Column Archive: 2010

Recently I am cornered frequently by beleaguered lean change agents eager to show me their scars inflicted by re-energized resistors. Lean naysayers have seized the Toyota crisis to resist change, admonishing: "You've been telling us to 'be like Toyota.' Look at them now!"

Don't lose heart.

Let's remember why we have sought to learn from Toyota in the first place. We don't study and seek to adapt Toyota's ways because the company was perfect. Toyota was never a muda-free zone. In fact, I've never thought that the leaders who built Toyota were touched by greater genius than many other famous or influential leaders. We looked to Toyota because, for reasons of largely historical happenstance, Toyota came to embody many of the ideals we desire in human organizations. Whether one's source of inspiration is Henry Ford, W. Edwards Deming, Alfred Sloan, the Training Within Industry program, Six Sigma, Frederick Taylor, Frank & Lilian Gilbreth, Elton Mayo, Mary Parker Follett, Henri Fayol, Max Weber, Peter Drucker, Shigeo Shingo, John Dewey, Douglas McGregor, Eli Goldratt, Michael Hammer, Peter Senge, Jim Collins, Tom Peters, Russell Ackoff, Edgar Schein, or Henry Mintzberg (whew! Did that cover everybody?), the ideas and ideals represented by those individuals and initiatives found their best actualization at Toyota. At least for a period of time. Will that period of time last forever? Is it already over? While it’s too early to answer these questions, it's more important to recognize the extent to which Toyota has served as the best large-scale business organizational laboratory we've yet seen.

Culture of Control?
Even so, we must recognize that even at its peak as an organizational GPS, Toyota was never as good as its reputation in some ways, but better in others. Both at once. There are still critical pieces of the way the company worked and works that haven’t been fully explained, and that I think may still provide answers to our most vexing problems of human organization.

One particular issue concerns the tension between respecting individuals while simultaneously being extremely tough on them. Critics charge that Toyota workers must sacrifice individuality for the good of the group, following rigid rules that dictate nearly every facet of their working lives. A recent article delving into this issue ('Toyota Man's' conformist ways come under fire (John M. Glionna, March 22, 2010) http://www.latimes.com/business/la-fi-toyota-man23-2010mar23,0,7100881.story?page=1) included the statement that, "The real 'Toyota Way' is a culture of control," says Masaki Saruta, a business professor at Japan's Chukyo University. The article goes on to say, "... guidelines dictate nearly every facet of employees' day -- how they turn corners while walking on company property, where they eat their lunch and even how they conduct themselves at home. At the Toyota plant here, workers cannot put their hands in their pockets. Hall monitors report scofflaws. Commuters who drive to work must report their routes to bosses. Those taking trips on days off must file such details as where they stopped for breaks..."

People who read this article ask me "Is that horrific description actually true?"

There are indeed aspects of that article that are - or WERE - true. That was also part of the Toyota Way. Toyota was never perfect, rather merely "relentlessly seeking perfection" as the phrase goes. Some of the things described in that damning article are (or WERE, anyway) true, but for the most part they also represent dimensions of Toyota during its formative period that some company leaders wanted to change. Turns out, it is not - news flash - so easy to change. Many Toyota leaders have - sometimes consciously, sometimes not - long desired to rid the company of precisely those less attractive dimensions described in the article.

No Hands in Pockets
None of this is new news. Toyota has always had its share of critics in Japan.
A communist sympathizing journalist joined Toyota as an assembly line worker in the early 70s and wrote up his experience in a scathing attack in a book called in English "Japan in the Passing Lane." The original Japanese title was something like "Hell Factory Toyota." The book was clearly a one-sided account, dissected expertly in a critical introduction written for the English edition by R. P. Dore.

In response to the question, "Is there really a 'hall monitor' to enforce 'no hands in pockets' rules?" Well, I don't know about "hall monitors." But hands-in-pockets was absolutely a no-no at Toyota in the old days. Hall monitors not needed, your friendly boss would do just fine. There was a logic to explain it.

1. Safety. You don't want people falling on their faces with their hands in their pockets.


2. Respect. This one has several sides to it.


1. Japanese custom.


2. Hands free exhibits a posture of "ready to help," especially in the factory.


3. And it exhibits a decidedly disrespectful posture relative to those working on an assembly line who have no opportunity to leisure about with their hands in their pockets.

