Executives are always under immense pressure to re-evaluate business costs in order to stay competitive and fund new investments. Businesses, and people, are also tired of relentless frequent cost reduction initiatives that frequently disrupt organisations, enable short term cost reduction dips and are followed by high surges on expenditure, usually surpassing the latest amount saved! Enters COVID-19 pandemic and its major consequence to add unprecedented levels of economic uncertainty, as businesses struggle to adapt to the ‘new normal’. And now with global economies preparing for new waves of lockdown the long-term impacts on businesses are far from being fully understood or predictable.
History shows us that pandemics don’t change things. They just accelerate shifts that were already underway. (source: Think with Google)
There are three key fundamental aspects to consider for successful and sustainable cost optimisation based on Kaizen:
- Consider a multi-dimensional approach looking at all the levers available as an integrated system to deliver long-term benefits rather than the standard, limited set frequently relied on by managers as heuristics
- Consider the end-to-end cost value stream, i.e. how cost flows through across all business functions, processes, systems and structures
- Empower your people to identify and deliver cost optimisation initiatives as they are best placed to drive innovation and new ways of serving your customers in the most cost-effective way
Kaizen and Cost Optimisation
Kaizen is a Japanese term roughly translated as ‘good change.’ It describes an approach to continuous improvement based on the idea that small, ongoing positive changes can reap significant improvements. This has been practised by many organisations for over 75 years and it has acquired new relevance for businesses looking to adapt to the challenges created by COVID-19.
In practice, Kaizen involves identifying issues and opportunities, creating and implementing solutions – and then cyclically repeating the process to address any additional issues.
Here at NTT DATA UK, Kaizen is an important part of our culture and business strategy. At the heart of embracing Kaizen, is the understanding that great leaders put their people first. Whilst big events can understandably shift this focus – such as this year’s coronavirus pandemic – the best leaders nevertheless put in a continuous, conscious effort to motivate and nurture individuals.
At NTT DATA, our Kaizen discovery and ideation approach targets the entire operating model to identify and deliver savings. Reducing costs is the first step for organisations to become more efficient. However, to be truly successful they need to change their culture to stay ahead, and indeed make the most of, the advancing tide of digital transformation that has swept through the economy in 2020.
Kaizen also empowers staff at all levels of the organisation to identify opportunities and be part of the cost optimisation process, enabling the organisation to collaborate and see the results together. This is especially important during the pandemic, where employees have been forced to work from home, jeopardising the sense of community. This also adds increased sustainability of the benefits through greater probability of adoption.
Our vision for Kaizen
The NTT DATA Kaizen approach is straightforward and effective – and can be applied to a number of business models, across various industries. We begin with contextual evaluation and idea generation, assessing the situation, exploring possible scenarios and then providing recommendations. We then move into the delivery stage of the process, defining prioritised roadmaps, implementing initiatives and ultimately changing the culture.
The simple idea of Kaizen is vigilance and awareness, looking for opportunities to systematically do things better. Through this process, and based on our experience we have developed several guiding principles, such as:
- Focus on opportunities that will take less than 3 months effort and that are likely to pay back within the financial year
- Aim to implement about 5% of optimisation initiatives in the first 6-8 month period
- Expect 50% of the initial initiatives identified to be potential candidates for optimisation
- To reap maximum benefit, initiatives should be given full time support – enabling employees to quickly refocus if required
It is also important to repeat Kaizen periodically in order to reap the full benefits of the process. Repetition gives organisations the opportunity to address inefficiencies that were not previously dealt with, preventing them from spiralling out of control.
The Kaizen business case
In looking at operational costs to help make organisations more effective, we generate significant savings and help businesses change how they operate. From our experience we have been able to enable up to 15% average reduction in costs. We have also enabled other benefits such as increase operational efficiency, reduce operational risk, and ensuring higher returns on project investment.
With our Kaizen expertise, we have supported multiple clients on cost optimisation initiatives. From optimising circuit inventory processes in a major telco to achieve over £6 million in annual savings, to reducing cost in call centres for a major insurance organisation to achieve over £2 million in annual savings.
Not only do our clients benefit from our Kaizen approach, at NTT DATA UK we also use this approach ourselves on a consistent basis. Most recently, we have successfully delivered 4 initiatives over a 6-month period that resulted in a predicted £1m of additional annual operational profit improvement in an already lean operation.
Final thoughts
The COVID-19 pandemic has had an unprecedented impact on the economy and presents an enormous cost challenge for businesses across the globe. This represents a golden opportunity for organisations to rethink their operations and rebuild their business for the future.
NTT DATA’s Kaizen approach is the perfect solution: it enables businesses to champion adoption, gather ideas, create a clear set of priorities, and ultimately deliver the much required tangible results to allow organisations to strive and continue to operate
Authors:
Claudio Costa, Director of Business Consulting, NTT DATA UK and
Patrick Scanlon, Senior Principal Business Consultant, NTT DATA UK