Unlock the Power of 1% With Continuous Improvement Strategy

Want a 38x improvement in the next year? Who doesn’t?

Businesses across the globe have long considered continuous improvement as a way to achieve operational excellence, but it can be more than that.

A continuous improvement strategy can be an overarching strategy to achieve a competitive edge as well as overall team alignment, performance, and satisfaction.

While humans, and as a result businesses, tend to focus on achieving big goals and rapid success, small incremental progress often goes unnoticed and is discounted. But as financial experts will tell you, the power of compound interest could be claimed as the eighth wonder of the world.

What if just a 1% consistent improvement over time could result in driving sustainable growth and both employee and customer satisfaction?

What is a continuous improvement strategy?

James Clear made the continuous improvement strategy popular with his book “Atomic Habits,” which featured the image below explaining the 1% rule; 1% better every day results in a whopping 38x improvement over a year.

The power of tiny gains

Source: JamesClear

The true source of the continuous improvement strategy, however, actually stems from the philosophy of Kaizen. 

Kaizen, a term coined from two Japanese words, “Kai,” meaning change, and “Zen,” which translates to good, is a philosophy that stems from the belief that life should perpetually advance towards greater satisfaction and fulfillment. Small, daily improvements can lead to substantial changes over time.

Kaizen holds significant relevance beyond personal development — the same concept can be applied to business. And we’re not just talking about traditional Japanese companies such as Toyota. 

Spotify: a Kaizen case in point

Spotify is the largest and most popular audio streaming subscription service in the world, with an estimated 286 million users; it is famous not just for its product but for its Spotify Squad Framework.

When it started in 2006, just like many other startups, it used the scrum methodology to manage its projects. As the company experienced exponential growth, it onboarded more people and had to adapt to new conditions while maintaining the agile culture it was known for.

Enter the Spotify model, a blueprint for organizational agility created from the company’s own ethos, values, and structural DNA, designed to keep the wheels of innovation churning. 

The model wasn’t just a set of guidelines; it was Spotify’s manifesto for fostering an environment where cross-collaboration wasn’t just encouraged. With its unique concoction of squads, tribes, chapters, and guilds, the model might seem like a labyrinth at first glance. However, each component was a cog in a well-oiled machine engineered to streamline processes and catalyze innovation.

Ironically, while Spotify doesn’t use the Spotify model anymore, it has kept certain principles to continue to inspire positive growth, seeking to improve and avoiding future failures by learning from past mistakes.

Spotify aims to fail fast and learn faster by considering each failure as an opportunity to learn and validate their learning.

Want to implement it? Don’t get lost in trying to create scrums and tribes and teams. Instead, focus on the principles:

  • Autonomy. Teams are given a high degree of independence to manage their work.
  • Alignment. Teams are organized to ensure alignment and collaboration across the organization.
  • Transparency. Information is shared openly, promoting visibility and knowledge sharing.
  • Experimentation. Teams are encouraged to experiment, take risks, share knowledge, and learn from their experiences.

Why does 1% compound interest matter in business?

We often praise people for giving 100% or 110% to their pursuits or companies, so why would anyone feel encouraged to aim for 1%?

The simple answer is that 1% over time is what creates the opportunity to win. And in a world where the winner takes all, this is of paramount importance.

“The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest.”

James Clear

Do you remember who came second in any Olympic sport over the past two decades? No, you wouldn’t. And yet, even if you aren’t an avid sports fan, you can probably name a couple of winners. 

If one company builds a more innovative product and has an edge in marketing, naturally, folks flock to buy it. The more money they make, the more they can invest in hiring top talent. Provided the company avoids failures, the more they’re immune to competition. It becomes a flywheel for growth. 

Being just a smidge better than the rest can mean hitting the jackpot because, in this game, the top dog gets the biggest bone. So it’s not just about the 1% compound interest; it’s about how those little gains keep you ahead of the pack, dominating the field.

The winner takes all!

The unconsidered benefits of continuous improvement

Apart from the obvious benefit of continued growth that comes from consistently improved processes, there are a host of unexpected benefits of incremental progression, including individual empowerment and resilience. 

For the most part, individuals are naturally reward-oriented and will seek out gain when embarking on a particular activity; when no reward can be seen, the individual ceases to act. In achieving small gains, the individual remains empowered and incentivized to keep performing. 

It’s a transformative mindset shift, as shared in The Gap and The Gain by Dan Sullivan and Dr. Benjamin Hardy, from focusing on “the Gap” — the shortfall between one’s current position and one’s aspirations, which breeds dissatisfaction — to appreciating “the Gain,” which emphasizes recognizing and valuing progress made from the starting point.

Perhaps one of the most critical yet overlooked benefits is the resilience that comes from the ability to adapt and evolve. Having a strategy of continuous improvement makes agility a default setting for organizations, enabling them to navigate uncertainties and bounce back stronger from setbacks, be more resilient, and be future focused.