This is one of the many cultural artifacts that made its way haltingly across the Pacific. I recall witnessing more than one occasion of Japanese managers slapping the hands of American employees as they began sliding into their pockets. Not just in the factory either. I still recall the shocked expression of a 30-something office manager as my own boss smacked his hands with an audible thwap.

Two Worlds
If Toyota - the old Toyota, anyway - were a person, he would be a pretty tough guy. An old-fashioned disciplinarian. The stern football coach who gets in his players' faces ala Vince Lombardi of the old Green Bay Packers. If not throwing things like basketball's Bobby Knight, no calm Duke Coach K either. NBA coach Pat Riley tells players, "I need your voluntary cooperation to push you further than you will want to go..." Toyota would be the military drill instructor who might push you to the breaking point but who would also give his life for you in battle. Tough love, as they say. Maybe not for everyone, but definitely part of the Toyota Way.

Respect isn't necessarily about making individuals feel good in an abstract way. As Jim Womack said in his e-letter of December 2007, Respect for People (http://www.lean.org/common/display/?o=755) "The manager challenges the employees every step of the way, asking for more thought, more facts, and more discussion, when the employees just want to implement their favored solution. Over time I've come to realize that this problem solving process is actually the highest form of respect."

So, a degree of "toughness" may be called for at times, especially in the dirty business of manufacturing something like a car. The process of several thousand people working together to assemble tens of thousands of parts that converge once per minute to comprise an automobile is tough work, demanding legitimate discipline. Still, there were instances at the old Toyota when many observers would understandably cry foul. And I imagine vestiges of that Toyota can still be found lurking around, especially at the end of a bad day. But these are also dimensions of the company that decades ago some leaders recognized as needing change. Chairman Fujio Cho and others have sought a Toyota that represents the best of both worlds. The best of "both" worlds on numerous dimensions: old and new, east and west, north and south, tradition and change, stern yet fair. Always improving, changing, built on utilizing and embodying the best we can hope for as humans working together for human purposes. That's the goal: then there's that plan versus actual thing.

js

New United Motor Manufacturing, Inc. closes its doors for the final time this Thursday, April Fools' Day. It is a sad occasion for anyone who has been touched by NUMMI over the years. It is a time for testimonials, such as the outstanding treatment by Frank Langfitt for an hour-long special "NUMMI" on National Public Radio's "This American Life". I can't remember hearing a better documentary radio show, featuring interviews with many individuals who have played key roles in the NUMMI story over the years. I suggest - no, I insist - that you give it a listen.

Unfortunately, for every yin there's a yang, in this case in the form of an article by Bob Herbert in the New York Times: "Workers Crushed by Toyota" (link: http://www.nytimes.com/2010/03/16/opinion/16herbert.html?scp=6&sq=herbert&st=cse ). I would like to give Herbert the benefit of the doubt. Surely he simply received bad counsel and was erroneously informed - otherwise he would never write such nonsense. But, upon closer reading, his nonsense is no one's responsibility but his own.

Herbert attacks Toyota for the closing of the NUMMI plant in Fremont, California. In previous columns ("Arigatou NUMMI", "Was NUMMI a Success?", "How NUMMI Changed Its Culture") I've written about the significance of this historical venture, and in my Sloan Management Review article I shared some lessons I learned while working there. Herbert's column merits a response because it reflects a fundamental misunderstanding of what NUMMI was all about. Both NUMMI and Toyota deserve better.

NUMMI Closing Misrepresented
Herbert's hollow outrage is evidence of how extreme the Toyota-bashing party has gone. I concur wholeheartedly with Herbert's wish that NUMMI remain open. Having played a role in NUMMI's beginning over 25 years ago, I am sure that I am saddened far more than Herbert by the unfortunate turn of events. But he totally misrepresents the situation.

Toyota was in fact lambasted (due to ignorance) when they moved in, and lambasted (due to ignorance) again as they exit - after being left holding the bag by GM. A federal lawsuit in 1984 almost prevented NUMMI from ever even happening. Even then, the judgment handed down by a federal judge limited the life of the GM-Toyota joint venture to 12 years. NUMMI only survived beyond that because Toyota (not GM) petitioned 10 years later to vacate the order, a request that was granted.

Bottom line: no one in the auto industry can make a business case to produce automobiles in California. Toyota - not GM which wanted out of the JV for years and was able to use Chapter 11 as an excuse to ditch Fremont - has tried to do the right thing fighting against the unfriendly economics for years.

