOT Focusing Only on High-ROI Projects

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This post builds off of a little rant I went on over on LinkedIn. I wrote:

The Catch-22 of “Lean” training and “implementation”…

Executives want big returns and high ROI. That's understandable.

But, at the core of Lean, if you're going to call it that, is “#Kaizen,” which means allowing everybody to do small improvements even if there isn't big ROI.

Encouraging people to make small, simple improvements focused on making their work easier unleashes a huge number of improvements and, guess what, some will end up having a big ROI. The executives would be surprised. Plus, the cumulative effect of many small ideas is larger than what you get from demanding a few high-impact ideas.

The counterintuitive thing is that you get *better* results by not demanding a huge ROI for each improvement or project. Studies have consistently shown that 80% of an organization's improvement potential comes from the small stuff. Yet, executives are ignorant to that truth or choose to ignore it.

You can, of course, choose to focus on big projects that you think will have big ROI. But call your approach “improvement projects,” not #Lean.

Here's a Toyota article on Kaizen. They don't talk about ROI.

“Within the Toyota Production System, Kaizen humanises the workplace, empowering individual members to identify areas for improvement and suggest practical solutions. The focused activity surrounding this solution is often referred to as a kaizen blitz, while it is the responsibility of each member to adopt the improved standardised procedure and eliminate waste from within the local environment.”

Quite a contrast to a hospital executive team telling people to only focus on high-ROI projects.

You can hear Alan Robinson talk about the “80%” finding that they uncovered in this podcast, where he talks about his latest book, The Idea-Driven Organization.

Podcast #217 – Alan Robinson, The Idea-Driven Organization


And Joe Swartz and I, of course, wrote about this in our Healthcare Kaizen books.

Here is a perspective from Kaizen Institute:

“Deming was basically saying, “go ahead, compute an ROI for your Continuous Improvement projects and for your client's projects, but it won't matter too much because it will be greatly underestimated and this must be realized.”  Dr. Toyoda supported this as he said Deming and his beliefs are the core of Toyota's management ….  not an ROI analysis.”

It's frustrating that hospital executives will call for “evidence-based medicine,” but then so blindly ignore “evidence-based leadership” (credit to Studer Group for that phrase).

This large-ROI approach should be called “project-based improvement attempts” instead of Lean.

Of course, it's not just hospital executives who make this mistake of ignoring the potential of many many small improvements.

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Mark Graban is an internationally-recognized consultant, author, and professional speaker who has worked in healthcare, manufacturing, and startups. His latest book is Measures of Success: React Less, Lead Better, Improve More. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. He also published the anthology Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also a Senior Advisor to the technology company KaiNexus.

5 Comments
  1. Mark Graban says

    The original LinkedIn rant if you want to comment there:

  2. Mark Graban says

    Andre De Merchant (former Toyota Canada):

    The Toyota that I spent 16 years with had a major focus on small improvements, incremental kaizen, that were typically of ‘small-dollar’ benefit. This was deemed to be—and has proven to be—more sustainable for the longer term than just the focus on large ROI gains. The reality is that unless you are a greenfield operation in its first 3 years of operation, there is unlikely to be a plethora of big eurekas out there waiting to be harvested. Also, having ALL of your staff complete multiple small improvements over the course of a year inevitably ended up with two benefits: one, it ferreted out waste that would be task-specific and unlikely to be uncovered in a large improvement event, thus allowing for legacy benefit to be realized every time that task or process was executed and, two, hundreds upon hundreds of small improvements always added up financially to a greater sum than the larger events.

  3. Mark Graban says

    Tracy Richardson (former Toyota Kentucky):

    Mark From day 1 Ernie and I were conditioned by our trainers at all levels to look for the “base hits” each day or (small celebrations as some may say). Collective base hits, increases the batting average of the individual and the team. If finish the baseball analogy. Teams that win the world series work together to minimize errors (waste) and this sets them up for the occasional “homerun” which we got from ideas quite often but it wasnt the MAIN focus. As Ive written about many times, saving a collective 1 second across all processes in the plant can allow us to make 8 more Camry or Avalon in the same amount of time there fore increasing productivity without manpower. Just a second ;). Find it! Doesnt get any smaller than that unless its a Nascar ran finish at the line !!

  4. Andy Wagner says

    I had an interesting conversation with a Theory of Constraints disciple about a similar theme a few years ago. He was pointing out how useless it was to do process improvement in areas that are not *the one* bottleneck of the factory.
    And of course, I took issue with it. After a bit of discussion, I recall he finally conceded when I pointed out that as constraints moved through the factory, it was always useful to have a team trained and ready to respond to them. And this, of course, is what lean does. It creates the fundamental problem solving skills *throughout* the operations to respond to short-term disruptions that might introduce temporary bottlenecks as well as the long-term systemic bottlenecks.

  5. Jess Orr says

    This is consistent with my experience at Toyota. When I was interviewing at another company, I told them about how an A3 that I facilitated reduced the top supplier-related parts defect at the plant by over 75%. The interviewer asked how much cost savings that translated to, and I had no idea, although I estimate it’s in the hundreds of thousands of dollars range. In my entire time working in Quality Engineering at Toyota, cost savings was never mentioned. The primary metric was DPV (defects per vehicle) which drove our focus on protecting our customers and delivering high quality vehicles. Great post!

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