While these seemingly soft skills may seem inconsequential, they have an extraordinary effect on the bottom line. 

Instead of thinking of empowerment and resilience as merits of a powerful continuous improvement strategy, it helps to frame it as a growth flywheel. 

The unconsidered benefits of a continuous improvement strategy

Source: Whale

The more individuals focus on the wins, the more empowered they become. The more failures are viewed as stepping stones to success, the more empowered employees are likely to contribute innovative ideas that can lead to breakthrough improvements.

In a culture of continuous improvement, these ideas are not only welcomed but actively sought.

This creates a flywheel for growth, resulting in:

  • Cost-effective change
  • Increased efficiency and productivity
  • Continuous skill development
  • Improved employee engagement and relationships
  • Improved customer satisfaction

In short, the continuous improvement strategy essentially promotes betterment that, at a certain point in time, is designed to result in the winner-takes-all effect. 

How to reverse engineer your continuous improvement strategy

After reading this, you probably think everyone should do it. But how do you sign up, and more importantly, how do you create a continuous improvement strategy?

The most logical step we tend to take is to imagine the ideal future and plan on steps. 

This is easy to understand. For example, Company X aims to earn 1 million dollars in revenue by a set date for the launch of a specific product. So, they set about understanding their customers and competition, offering clients value, and measuring progress along the way. 

This is indeed valuable, but what if, in conjunction, the same company conducted a failure “premortem” as a way to assure their success and even reverse engineer it?

According to a Harvard Business Review article, “Unlike a typical critiquing session, in which project team members are asked what might go wrong, the premortem operates on the assumption that the ‘patient’ has died, and so asks what did go wrong?”

Can you imagine the exponential growth in not only improving what’s working but also avoiding what isn’t? In a fully digital world, what would be the impact on your people, process, and technology?

Instead of focusing on the goal, it involves devising the process needed to reach it. In the realm of things like software development, this ability to anticipate challenges and address them preemptively is paramount.

When creating a continuous improvement strategy, it’s as vital to consider activities to avoid as it is to focus on the activities that must be taken to achieve success.

However, you won’t be able to conduct a successful premortem unless team members feel safe enough to express their honest thoughts. Psychological safety and transparency are key in discussing potential failures and ensuring success. 

The four stages of habit formation in business

Often, people wait for motivation when they need to focus on a plan of action. Instead of waiting for motivation, focusing on building consistent habits is helpful. This matters in personal development, but why should it matter in business?

Well, what is a continuous improvement strategy but essentially a process of developing new habits consistently? 

If you’re truly trying to enhance the efficiency of this strategy in your organization, then it helps to understand the four stages of personal habit formation: noticing, wanting, doing, and liking, as well as how they relate to business.

Remember that time you noticed that you couldn’t walk up the stairs without gasping for air? This is what’s called noticing in personal habit formation. This observation may have led to a desire to get into shape (wanting). Maybe you even got as far as taking that ever-feared first trip to the gym (doing)? You may even have felt good enough to keep up the habit (liking) because you started to feel good about yourself.

Pretty simple to understand how to leverage this for that 1% improvement in your personal fitness levels. So, how does it work in business?

The 4 stages of continuous improvement process

Source: Whale

1. Planning

Planning is not just about identifying goals; it’s about being aware of the need for continuous improvement and pinpointing specific areas for growth. This includes:

  • Conducting the above premortem exercise.
  • Encouraging open communication and feedback to uncover insights and challenges that may not be immediately visible to the management team.
  • Conducting regular SWOT analyses to identify areas for improvement.
  • Staying informed about industry trends and competitor strategies to anticipate changes.

2. Executing

In the cycle of habit formation, wanting provides the motivation or desire to change. In a business context, this means not only initiating action but also maintaining momentum. This means:

  • Setting clear, measurable goals and benchmarks to maintain focus and direction.
  • Ensuring that resources (time, workforce, budget) are allocated efficiently.
  • Fostering a culture of accountability where team members are responsible for specific tasks and outcomes and motivating them to commit to the execution process.

3. Reviewing

When you feel good after working out, you’re likely to repeat the habit, right? Same thing in business. Reviewing is about critically assessing the effectiveness of actions completed, for example:

  • Implementing regular review meetings to assess progress toward OKRs and goals.
  • Using data and analytics to measure performance objectively.
  • Encouraging a culture of transparency and honesty in feedback to facilitate effective problem solving.

4. Refining

You’re more likely to refine and update your way of working when you can see the results demonstrated in reviewing, whether to improve or learn from mistakes. This means:

  • Celebrating successes to motivate teams and reinforce the value of the continuous improvement process.
  • Learning from failures or shortcomings without assigning blame, using these as opportunities to strengthen future planning and execution.