I can't claim to know all the facts weighed by Toyota or GM in making their business decisions to exit NUMMI. Neither can Herbert. But that doesn't prevent him from outrageous statements such as, "The company could keep the plant open and profitable if it wanted to." Herbert can't possibly know that to be true. What is most outrageous here is the double-standard Herbert brings to lay all the blame on Toyota. If we want to speculate on the business case for all the parties here, an equally strong or stronger case can be made to "blame" GM, or even the state of California for NUMMI's unfortunate closure.

Herbert blames Toyota for "crushing the workers", but the fact is that this is the second time for GM to pull out of the same community, each time with no regard for the community or the workforce. Where was Herbert when GM pulled out of Fremont in 1982? Or when Ford pulled out of Milpitas, ten miles away? Or when GM closed Van Nuys, or Oakland, or South Gate, all also in California? There are no other auto factories in CA today because the business case hasn't been there to justify it for 30 years. Toyota stayed this long IN SPITE OF the lack of business case, and in spite of the fact that GM has long desired its second exit from the plant.

Let's not forget that Toyota's decision to enter the JV in the first place salvaged a mess left by GM in Fremont two years earlier. The plant had been a disaster prior to its first shuttering. A Wall Street Journal article from the time reported: "When GM closed its Fremont plant in 1982, laying off about 5,000 workers, an extraordinary 800 grievances were pending and absenteeism regularly passed 20%. Beer bottles littered the parking lot and even a union request for a fan in a plant telephone booth had to go to the negotiating table." ["GM, Toyota, UAW Are Nearing Their Goals," John Bussey and Mike Tharp, Wall Street Journal, May 20, 1986] By the way – after Toyota introduced its production and management systems, that absenteeism reduced to a steady 2%.

Gold Rush in Reverse

What does Herbert mean by "California has been very, very good to Toyota."? Last July, BusinessWeek ran an article ["Toyota, GM End Long, Costly Marriage," David Welch, Business Week, July 1, 2009] that said "Then there is the higher cost of doing business in California. Since 2000, the Golden State has lost 456,000 manufacturing jobs mostly due to rising costs. Corporate tax rates are double the national average, according to Jack Stewart, president of the California Manufacturers & Technology Association; electricity rates are one-third more." Toyota is following the same business logic that chased all of those manufacturing jobs out of the state. Why single out Toyota to blame for that?

At the time GM and Toyota made their respective decisions, Toyota was losing money and market share. Volumes were falling. A recovery of both profitability and volume had just begun for GM, which was already starting to look for more volume at about that same time. Yet GM backed out of the plant while Toyota continued to produce cars and employ workers.

Note the timeline. In July 2009 - AFTER filing for bankruptcy - GM announced that "as part of its long-term viability plan, General Motors has decided that its ownership stake in the New United Motor Manufacturing Incorporated (NUMMI) joint venture with Toyota will not be part of the 'New GM'." Clearly, they didn’t believe they could make a positive business case for the plant. In August, Toyota announced that it had lost $819 million for the first quarter. At the end of the month, Toyota announced that it would end production at NUMMI at the end of March 2010. In other news that August, GM announced that it planned to raise its overall U.S. production 20% in the third and fourth quarter, and that it would reinstate 1500 jobs. "'The uptick is an encouraging sign that vehicle sales are turning around,' said Tim Lee, GM group vice president of global manufacturing and labor." ["Toyota Weighs Shutting California Site," Norihiko Shirouzo, Wall Street Journal, August 19, 2009.] By the way, in that same announcement, GM said that it would be adding shifts to plants in Lordstown Ohio and Ontario Canada.

$280 Million of Ingratitude
Herbert also attacks Toyota's business logic. But, regarding NUMMI's profitability and productivity (the plant's biggest contributor to profitability), relatively speaking, for Toyota, I'm guessing that NUMMI would have had easily the lowest productivity of any of its plants in North America. For GM, I believe that NUMMI has lately been middle of the pack. GM didn't choose to close ALL plants, just some, so just because they were in Chapter 11 does not automatically mean they had to pull out of NUMMI. With risks and some costs shared with a joint venture partner, good (for GM) productivity, growing volumes, an ongoing need for small, fuel efficient vehicles, you could argue that GM could easily have made the decision to stay with NUMMI.

Further, even granting (as we should) GM its right to make business decisions as they see fit - in this case pulling out of NUMMI - what is the justification for how they exited? Twenty-five years of partnership with Toyota (50/50) and with the UAW and the local community and they simply walk away, for the second time from the same community, workforce and union local.

