Unlocking Innovation: How a Suggestion System & Open-Book Management Can Transform Your SME

by Sean Foster | June 30, 2025 | Strategy, Open Book Management

If you run a small or medium-sized business, you know that every idea counts. In fact, if good ideas are coming from your staff, and the business is not solely reliant on you to come up with all the ideas, this relieves some pressure on you and is excellent for the business.

In today’s competitive environment, innovation isn’t just for big companies, it’s a necessity for survival and growth. But how do you tap into the creativity of your team, encourage continual improvement, and build a culture where everyone feels valued and heard? The answer lies in combining a robust suggestion system with open-book management and the principles of Kaizen.

This guide will walk you through:

• What a suggestion system is and why it works
• The power of open-book management
• How continual improvement and Kaizen drive business results
• Practical steps to train your staff and implement these ideas
• Common risks, pitfalls, and how to overcome them

Let’s start with the basics.

What Is a Suggestion System and Why Does It Matter?

A suggestion system is a structured way for employees to share ideas that can improve your business, whether it’s saving time, cutting costs, making work easier, or developing new products or services. The goal is to tap into the collective intelligence of your team, encouraging innovation and continual improvement from the ground up.

Why is this so important for SMEs?

In small businesses, everyone wears multiple hats. Your team sees problems and opportunities every day, but busy schedules and informal chats mean many great ideas never get shared or acted on. A suggestion system gives everyone a voice and ensures that good ideas don’t get lost in the daily rush.

Real-World Example:

This recently happened in my business. We transferred our chain link machine from one location to another. This was a significant change and resulted in a 30+ year experienced operator retiring. But it also offered us an opportunity to explore how we could operate the manufacturing process more efficiently. Through this brainstorming process, one of our engineers created an app, accessed by a tablet near the machine to better manage the orders and to record operating efficiency per operator and per product type. Super useful information that will allow us to not only price our products better but to also know with much higher certainty where efficiency gains are likely to be found.

The Power of Open-Book Management

Open-book management is about transparency. It means sharing your business’s strategy, key financials and key performance indicators (KPIs) with your team, so everyone understands how the business is performing and how their work contributes to success.

Benefits of Open-Book Management:

• Better Communication: Teams talk openly about costs, revenue, and opportunities.
• Fresh Ideas: Employees come up with new ways to improve profitability.
• Ownership and Engagement: Staff feel more invested in the business and are more likely to stay.
• Focus on Success: Everyone works together to achieve common goals.

When you combine open-book management with a suggestion system, you create a culture where everyone is encouraged to innovate and contribute to continual improvement.

Related Article: An Introduction to Open Book Management

Continual Improvement and Kaizen: The Heart of Business Growth

Continual improvement, often called Kaizen, is the process of making small, regular changes that add up to big results over time. It’s not about radical overhauls, but about everyone looking for ways to do things better, every day, consistently.

The Five Principles of Kaizen:

1. Know Your Customer: Understand what your customers need and expect.
2. Let It Flow: Minimise waste and keep processes running smoothly.
3. Go to the Source: Solve problems where they happen.
4. Empower People: Give your team the tools and authority to make improvements.
5. Be Transparent: Share information and results openly.

These principles are at the core of successful suggestion systems and open-book management.

Related Article: The Power of a Well-Implemented Suggestion System

Educating and Training Your Team: Lessons from Toyota

The book 40 Years, 20 Million Ideas: The Toyota Suggestion System by Yuzo Yasuda details how Toyota empowered every employee to contribute ideas, leading to extraordinary results. You don’t need to be a global manufacturer to benefit from these lessons, SMEs in New Zealand need to be adopting the same approach.

How to Train Your Staff to Make Suggestions:

• Explain the Why: Make sure everyone understands the purpose of the suggestion system and how it benefits the business and the team. Especially meaningful if you also operate a profit-share or employee share scheme.
• Set Clear Guidelines: Show staff how to submit ideas, what kinds of suggestions are welcome, and how ideas will be reviewed.
• Make It Easy: Use simple digital tools (like Google Forms or Trello), or the physical suggestion box, so staff can submit ideas quickly and easily.
• Encourage Small Ideas: Not every suggestion needs to be a game-changer. Small, practical improvements often have the biggest impact.
• Provide Feedback: Let staff know what happens to their ideas and why decisions are made. Transparency builds trust and engagement.
• Recognise and Reward: Celebrate contributions, big and small. Recognition can be as simple as a thank-you or a shout-out in a team meeting.

