Let’s Do Kaizen, Not Kaizan

It doesn’t really matter how you pronounce the Japanese word for continuous improvement through total involvement and a focus on the elimination of waste, variability and overburden. The word is kaizen, but you can call it kaizan as long as you do kaizen. For some reason it seems easier to pronounce it “kaizan” for many English speakers. Either pronunciation is okay as long as we do not actually do kaizan.

In Japanese kaizan means to alter or fake a document. In business it often means “to cook the books” which in more formal English means to falsify financial information with the purpose of making money when no actual value is being created. In most countries this is highly illegal. The world has seen a striking number of cases of kaizan recently being exposed recently. We haven’t seen anything as blatant as Enron recently thanks to Sarbanes-Oxley legislation and earnings management as formerly practiced by General Electric is much harder for publicly traded companies to pull off. We are still face with lending and banking practices which are irresponsible at best and are kaizan at worst seem rampant. More regulation is likely on the way, and this is kaizen.

We have seen the effects of kaizan ranging from the subprime loan crisis to the resulting exposure and collapse of various investment funds turning out to be little better than Ponzi schemes, the collapse or restructuring of overly leveraged investments propped up by the promise of future returns, to major industrialized economies whose currencies are based on the faith in their ability to borrow and pay back our debts on earnings fueled by future consumption. A close study of the very basis of today’s economies leads us to some frightening conclusions about the definition of Ponzi schemes…

Kaizan is nothing new. The first dishonest financial act was no doubt came immediately after the invention of the notion of currency, if not of trade itself. What is different about kaizan these days is that the swindles have become much larger, global in scale even, with adverse knock-on effects we are only beginning to understand. The ability of acts of kaizan to affect a much greater number of people creates an urgent need for kaizen – continuous improvement of the system – if not outright kaikaku: revolutionary change. If visual management is a good thing for businesses to detect abnormalities earlier and contain potential problems while they are small, an even greater degree of visibility and transparency would seem to be vital for the financial business in the future.

Henry Ford said, “A business that makes nothing but money is a poor kind of business.” We have too many businesses in the world that make money by adding no value to the customer, and like all schemes they will be exposed as kaizan sooner or later. If all you do is make money using money, the temptation to kaizan is very strong while the need to kaizen is very low. If you are managing complex logistics chains, equipment, facilities, manual and automated processes, and the interaction of all of this with people, there is great need to do kaizen and relatively less time and opportunity to kaizan. Without making hasty judgments about the virtues of the financial services industry, it seems that professionals in the field, those who regulate them and their customers could benefit from a careful study of the very important difference between kaizan and kaizen.

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