"Toyota is paying the state back with the foulest form of ingratitude," charges Herbert. The facts say otherwise. On March 18, Toyota announced that it will pay $280 million to fund transition support for NUMMI's salaried and hourly team members. This is in contrast to the payment from General Motors of, let's see, that would be precisely $0. I don’t know but that's probably the same they offered the workers when they laid them off in 1982.

Herbert condemns Toyota for its "ingratitude." What did the state of California do to take advantage of the incredible gift (new production paradigm; new model of labor-management relations) that NUMMI/Toyota gave them? Did they build an industry-friendly environment to attract more businesses and auto suppliers? No. They sat and watched as company after company fled the area, fled the state. Instead of being vilified for bucking the trend (self-inflicted by the state) of exiting, Toyota should be lauded for staying long after every other automaker fled.

Labor Pains
As long as we're passing around blame, let's not forget the national and international levels of the UAW. Instead of learning from the outstanding success of its outstanding brothers and sisters at the UAW Local 2244, UAW leadership remained suspicious of the innovative and successful model of labor-management relations pioneered by NUMMI. NUMMI and UAW Local 2244 signed their first collective bargaining agreement in June 1985, with the company and union committed to resolving problems together and seeking mutual trust. But, UAW national and international leadership remained skeptical, stuck in a 1950s mindset of adversarial labor-management relations, as they watched their membership plummet over the years.

Imagine if the State of California and the UAW had together embraced the NUMMI model and made CA into the land of the world's best environment for businesses and workers to work together for mutual prosperity! Instead they chose years of business-unfriendly policies and inaction rather than aggressive action to retain and attract business. Now they expect Toyota to now do FOR them instead of asking what they could do for themselves.

Toyota's ongoing involvement as GM's JV partner at NUMMI has been a matter of loyalty as much as anything else. Under ordinary circumstances, Toyota would never close an operation it had invested in. Toyota has a track record of proving time and again the lengths to which it will go to preserve jobs well past the apparent business need for them. When NUMMI opened, Toyota didn't receive ANY of the product from the plant, so NUMMI wasn't even part of Toyota's marketing plan. Toyota added its own product to the mix when GM couldn't sell enough to keep the plant running at anywhere near capacity. Until Toyota added the dowdy Corolla FX hatchback in about '88, the plant was running at about 70% capacity. GM would've laid off the extra workers; Toyota gave them additional training.

In the beginning, Toyota had many concerns about transplanting perhaps the most important aspect of its production system - its way of cultivating employee involvement - in getting started. How could workers with such a bad reputation support us in building in quality? How would they support the concept and practice of teamwork?

As it turned out, the "militant" by reputation workforce of the old GM Fremont plant was not an obstacle. Of course, problems cropped up but they were overcome through the effort of all involved. In fact, UAW Local 2244 members didn't just accept Toyota's system, they embraced it with passion. They took the quality of the plant from GM's very worst to GM's very best - not just bad to good, from worst to best - in only one year. The exact same workers, including the old supposed "troublemakers." (Again, see SMR article.)



The fact is, for either GM or Toyota, we don't know and won't know all the facts around their respective business decisions to exit. But, it is certainly a stretch to hold Toyota more culpable than GM just because they were left holding the bag.

Remember the Alamo
Herbert states that NUMMI was de facto a Toyota production facility, quoting production figures carefully chosen from the years 2002 to 2009, when sales (and therefore production) were down for GM and strong for Toyota. But, percentage of product per partner is incidental to responsibility as a 50/50 joint venture partner. Investment in a factory - whether joint venture or wholly-owned - means investment in the people and assets with an eye to their value beyond product mix allocation at a given point in time. Probably Herbert didn't know that initially Toyota received no product at all from NUMMI, with all of the production going to GM. Over the course of the 25 years of the joint venture, a little over 25% of the product went to GM. Note, however, that in recent years the low volume of GM product was not due to anyone's strategic intent - GM just couldn't sell the product in the volumes they would have liked. The increase in percentage of production the past few years wasn't because of any long term plan for Toyota to take over NUMMI - it was simply because Toyota could use capacity that GM didn't want at that time.

That ignorance did not prevent Herbert from calling "a cold and irresponsible act on Toyota's part, a decision that was not necessary from a business standpoint." I guess Herbert knows a lot more about Toyota’s business situation than I do. What I do know is that Toyota was facing fundamental challenges in terms of excess capacity at a time of lower demand. It was faced with owning the remaining automobile production plant in California - a state that had witnessed the exodus of more than a dozen other plants over the years. As Herbert states, "Shutting down the plant will be another milepost in the long erosion of California's once-thriving auto industry."

