# Kaizen: Understanding the Japanese Business Philosophy

![Kaizen](https://www.investopedia.com/thmb/X_mBQgIeX9fcGaEoyn499XqSTFY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/kaizen.asp-ADD-Source-51522de6c889423a87ae1b0bee396d22.jpg)

*— Investopedia / Alex Dos Diaz*

> **Definition**
>
> Kaizen is a Japanese business philosophy that aims to make small changes over time to drive ongoing improvement.

## What Is Kaizen?

The Japanese concept of kaizen encompasses a wide range of ideas. They include making the work environment more efficient by creating a team atmosphere, improving processes and procedures, ensuring [employee engagement](https://www.investopedia.com/terms/e/employee-engagement.asp), and making jobs more fulfilling, less tiring, and safer. Many companies around the world now practice kaizen in one form or another.

### Key Takeaways

*   Kaizen is a Japanese business philosophy.
*   Its goals include greater efficiency, higher quality, and less waste.
*   Kaizen is no longer confined to Japan.
*   The concept of kaizen is now practiced around the world, both in manufacturing and other sectors.

## Understanding Kaizen

The goal of kaizen is to make small changes over time to drive continuous improvement within a company. The kaizen process recognizes that small changes now can add up to huge impacts in the future.

Ultimately that can mean better [quality control](https://www.investopedia.com/terms/q/quality-control.asp), more efficient processes, and the elimination of waste, among other benefits.

Under kaizen, improvements can be initiated by any employee at any time. The philosophy is that everyone has a stake in the company's success and everyone should strive, at all times, to help make the business better.

Many companies around the world have adopted the kaizen concept. Most famously, the automaker [Toyota](https://www.investopedia.com/articles/markets/021416/how-toyota-makes-money-tm.asp) has long employed kaizen within its organization and describes it as one of its core values. To improve its production system, Toyota encourages and empowers all employees to identify areas of potential improvement and create viable solutions.

> **Fast Fact**
>
> Toyota's process of identifying solutions is called "kaizen blitz."

## How Does Kaizen Work? Key Principles

Kaizen is often broken down into a set of key principles.

For example, the Kaizen Institute, founded by Masaaki Imai, author of a 1986 book that helped popularize the term, lists them as:

*   Know your customer
*   Let it flow (eliminating waste, or non-value-adding activities, from the workflow)
*   Go to gemba (where things actually happen, such as the factory floor)
*   Empower people
*   Be transparent

Underlying kaizen is the recognition that the people who perform certain tasks and activities know the most about them. Empowering those people to effect change is the best strategy for improvement. Ideally, kaizen will become deeply ingrained in a [company's culture](https://www.investopedia.com/terms/c/corporate-culture.asp).

Kaizen posits that there is no perfect end and that everything can be improved upon, so people must strive to evolve and innovate constantly.

> **Important**
>
> Teamwork is core to kaizen, where regular team meetings involve discussions about possible improvements.

## What Are Some Benefits of Kaizen?

Kaizen offers companies many potential benefits. They include:

*   Increased productivity
*   Reduced waste
*   Better management of resources
*   Improved quality
*   Better safety
*   Lower costs
*   Greater customer satisfaction
*   Improved cooperation and communication
*   Higher employee satisfaction and morale

## Kaizen and the PDCA Cycle

The improvement process used in kaizen often follows the [PDCA cycle](https://www.investopedia.com/terms/p/pdca-cycle.asp) format, first developed in the U.S. in the 1920s. PDCA stands for Plan-Do-Check-Act.

The _Plan_ phase includes proposing and mapping out changes so that everyone knows what to expect when teams try to solve a problem.

The _Do_ stage implements whatever appears to be the best solution for the problem.

The _Check_ step involves evaluating the solution to the problem to see if it worked.

When a company _Acts_, it determines whether or not the solution should become a company standard or if it needs further changes. If managers decide to implement more changes, kaizen goes back to the _Plan_ step and the process starts over again.

## Just-in-Time Inventory Strategy

One of the key goals of the kaizen process is to reduce waste and increase efficiency in the production cycle. A [just-in-time (JIT)](https://www.investopedia.com/terms/j/jit.asp) inventory strategy allows management to minimize excess inventory by matching the delivery of raw materials from suppliers with production schedules.

The JIT strategy is part of the Toyota Production System (TPS), which is now used by numerous companies. JIT helps manufacturers save money by reducing [inventory carrying costs](https://www.investopedia.com/terms/c/carrying-costs.asp). It also reduces waste because companies are not left with extra inventory should a customer cancel or postpone an order.

Another Japanese innovation, [kanban](https://www.investopedia.com/terms/k/kanban.asp) is an inventory control system used in conjunction with a JIT strategy. It provides employees with visual cues that tell them when it is time to order parts and materials as they run out.

The system relies on colored cards that track production and alert employees when it's time to replenish a needed part or material. It enables employees to quickly order the correct number of parts from the supplier and have them delivered to where they are needed in the factory.

The goal of kanban is to ensure the efficient running of the factory assembly line and to prevent [bottlenecks](https://www.investopedia.com/terms/b/bottleneck.asp) from occurring.

## What Is the Kaizen Method, in Brief?

The Kaizen method is a set of guiding principles and tools that seek to involve all employees in gradual and continuous improvement throughout a company. As such, it is an ongoing process and one that never ends.

## What Is an Example of Kaizen?

Toyota is probably the most famous example of a company using kaizen to sustain its success. Another well-known example of kaizen in action involves the Ford Motor Company, which embraced kaizen to cut the time it took to complete various manufacturing processes. A non-manufacturing example would be [Fidelity Investments](https://www.investopedia.com/fidelity-review-4587897), which adopted the concept years ago to improve its customer service.

## What Is Kaizen 5S?

Kaizen 5S is a five-step process often used in [lean manufacturing](https://www.investopedia.com/terms/l/lean-enterprise.asp). The steps are: Sort, Set in Order, Shine, Standardize, and Sustain.

## What Is Six Sigma?

[Six Sigma](https://www.investopedia.com/terms/s/six-sigma.asp), like kaizen, is a methodology for improving business processes, reducing waste, and improving quality control. It was introduced by the U.S. manufacturer Motorola in 1986, around the same time that kaizen was gaining worldwide attention.

## The Bottom Line

Kaizen is both a philosophy and a practical system for facilitating continuous improvement in a company. From its beginnings in Japan, largely as a way to improve manufacturing processes, it has spread across the world and into many different types of industries.

> **Article Sources**
>
> 1.  Toyota. "[Toyota Production System](https://global.toyota/en/company/vision-and-philosophy/production-system/)."
>     
> 2.  Kaizen Institute. "[What Is Kaizen: Dive Into the Kaizen Methodology](https://www.kaizen.com/what-is-kaizen)."
>     
> 3.  Toyota. "[Muda, Muri, Mura – Toyota Production System Guide](https://mag.toyota.co.uk/muda-muri-mura-toyota-production-system/)."
>     
> 4.  Kaizen Consulting Group. "[Kaizen](https://www.kaizen.com.sg/kaizen/)."
>     
> 5.  Toyota. "[How Does Just-in-Time Production Work?](https://mag.toyota.co.uk/just-in-time/)"
>     
> 6.  JStor. "[Adventures of a Contrarian](https://www.jstor.org/stable/20013445?seq=1)."
>     
> 7.  United States Environmental Protection Agency. "[Lean Thinking and Methods – 5S](https://www.epa.gov/sustainability/lean-thinking-and-methods-5s)."