Continuous improvement methods

Typical methods of continuous improvement include Kanban, Lean, Agile, and Six Sigma, and the particular path of choice will depend on your specific set of organizational circumstances. 

  • Kanban, with its visually driven approach, empowers teams to manage work with unparalleled clarity. 
  • Lean methodology strips away the unnecessary, focusing on value creation through the lens of the customer. 
  • Agile, the dynamic and flexible strategy, enables companies like Lego to adapt and thrive in the face of change. 
  • Six Sigma is a meticulous, data-driven approach, which is all about minimizing defects and maximizing quality. 

How do you like your steak or veggies done? There’s no right or wrong. The same goes for choosing a specific method. The effectiveness of each methodology hinges on the size of your team, your organization’s culture, the specific challenges you face, and your strategic objectives. Some companies even blend elements to create a hybrid approach tailored to their unique circumstances. 

What we can say is that each of these methodologies has at its core data-driven decision-making, continuous skills development, a culture of communication and feedback, and the obsessive pursuit of activities that demonstrate results. 

Ultimately, the “best” methodology is one that aligns with your goals and can be effectively implemented within your organizational context.

Considerations for continuous improvement implementation 

Businesses may need to consider additional factors when implementing a continuous improvement strategy. 

Leadership and culture

The days of doing what I say, not as I do, died with General Motors.

In case you weren’t aware, General Motors resulted in one of history’s largest bankruptcies. Failure to innovate and blatantly ignoring competition played a major role. As they focused predominantly on profiting from finance, the business neglected to improve its product, failed to adapt to customer needs, and did not invest in new technologies.

One has to wonder whether it was as simple a matter of lack of open and transparent conversation that led to the tragedy. 

It’s not enough for leaders to simply walk their talk. Psychological safety is a key component to be created by leaders if continuous improvement is to be fully realized in an organization. If criticism is the death of creativity, then room for failure is the clincher to creativity.

Needless to say, if you don’t want to end up second best or worse, then it’s not just the strategy that matters but how it’s lived. 

We all know that “culture eats strategy for breakfast” (Peter Drucker), and at the core of developing a culture of continuous improvement is the unwavering commitment from leadership. This commitment manifests not only in verbal endorsements but also in the organizational DNA.

Leadership must lead by example, embodying the continuous improvement mindset in their actions, decisions, and the way they allocate resources.

By meticulously measuring performance, identifying inefficiencies, and celebrating milestones, leaders demonstrate accountability among team members and create a mindset that fosters a commitment to ongoing enhancement and optimization of processes, products, and services. 

Consider the environment

It may seem superfluous and even indulgent, but the workplace environment has a greater impact on people and teams than one might expect. 

This goes for the digital environment as much as the physical environment. Things like how easily a tool integrates with another may make a world of difference to how team members perform their tasks. 

When considering a method to implement, consider the environment and how to remove obstacles for increased efficiency effortlessly. 

How to make your continuous improvement strategy “continuous”

Let’s go back to the example of getting into shape. How many times have you heard of someone who signed up for the gym and kept working out consistently for a month but then caught a cold for a week and never went back? 

It’s easy to quit. And it is even easier to slip into bad habits. 

Like many great business imperatives, people get excited in the beginning, but the key ingredient in implementing a continuous improvement strategy is to make it continuous. The answer lies in a culture of continuous improvement. 

There are three main ways to achieve this consistency: 

  • Measuring progress along the way
  • Failing forward
  • Encouraging feedback and knowledge sharing

This implies having SMART goals and ensuring that failures are not only not repeated but used to leverage opportunities. One of the things alluded to in a continuous refinement strategy is the need for feedback and transparency.

Bottom line? 

You won’t be able to make your strategy stick unless you and your team members are willing to be honest about what’s working, what isn’t, and how to make it right. 

Focus on what works, eliminate what doesn’t

What you enhance in one area of the business will impact multiple areas; for example, an idea that increases revenue may also improve customer safety and satisfaction. 

Statistics from KaiNexus show that:

  • 36% of all improvements impact quality
  • 11.5% of all improvements increase the safety of staff and customers
  • 31% of all improvements increase staff and customer satisfaction

If you’re serious about implementing a continuous improvement strategy in your business, remember that Kaizen means ‘improvement’ or ‘change for better’ (from 改 kai — change, revision; and 善 zen — virtue, goodness).

The focus of the word is on improvement. 

As such, what is also useful to understand is the caveat: focus 1% iterative enhancement on activities that will produce success. Getting better every day at activities that don’t move the needle doesn’t help.

Want that 38X improvement in the next year? You may have to eliminate some of your most darling tasks and anything else that doesn’t work.

Ever wonder how you can optimize your team’s productivity effortlessly? Explore the benefits of employee time and attendance tracking.

Edited by Jigmee Bhutia

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