That is the one statement that Herbert makes with which I can agree, in both fact and sentiment. It is indeed a sad state of affairs that a once-proud industry is now a thing of the past. But, don’t blame losing the battle on the last-standing soldier at the Alamo.

NUMMI's Magnitude
NUMMI was hugely important to American manufacturing. NUMMI proved that the best, supposedly "Japanese," production methods in the world could work on American soil with American labor. An early motto at NUMMI was "Best of Both Worlds." I truly believe NUMMI in its heyday embodied that motto in principle and in practice. And, if lean production and lean thinking and the lean enterprise are the way forward for American organizations in all industries, NUMMI was the most important lens for the world outside Toyota to see it up close.

The story of NUMMI is a hugely important one in the history of American industry. In the mid-1980s, NUMMI offered the first close-up look at what later became known as lean production. While many visitors in the 1980s marveled at the technical details of the Toyota Production System, others raved about the new model of labor-management relations that NUMMI spearheaded.

If NUMMI made business sense for Toyota as a solely-owned operation, Toyota would surely stay and keep the plant open. Without a joint venture partner, we can only assume that the numbers just don't add up. It's as simple as that. Rather than outrage at Toyota for leaving due to a situation that makes for an impossible business case, Herbert would serve his readership better to encourage the building of business environments that attract and keep good employers. With such an environment in place, I'm sure both Toyota AND General Motors would have made different decisions.

Agreement - and Closure
The closure of NUMMI is indeed unfortunate and I am joined by thousands of others in lamenting its demise. The employees of NUMMI didn't care about the geopolitical environment that brought about the creation of the joint venture 25 years ago, and they don't much care about the macro-economic trends that have contributed to its termination today. The employees - hourly and salaried - of NUMMI did their part to show a better way of working together. They deserve better treatment now, from all parties, not just Toyota.

john

An Interview with Professor Takahiro Fujimoto, Manufacturing Management Research Center, University of Tokyo

As Toyota's crisis has unfolded the past few weeks I have been in regular touch with the most knowledgeable "Toyota watcher" of all, University of Tokyo Professor Takahiro Fujimoto. Taka first became famous for the important research he conducted at Harvard Business School with Kim Clark on Toyota’s product development system. Since then, having returned to Japan, Taka has written many informative books, including The Evolution of a Manufacturing System at Toyota, The Birth of Lean, and Competing to Be Really, Really Good.

I asked Taka to give us the benefit of his perspective on Toyota's woes through a simple Q&A. You will see repeated reference to "monozukuri" and the "monozukuri gemba." The literal meaning of monozukuri is simply "making things." But like other simple terms such as kaizen or gemba, the Japanese use of the term monozukuri takes on deeper meaning - call it the "art, science and craft of making things" - with connotations of something close to a national philosophy and a reflection of national character. Toyota's troubles, along with other indications of industrial decline, have led to national dialogue in Japan concerning the loss of monozukuri leadership. That backdrop can be read in many of Taka's remarks, which limit themselves to not only Toyota, but which concern Japanese industry as a whole.

The Emergence of Complexity

John Shook: The rash of recalls and embarrassing public hearings in Washington represent an unprecedented crisis for Toyota. What is your take on what has led up to this state of affairs?

Takahiro Fujimoto: The current series of problems represents a massive failure on the part of Toyota. And Toyota must take full responsibility for ending up where it is today. But the root causes of these problems are not easily identified. Many internal and external factors have combined in a complex mix. These include misjudgments by Toyota, and overconfidence in its own quality. The factors also include increasingly complex vehicle design, production increases and globalization, and the resulting explosive rise in the number of related problems. While some of these factors are specific to Toyota, others affect the industry as a whole.

I won't join the critics who are questioning the integrity and quality of the entire company, and who are looking for simple solutions to the current complex state of affairs. We must be careful about judgment until investigating the actual problems more thoroughly.

I have had ample opportunity to examine the company and do not believe that Toyota's guiding principles are the source of its troubles. Nevertheless, I do find that Toyota's operations have stumbled in both attentiveness and ability.

Shook: Can you name one primary factor that has contributed to this?

