Editor's note: It's easy for small companies to get swallowed up by today's fast-paced environment. But according to Joel Litman – founder of our corporate affiliate Altimetry – that provides opportunity for strategic acquirers. In this piece, adapted from a December issue of the free Altimetry Daily Authority e-letter, Joel explains why continuous improvement plans help certain businesses stay ahead of the competition...

Also, our offices will be closed on Monday in observance of Presidents Day. Look for the next issue of DailyWealth on Tuesday after the Weekend Edition... And enjoy the holiday!

When business student Larry Culp dialed up the CEO, all he wanted was a job and a paycheck...

Eleven years later, he was running the show.

As a second-year student at Harvard Business School, Culp was fascinated with Japanese and German manufacturing models. He knew he wanted to work for a company with similar values.

Manufacturing conglomerate Danaher (DHR) had just appointed George Sherman as its new CEO in 1990. Culp was inspired by Sherman's vision to make Danaher into a world-class manufacturer.

So 10 days after Sherman took over, Culp cold-called him... and walked away with a job offer.

After graduating from Harvard, Culp quickly made his way up the ranks at Danaher. He was tapped by Sherman himself to take over as CEO in 2001.

With Culp at the helm, the company took off... Revenue soared from $4 billion to $20 billion by the time he retired in 2014. The stock more than quintupled.

The secret to his success was mergers and acquisitions (M&A)... and a philosophy called "Kaizen," the Japanese term for "continuous improvement." This idea took root in Japan's business world after World War II, when it was adopted by carmaker Toyota Motor (TM) to boost efficiency.

As I'll explain today, Kaizen is now taking a brand-new form. Companies are rethinking this philosophy for the modern economy. And investors can find plenty of businesses that use this approach... whether or not that's what they call it.

During Culp's 14-year tenure as CEO, Danaher acquired more than 140 companies by following a playbook called the Danaher Business System ("DBS").

DBS was created by brothers Steven and Mitchell Rales, who founded Danaher in 1984. It's based on five core values... the best team wins, innovation is the future, compete for shareholders, listen to the customer, and Kaizen is the way of life.

It's a simple system. If Danaher can buy a company at a reasonable price, improve its operations based on the five DBS principles, and increase its value as a result, it will make the acquisition.

All acquisitions should be small companies. That way, if the company fails to integrate, it has a very small chance of hurting the overall business.

And with each successive purchase, the Danaher executive team got that much better at implementing DBS...

The greatest part about the DBS strategy is it can snowball. It's not just that Danaher's management knows how to improve a company's operations. Every single subsidiary subscribes to the strategy, too.

Danaher kept expanding into new industries like life sciences, water quality, and industrial manufacturing. And each of those segments started buying even smaller businesses, meaning they could grow even faster.

DBS is perhaps the most famous example of Kaizen in the business world. But it's far from the only example...

For a textbook case of how Kaizen is getting applied today, look no further than e-commerce giant Amazon (AMZN)...

A critical aspect of Kaizen is eliminating waste through three tenets. "Muda" is about reducing waste. "Mura" addresses operational unevenness. And "Muri" aims to alleviate overburden.

Amazon has addressed these by seamlessly blending artificial intelligence ("AI") into its operations. Even though the company doesn't name Kaizen as its guiding principle, it embodies Muda, Mura, and Muri in all it does.

In terms of Muda – reducing waste – Amazon's use of AI in packaging is remarkable. Machine learning has allowed it to cut down packaging weight by 36%... and eliminate more than a million tons of packaging.

This isn't just about being eco-friendly. It's a smart business move to make good use of resources and cut costs​​​​.

Then there's Mura... Amazon's AI-driven regionalization strategy ensures products are stored and shipped from the nearest warehouses. More than 76% of U.S. orders are shipped from local centers. That makes delivery times faster and more predictable.

As for improving overburden through Muri... Amazon tackles this by deploying more than 750,000 robots in its facilities.

Equipped with AI, these robots take on the heavy lifting. They're intended to reduce the strain on employees and increase efficiency – a clear case of technology serving people, not the other way around​​​​​​.

Amazon's AI and robotics innovations should drive earnings significantly higher. Uniform earnings are expected to rise from $43.7 billion in 2022 to $59.8 billion by fiscal year 2024.

So these continuous improvements allow Amazon to keep even more money for itself. It's a clear sign that smart, efficient operations powered by AI can lead to substantial financial growth​​.

Amazon's story isn't just about a company using AI. It's about a business that embodies modern Kaizen... showcasing how traditional principles of improvement can evolve with technology.

For investors, it's a lesson in identifying companies that embrace such forward-thinking strategies. Because when it comes down to it, Kaizen is key in today's business wins.

It's not just about what these companies are doing... It's about how they're doing it.

Regards,

Joel Litman

Editor's note: Joel has used forensic accounting to successfully predict the 2008, 2020, and 2022 crashes. Now, he's teaming up with Dr. David "Doc" Eifrig (for the first time ever) to deliver an urgent warning. Joel and Doc say a trend is escalating today – one that has appeared before every major market downturn. But it could also lead to a tremendous opportunity in one specific group of stocks... with the potential for triple-digit upside. Click here for the full details.