Kaizen fuels Microsoft’s AI transformation strategy

The Japanese business philosophy Kaizen is fueling Microsoft’s artificial intelligence (AI) transformation strategy. That’s according to Carolina Dybeck Happe, the tech giant’s chief operating officer.

Speaking at the Wall Street Journal Leadership Institute’s Technology Council Summit, Dybeck Happ said a focus on people and processes before technology and the principle of Kaizen are driving much of her work to transform the decades-old organization into one that’s AI-first.

Successful AI transformation is about “getting alignment around the goal,” understanding the business process you’re trying to apply AI to before AI comes into the equation, Dybeck Happ said.

The PEX Report 2025/26 found that 16 percent of surveyed organizations are currently using Kaizen to support business transformation initiatives.

Process clarity is key to AI success

A clear understanding of business processes is key to successful AI adoption, Dybeck Happ suggested. “A lot of people would tell you what they think the process looks like, what they wish the process looks like,” reported WSJ. “If you understand what it really looks like – and it always gets really messy – then you can say, ‘OK, this is what we’re working with,’ and you get that alignment.”

Dybeck Happe shared an example of business process improvement, noting that Microsoft significantly reduced the customer onboarding process from 230 steps down to fewer than 40.

This streamlining effort required close coordination among Microsoft’s sales, marketing, product and finance teams. Following that, about 75 percent of the remaining onboarding steps were automated using AI agents.

“In the end, what came out was a phenomenally better experience for the customers as well as for our teams,” Dybeck Happe said.

With the vast amount of emerging technology, she advised business leaders to surround themselves with the best people possible, as they will be able to take that technology further.

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What is Kaizen?

Kaizen – meaning “good change” – is rooted in quality systems like the Plan‑Do‑Check‑Act cycle. It emphasizes making small, incremental changes that combine to generate larger results over time. It has evolved to become a common element of modern process and operational excellence (OPEX).

There are three specific things that are needed to be successful in a Kaizen approach:

• Breaking big challenges down into small challenges.
• Being consistent in the time and resources allocated.
• Keeping a good overview of the big picture and state of processes.

Kaizen not only paves the way for digital transformation but also helps organizations continuously improve and expand upon these initiatives in the long term.

Despite being decades old, there are a number of aspects in which Kaizen remains relevant for modern organizations, according to Dara Kiernan, process improvement consultant at KPI Consulting. “Adopting this approach allows organizations to be agile and adaptable in a fast-paced business environment promoting small continuous improvements which make it easier for a business to respond to changes in technology, or in the market, a lot faster.”

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