Fujimoto: Again, it is difficult to name one just factor because the root causes are extremely complex. Toyota has absolutely made its own errors: clearly there are specific aspects of Toyota's organizational culture that lurk behind its poor decision-making. Moreover, I have observed an air of arrogance that may certainly have weakened Toyota in recent years. Yet it must be noted that Toyota faces the same huge challenge as any other company of its scale, in terms of product, market, and production complexity - all the challenges of globalization. The automobile companies of developed countries have been and will continue battling what we might call the demon of complexity - a long-distance obstacle course on which they are challenged to build their capabilities.

If there is one primary reason for the crisis, it is that this overwhelming complexity exceeded Toyota’s organizational capability.

The conditions leading up to this affect all major global automakers. Vehicles in developed countries become ever more complex for several reasons. For one, the governments of developed countries have imposed strict regulations governing safety, emissions, fuel consumption and so on. Meanwhile, the requirements of customers have also grown more stringent. Such preconditions mean that industrial design teams have to solve what is in effect a vast set of simultaneous equations. One response has been to limit the shared use of components, and to seek product-specific optimization. And so technologists have developed extraordinarily elaborate - and complex - electronic control systems as a means of modularizing their designs with these constraints. The vehicles demanded by customers in the developed economies of the 21st century contain software with more than 10 million lines of code.

Up until now, Toyota has led the race in dealing with the increasing complexity of functionality, the capacity needed to produce an increased number of vehicle models, and the challenge of managing an increasing global organization. In fact, Toyota has been an industry-leader in vehicles with complex designs, such as mass-produced luxury cars and hybrids. And yet the integrated organizational capability that drove Toyota's success and leadership in the U.S. market could not hold together in recent years, which betrayed its dark side. Despite their best efforts to build capability, they were unable to conquer these demons of complexity.

The Roots of Toyota's Troubles

Shook: How much of the trouble would you attribute to specific decisions made by Toyota, as opposed to the general challenge of complexity facing all global companies?

Fujimoto: Toyota's great success of recent years put the company in a unique position, which led to some of its mistakes. The company was running too fast enjoying the tailwind of years of dramatic growth. When the financial boom in America generated increased demand for luxury cars, Toyota was able to meet that demand by tapping into its strong Japanese operations specializing in the mass production of complex products of high quality. Consequently, Toyota's volume of luxury cars exported to the U.S. rose rapidly, which generated unprecedentedly high profits. The company then invested that profit by rapidly expanding production volumes, and increasing the number of manufacturing facilities and product lines. As a result, Toyota found itself leading the world in production volume. As a trailblazer to develop environmentally-friendly vehicles, they also led the field in the "complexity race."

However, when the U.S. boom turned to bust, Toyota's fortunes were reversed. The collapse of the American market for luxury cars, and a misguided period of investment into U.S. truck factories caused the red ink to start flowing. The rapid increase in the number of overseas factories and new models simply exceeded the amount of quality managers available. Observers suspect that the failure to evaluate and approve components designed by overseas suppliers lies behind the problem with the accelerator pedal.

Most important of all, Toyota's new position as global leader appears to have influenced leaders to lose sight of a fundamental way of thinking at the company. Toyota's thinking had always been "seek quality, and volume will follow". But the looming prize of becoming the world's number one automaker led some managers to replace the company's quality first policy with a "plan for volume and achieve volume" approach. The result was to chase volume and overextend on quality - a flaw that was amplified by the multiplying effects of increasingly complex designs and rapidly increasing volumes.

Shook: What other factors have you identified as key? How have senior managers reacted to this crisis and criticism after years of success and praise?

Fujimoto: Having spent the '90s being admired for producing the world's best quality, an arrogance born of overconfidence started to appear in certain sections of headquarters. The signs of that unfortunate arrogance are clear. The number of customer complaints received by the company is significant. And yet even as quality problems and accidents occurred, Toyota leadership clearly responded by saying, "our quality is perfect - it's the user's fault." This attitude is a severe departure from Toyota's true management philosophy and demands correction.

Toyota certainly knows that there is no excuse for a company to avoid full accountability. More than ever, businesses must be self-critical and accept responsibility whenever there is a disconnect with customers; or they cannot win trust from customers and society in general. Businesses should never say things like "we didn't envisage this type of use," or "it's the driver’s fault," or "it's just a question of how the customer feels."

Businesses have to realize that in this age of complexity, not only technology but customer requirements have also advanced. For instance, Toyota made some recent recalls on the basis that "certain customers felt uncomfortable." What had previously been regarded as acceptable is now unacceptable. If Toyota wants to lead, it has to stay ahead of advancing customer requirements.