Where Should the Focus Be?

• Process Improvement: Look for ways to save time, reduce waste, and make work easier.
• Customer Experience: Find opportunities to delight your customers and build loyalty.
• Cost Reduction: Identify areas where you can cut costs without sacrificing quality.
• Innovation: Encourage new product or service ideas that can help your business grow.

How to Implement a Suggestion System and Open-Book Management in Your SME

The steps above explain the fundamentals of implementing a suggestion system, the following delves into a critical nuance. We can learn a lot from Toyota’s experience:

A significant portion of anyone's suggestion must stem from their own work area. The most effective suggestions are directly related to an employees’ immediate work areas.

This is a core principle of Toyota’s approach: those closest to the work (“Gemba”) are best positioned to identify real problems and to propose practical improvements.

This focus on the immediate work environment serves several important purposes:

• Proximity to Issues: Employees working daily in a specific area see inefficiencies, safety risks, and quality issues firsthand, making their suggestions highly relevant and actionable.
• Avoiding Blame Culture: By encouraging staff to focus on their own work areas, the suggestion system naturally steers away from finger-pointing at colleagues. Improvements are about process, not people—aligning with Toyota’s “blame the process, not the person” philosophy.
• Empowerment and Ownership: When employees suggest changes within their own scope, they feel ownership over improvements and are more motivated to see them implemented.
• Incremental Improvement: Many suggestions are small, incremental changes—often called “singles, not home runs”, that cumulatively lead to major business gains.

This approach is reinforced by the idea of Gemba walks, where leaders observe processes directly and engage with employees where the work happens, further embedding a culture of process-focused, blame-free improvement.

Common Risks, Pitfalls, and How to Manage Them

No system is perfect, and there are challenges to watch out for:

• Lack of Leadership Support: If management isn’t committed, the system will fail. Make sure leaders are actively involved and champion the process.
• Slow Response or No Feedback: If suggestions disappear into a black hole, staff will stop participating. Always provide feedback and keep the process transparent.
• Overcomplicating the Process: If it’s too hard to submit ideas, people won’t bother. Keep it simple and user-friendly.
• Focusing Only on Big Ideas: Don’t overlook small improvements. They often deliver the biggest gains.
• Employee Overload: Don’t bombard staff with requests for ideas. Encourage participation, but respect their time and workload.
• Bias or Favouritism: Be fair and transparent in how ideas are evaluated and implemented.
• Legal and Intellectual Property Issues: Make sure you have clear guidelines on ownership and confidentiality for ideas.

Related Article: The Disturbing Fact About Open Book Policies

Building a Culture of Innovation and Continual Improvement

To make innovation and continual improvement part of your business DNA, you need to create a culture where everyone feels safe to share ideas, take risks, and learn from mistakes. Here’s how:

• Lead by Example: Show your commitment by sharing your own ideas and being open to feedback.
• Encourage Collaboration: Foster a team environment where people work together to solve problems.
• Celebrate Learning: Recognise not just success, but also the effort and learning that comes from trying new things, even if the end result was not positive.
• Keep Improving: Regularly review your processes and look for ways to make your suggestion system and open-book management even better.

Your Next Steps: How to Get Started

Ready to unlock your team’s potential? Here’s what to do next:

• Educate Yourself: Read about suggestion systems, open-book management, and Kaizen. The book 40 Years, 20 Million Ideas is a great place to start.
• Start Small: Introduce a simple suggestion tool at your next team meeting. Encourage everyone to share one idea this week.
• Be Transparent: Share key business metrics with your team and explain how their work contributes to success.
• Provide a Framework: Give staff clear guidelines on how to make suggestions and how decisions will be made.
• Act and Celebrate: Implement the best ideas quickly and recognise those who contributed.
• Keep Improving: Regularly review your processes and look for ways to make your system even better.

Conclusion

Innovation, continual improvement, and open-book management aren’t just buzzwords, they’re practical tools that can help your SME thrive in a competitive world. By implementing a suggestion system and embracing Kaizen principles, you’ll tap into the creativity of your team, build a culture of trust and engagement, and drive real business results.

Ready to take the next step?

Explore any reputable resources on suggestion systems, open-book management, and continual improvement to help your business reach its full potential. Alternatively contact Sean (sean@seanfoster.co.nz), or book a Zoom meeting here.