KAIZEN Lean Measurement is the means by which lean organisations measure all aspects of their business, from real-time operational performance measurement to financial and business information measurement. At KAIZEN Institute New Zealand, as the Measurement specialist I have aided a number of organisations in the last few years deliver faster, more relevant and more cycle-based cash-driven measurement to improve their decision making and ultimately their performance.
So what insight can KAIZEN Lean Measurement tell us about the competition for eBook readers’ hearts and minds? Plenty, as it turns out.
First, some background for those of you who many not have ventured into eBooks or who perhaps don’t follow these tech things to the same extent as me. Amazon pioneered the eBook reader market space a couple of years ago when they released their Kindle standalone device. In August they will release the third iteration of the Kindle device, but in the meantime Amazon has more or less had this market to themselves. Sure there are other players like Barnes and Noble with the Nook and Borders with the Kobo (as introduced recently here in New Zealand through Whitcoulls) but as yet they are very much the bit players.
Enter Apple with iBooks for their iPad, iPhone and iPod touch range. While the iPad and iBooks are still very new (only released in April), the staggeringly fast adoption rate of iPads and purchases of books through the iBooks store suggest Amazon has a major battle on its hands.
The Wall Street Journal interviewed Jeff Bezos the CEO of Amazon on 29 July 2010, who outlined the thinking behind the latest Kindle. What caught my eye however was the following:
The dual nature of Amazon's Kindle brand, both e-book reader and e-bookstore, is underscored by the way Amazon runs those businesses, with separate teams focused on each. "Internally, we view them as two stand-alone businesses that have to succeed on their own merits," said Mr. Bezos.
Reading this tells immediately tells me that the Amazon strategy for eBook devices is in trouble. Why – because Amazon is making the cardinal mistake of splitting up the value stream for eBooks into separate divisions with separate teams.
The value stream concept lies at the heart of KAIZEN Lean Measurement and indeed all lean thinking. It recognises that the best means to provide the right combination of quality, cost and delivery outcomes to the customer is to the extent possible bring all the processes that impact on those outcomes into one very visible process stream. So if the customer has an issue with content quality, or the delivery mechanism, or the overall cost of the experience, that information can find its way back through the chain without obstruction to the place where it can be acted upon and the issue solved and avoided in the future.
Amazon is making the mistake of separating two core parts of the same experience – the delivery and the content – and essentially putting them into a competitive environment. How likely is it that they will really be able to capture the opportunities for improvement at the customer end and bring them to the correct place in the value stream to be assessed and addressed?
By contrast Apple has taken a typically conservative, controlling stance to the addition of publishers and regions to the iBookstore. From observation of how the app store for iPhones has been controlled to date, we can be sure that only publishers with whom Apple has established the full ground rules of the customer experience, from beginning to end, will be allowed in the iBookstore. We can also be sure that Apple will be sharing plenty of information with those publishers about the experience so that both parties can work (virtually) seamlessly to work to improve that experience and address any issues that arise.
This will be an intense battle with both sides having well-entrenched brand values that will see them in good stead along the way. But I suggest that the weakness of Amazon in forgoing the power of value stream thinking will ultimately see them relegated to second place despite the head start that the Kindle has given them.
To find out more about KAIZEN Lean Measurement principles or to explore how the same lean thinking that applies to operational parts of businesses can be equally applied to the accounting function, contact Kimball Fink-Jensen, Principal on +64 (0)21 654 357 or by email kfinkjensen@spam.kaizen.com.
Whether a company has just begun some KAIZEN/Lean activities or whether it is down the path of the full lean journey, the issue of successful measurement will arise sooner rather than later. Just as KAIZEN/Lean thinking challenges the traditional models of how businesses operate, so it also challenge the way business measures performance. And like KAIZEN/Lean thinking, this applies at all levels of business measurement - from the shop floor to the Board room.
Putting it bluntly, traditional performance and accounting measurement simply don't reflect adequately the true progress being made in a business as it achieves successful KAIZEN/Lean improvement. In fact, they can be quite misleading and without addressing the measurement frameworks, can result in significant misunderstandings about whether KAIZEN/Lean is working.
To give but one example - as a lean journey commences, one of the consequences is likely to be substantially reduced inventories throughout the value stream. However this will bring historical costs currently on the balance sheet onto the Profit & Loss Statement, creating some communication challenges. Under a Lean Measurement framework, the true benefits of KAIZEN/Lean improvements are put instead into their proper context and translated into methods of communciation that ensure the progress is seen for the success that it is.
At KAIZEN Institute New Zealand we have dedicated resources that focus on the area of improving measurement processes, systems and outcomes to accompany the KAIZEN/Lean journey.
Contact Kimball Fink-Jensen, Principal at kfinkjensen@spam.kaizen.com or on +64 21 654 357 if you wish to discuss further this aspect of business and performance measurement.
Kimball Fink-Jensen from the New Zealand office joined KAIZEN Institute in 2008 and established the first agency specialising in “lean measurement”, which is about finding and reporting the right numbers to accompany the KAIZEN/lean journey. He visited the USA in late September and attended the 5th Lean Accounting Summit in Orlando, Florida.
Lean Accounting is a necessary alternative for lean companies to the standard accounting approach today. Current accounting methods were designed in the times of mass production when it made sense to allocate as many costs as possible against the expected production, then assess variances to find out what was happening.
However in the world of KAIZEN/lean, it makes no sense to allocate any costs other than the truly variable – typically only direct materials. To continue to follow traditional accounting methods is to invite anti-lean behaviours (such as building inventory, batching, buying large EOQs of materials, over-producing) to try to manage variances. In addition, successful lean outcomes can actually make the company financial situation look worse than before under traditional accounting methods – making continuing the lean journey hard to sell.
About 260 people were at the conference including most of the leading lean accounting thinkers, as well as a good cross-section of academics and students. Most of the attendees however were company executives who were either finding out about lean accounting as part of their lean journey or were presenting their experiences in applying lean accounting. There were 24 presentations and two keynote speeches across two days, as well as an optional one-day workshop beforehand. The presentations ranged from introducing the principles of lean accounting through to using lean accounting to drive pricing and manage sales optimisation. Much of the discussion outside the presentations focused on key lean issues of the day (especially healthcare) and how lean accounting could be used to help get the lean journey started.
It was a fascinating event with some great stories about lean accounting in action and it was very inspiring to see the still-new concepts of lean accounting being gradually applied in increasing numbers of situations. I believe this dimension of lean will become more and more critical to the lean story over the next few years.
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