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Kaizen – from Toyota to Service Physics

Updated: Nov 1, 2023

Toyota > NUMMI > Starbucks > Service Physics

At Service Physics, we talk a lot about kaizen – but what exactly is that, and what is our background in and involvement with it? Linguistically, the Japanese portmanteau of Kai and Zen is most often translated into English as “continuous improvement” or “change for good.” However, the philosophy of kaizen as applied to business starts with the Toyota Motor Company and the incredible about-face the Japanese manufacturing sector made in the 1960s through the 1980s.

Reaching a first-of-its-kind, unlikely but nonetheless mutually beneficial agreement in 1984, rivals Toyota and General Motors collaborated to co-open the New United Motor Manufacturing, Inc. auto plant in Fremont, California (famously known as NUMMI). It was at this facility that plant manager John Shook is credited with importing Toyota's Lean production system to the United States. Decades later, John became instrumental in teaching Lean practices to another large corporation, allowing them to scale to the massive success we're all familiar with today – Starbucks. It is here that these practices directly and heavily influenced the founders of Service Physics, and where our origin story begins.

Toyota Production System

Japanese-made cars are today considered among the world's most reliable and desirable – but it wasn't always that way. In the 1950s and 1960s, Japanese manufacturing on the whole was still much maligned by the global market due to poor quality control, a perception of product “cheapness”, and ineffective foreign marketing. However, at Toyota, the foundation was being laid for nothing less than an eventual and complete global about-face on Japanese manufacturing.

A precursor to more general "Lean” manufacturing principles, the Toyota Production System (TPS) was designed to identify and remove waste from all aspects of the manufacturing process, utilizing a number of innovations and methodologies, including the notion of “just-in-time" component availability, which seeks to keep production and storage of required project elements to a minimum and ideally at exactly the rate of use. TPS made heavy use of kaizen principles, as well as other notions, including jidoka – automation with a human touch.

Having moved to Japan and immersed himself in the culture to study this new method of manufacturing as it related to automobile production, Toyota's John Shook would eventually be pivotal in bringing the kaizen way of doing things to the United States, via a joint venture between Toyota and GM; the NUMMI factory. This unlikely partnership was mutually beneficial. Toyota sought a manufacturing location and foothold in the American market to avoid costly import and transportation fees. GM needed to explore new ways of increasing much-maligned quality and decreasing gas-hungry auto form factors without necessarily increasing costs, by reexamining their own production methodology and capabilities. For a time, NUMMI became a shining example of what could be achieved by translating Japanese manufacturing practices into American procedural, work-culture, and ethics pivots. The memory of NUMMI still serves as a model for success and global source of inspiration to this day. As these new work practices took hold in the United States and abroad, the evolution into what would be rebranded in the late 1980s as Lean was well under way.

The Starbucks Connection

Fast forwarding to the mid 2000s, the already hugely successful and nearly ubiquitous Starbucks was struggling with scale. Often credited with creating the “coffee shop” scene in the United States, Starbucks had grown large enough to attract competitors. The company was being squeezed between high-end local coffee shops and value competitors, like McDonald's McCafé offerings. A crisis moment for the brand was reached with the great recession of 2008. With collapsing stock prices, the company found itself needing to reinvigorate its customer value proposition. Among the most fundamental elements to suffer with rapid expansion, Starbucks discovered it was failing its own beverage quality benchmarks more than 50% of the time! In other words, for every 2 beverages that were served, one of them did not meet the company's own standards.

Enter John Shook and Lean, once again. Drawing from his experience with TPS but tempered and augmented by years of field application of these philosophies, John and the newly formed Lean Innovation Lab would help transform the way Starbucks operated at a fundamental level. This flavor of Lean would be different, however; it held that the social components of the methodology were just as important as the more technical, production-centered ones. And it was this specific subset of Lean thinking and kaizen implementation that the co-founders of Service Physics initially became exposed to and involved with, being applied for perhaps the first time within a foodservice operation.

Brian Reece began working closely with Steve Crowley to innovate on the Starbucks experience, leveraging their recently acquired operational foundation of kaizen to ensure the quality and scalability of the work. Among the programs built on the foundation of Lean were a reimagined Starbucks drive-through experience; its operation built for speed and efficiency, as well as the industry-leading Mobile Order and Pay channel.

The Birth of Service Physics

Building on their success at Starbucks, the two would later bring their shared expertise to AB InBev, but quickly realized the value and potential of Lean to help companies in the larger service industry. Much the same as GM needed to reinvigorate its approach to operations in the 1980s, the service industry needed to reinvent itself in the face of disruption at the hands of the COVID global pandemic and evolving customer interaction and touchpoints.

Thus, Service Physics was founded, “to solve the industry's biggest problems." Kaizen and Lean thought have been at the core of our methodology from the beginning, and always with a humanity-focused outlook. We now bring these tools to bear within the sectors of Healthcare, Hospitality, Retail, and beyond. Service Physics proudly traces our evolution directly from the Toyota Way and the emergence of kaizen thought in the United States via NUMMI, and continues to bring these transformational practices to new industries and markets as we continually look to the future and the next operational and digital problems in need of solutions.

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