Principle #1 - Simple Disciplines Repeated Over Time:
It is the simple disciplines (choices) in life that don’t seem to make any differences at all in the moment; however, repeated over time, the compounded effect makes all the difference in the world. Personal choices may be to take time daily to talk to a loved one, to show compassion to a colleague or report, to exercise, to meditate, to save money. In business, we employ continuous follow-up after every customer installation, product changes based on customer feedback and implementation, quality corrective actions.
Principle #2 - Simple Errors Repeated Over Time:
It is the simple errors in judgment that don’t seem to make any difference in the moment; however, repeated over time, the compounded effect makes all the difference in the world. Personal examples may be smoking, eating that daily bacon breakfast sandwich, skipping lunch or exercise. These are innocuous, seemingly innocent little "miscues" or transgressions. Businesses may decide to "go cheap" and skimp on customer service, allow more quality defects or cheaper parts in their product, a bank may continuously add fees, etc.
This simply means that things add up over time but in a compound (non-serial) manner, like bank money getting interest on top of interest on top of the original principle. Those french fries you eat every day add up, compounded by the lack of exercise, and over time, you're "suddenly" fat. Well, it really wasn't sudden. The simple repeated "errors" eventually get to the point of being noticed. Vice versa, you can exercise and eat right as a routine and have all this turn into a healthy person.
Many businesses are, unfortunately, testing the limits of customers with Principle #2. Negative compounding can eventually be the "straw that breaks the camel's back". Bank of America is continuously reducing services and adding fees. Their last try at a debit card fee in late 2011 caused a backlash of negative press and consumer resentment. You eventually take your business elsewhere.
Albert Einstein supposedly said that "Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.". (Probably an urban legend.)
This means to be aware and choose consciously. It's easy to treat each day as in the movie "Ground Hogs Day" with a "rinse, lather, repeat" routine. We're just overwhelmed and tired. What happens is that life passes you by. There's the story about the frog sitting in a pot of water. The frog will sit comfortably in the pot while the water is slowly heated to boiling point. It eventually gets boiled alive*.
This has been and can be applied in business. Do the small improvements and changes continuously.
Fix problems so they don't repeat. Allowing unhappy customer situations to happen repeatedly will eventually add up to an unhappy customer base which then gets compounded to the point of going out of business. Conversely, the continuous, "small" improvements in customer satisfaction and product improvement will eventually show as "big" positive results. Kaisen is the Japanese word for "constant and never-ending improvement". "Kai" means change and "zen" means good.
Credit to Mary Allen for teaching me the 2 principles and compound effect (she also wrote a fascinating book named "The Power of Inner Choice").
* You also need to clamp the lid down and ignore the banging and screaming inside the pot. It still makes a good lesson and worth passing on.