Shook: Have you observed the same kind of negative changes in the factories, at the production gemba?

Fujimoto: I have never seen this kind of arrogance at a Toyota factory, the company's monozukuri gemba.

It is critical at times like this, when reports in the media dramatize the waning of the foundations of all Japanese monozukuri (manufacturing), to be sure to evaluate actual conditions at the monozukuri gemba. The reliability of monozukuri is a function of the overall balance of production gemba capability with demands placed on it. The collapse of that balance is one of the causes of the current problem. However, as far as I have been able to discern, there are no indications of the collapse of the fundamental capabilities of the engineering and production operations of Toyota or other Japanese manufacturers.

It is highly probably, however, that the burden of keeping pace with the increasing complexity of today's automobiles exceeded the pace of building capacity at the gemba. Broadly speaking, the overall complexity of the products and the industry itself is an underlying cause of Toyota's situation. The company's product development and engineering organization, which has defined itself by stretching the limits of electronic application as exemplified by the hybrid vehicles and high-end electronics for luxury vehicles for the U.S. market, was in this case defeated by the complexity. Rather than characterizing the situation as a "decline of product development capability", a more appropriate characterization would be to state that the "development and engineering burden was simply too great".

Regarding the specific problem of Toyota's sticky accelerator pedal, I suspect that functional requirements and basic design constraints were assigned to the American supplier CTS, which then conducted the detailed engineering design. Even so, ultimate evaluation of all vehicle components is the responsibility of the automobile manufacturer. It is possible that Toyota’s supplier quality evaluation capability was insufficient.

Despite all this, I will share that I personally walk and observe Toyota’s gemba regularly and can state that capabilities at the company’s core operations are still healthy. Given its extraordinary abilities to learn, I fully expect Toyota to quickly recover.

Shook: Can you discuss how two commonly cited factors - the commonization of parts, and the increased use of temporary workers - may be tied to the current crisis? In the U.S., commonization is frequently cited as an important factor. In Japan, the issue of temporary workers and their impact on teamwork has been a topic of great debate for several years.

Fujimoto: Certainly excessive parts commonization can be an invitation to problems. This is a complex issue.

At a February 4 financial briefing, Toyota executive Yasuhiko Ijichi stated that it is possible to achieve both high quality and low cost. This position must be considered from the two dimensions of design quality and manufacturing quality. As Mr. Ijichi said, manufacturing quality improvement and cost reduction absolutely support each other. This belief is at the very foundation of Toyota's production system and quality control.

But, the relationship between design quality and cost reduction is not such a simple matter of linear cause and effect. On the one hand, the connection between costs and design standards is clear: the higher design standards of today's complex products increase costs greatly. That’s why product developers use Value Engineering (VE) to prevent designing in more functionality than is necessary. Beginning in the 1990s, over a period of about 10 years, Toyota realized over One Trillion yen ($10 billion U.S.) from VE. More recently, through such activities as reducing the number of different kinds of bolts, Toyota quickly increased the usage of common parts across new models.

On the other hand, it is common knowledge that with excess parts commonization, design quality problems can easily spill over to all models (that use a given part). A study by the Japanese Ministry of Transportation found that "parts commonization is one cause of product recalls." So, while to state that "quality and cost reduction can coexist" is absolutely true regarding manufacturing quality, design quality is a different and more complex matter.

As for the impact of temporary employees, it is commonly thought that the high rate of temporary employees has been a negative factor on product quality in Japan. I think the situation is a little more complex than that. Japanese vehicle assembler's percentage of temp workers in many factories is 20-23 percent lower than the level in consumer electronics factories. There is no evidence that increased presence of temporary workers has been detrimental to production gemba.

In fact, I believe that Toyota has responded to the complexity challenge with many innovative organizational practices involving its workers, including as the use of SPS (Set Parts System, an advanced form of kitting), increased quality control within each production process, and a revival of the role of the team leader. But in parts suppliers, the rate of temporary workers can reach over 60 percent, leading to conditions where standardized work has not been maintained. I speculate that the impact of such a high rate of temp workers in parts suppliers has been very high, and believe more research is needed to be able to say for sure.

The Path Forward

Shook: Given all this, what countermeasures do you recommend for the company?

Fujimoto: At a minimum, vehicles for advanced countries must be designed to meet even more stringent functional constraints and requirements in terms of safety, environment, trends, and styling. This is the fate of automobiles due to their nature as "high-speed, high-cost, big products that impact the public welfare." This means that firms must prepare to meet the challenge of the complexity problem by mobilizing all its employees toward advancements in such areas as design rationalization, refinement of electronic control systems and digital engineering, and quality control.

Companies wanting a strong presence in all world markets must maintain strategies for simple, low-cost products for the new middle classes of emerging markets as well as confronting the complex design challenges of products for the highly profitable US market - a market which has been a source of strength of the Japanese makers, especially Toyota. And so major changes must be made to meet the twin challenges of complexity and simplification.

Japanese auto makers must continue to embrace luxury and ecologically friendly cars and the associated battle with design complexity, while at the same time eyeing the demand for simple, low-cost, even 500,000 yen ($5,000 U.S.), cars for emerging economies.

Regarding the shift of customers into new price segments, it is a repeat (albeit reversal) of what occurred in the U.S. market 30 years ago. Automakers must create two separate internal groups: the "regular troops" to continue down the more complex path and "special guerilla forces" for engineering and production for low-price products.

Shook: I've been focusing in this space and elsewhere on the tremendous learning opportunities here for Toyota and for the rest of us as well. What opportunities do you see in that regard?

Fujimoto: I agree that the opportunities are great. This isn't a simple matter of the collapse of Japanese monozukuri capability. Toyota was defeated in this case by the demons of complexity. But, the general ability of Japanese manufacturers to cope with complexity is still world class. There is no course other than to redouble efforts to meet the challenge, with deep hansei (reflection) and needed changes.

Obviously there are technical and global management issues to study, but also there are issues to explore at the level of front line work at the gemba. One important question concerns how the extensive use of temporary workers may impact teamwork, quality and productivity, as well as problem-solving and kaizen capability of the organization. It is well-known that this capability has been a great source of competitiveness for Japanese monozukuri.

My own research group has begun a study with a Japanese auto manufacturer to explore the degree to which a team needs to be comprised of regular full-time employees in order to function as a "team." For example, regarding resolving problems on a production line, let's say that usually the line stops less than one minute. In our research we will study what needs to occur to solve problems that appear at such a rapid pace. Within that process, we need to clarify what specific things require a regular full-time worker.

With current levels of training and development technology, even temporary employees can be developed into a conventional "multi-function worker" in a matter of weeks. But naturally it is no simple process to develop a "super multi-function worker" possessing such skills as the ability to handle many processes, conduct speedy troubleshooting, take care of subordinates, inspect equipment, and perform continuous kaizen. It takes years to develop such capability, so regular workers have greater opportunity to develop those skills. For Japanese manufacturers it is critical to determine whether effective teamwork can be achieved with the ratio of regular to temporary workers of only a 50 percent or if a ratio of perhaps 70 percent is required.

For Japanese vehicle manufacturers and suppliers together, the current crisis represents a once in a lifetime opportunity to conduct a thorough assessment of the condition to enable continued survival in the context of right-sizing production capacity while preserving current domestic Japanese production operations with a high percentage of regular employees.

Shook: Thank you, Taka, for sharing your wisdom. We all, Toyota included, have much to learn here that can help us improve.

john

John Shook
Senior Advisor, Lean Enterprise Institute

I have previously introduced readers of this column to Robert Cole, Professor Emeritus at Berkeley, former long-time professor at the University of Michigan, and currently Visiting Researcher at Doshisha University in Kyoto. I hope some of you saw the PBS video linked in last week's column that featured Bob in an insightful interview about the significance of NUMMI.

Bob is the first American academic to seriously study the inside workings of Japanese industry. To those of us who have studied the history of lean or TPS, Bob's work predates even the critical work of Doc Hall, Richard Schoenberg, Norm Bodek and the other American discoverers of TPS in the late 70s and early 80s. As part of his graduate research in the mid-1960s, Bob worked at two Japanese auto suppliers as a production worker, leading to learning that he later captured in numerous writings, including the seminal Japanese Blue Collar, (University of California Press, 1971). Bob's early work was an inspiration for me to study Japanese business, many years before I finally had the chance to meet him (at his favorite Chinese restaurant in the Shiba Koen area of Tokyo).

Bob took note of the recent dialogue in this space with Jeff Liker and we agreed that he would share his thoughts. Over the years Bob has followed the "quality movement" as it developed in Japan and spread around the globe (see Managing Quality Fads, Oxford University Press, 1999). Remarkably, just before the Toyota story broke, he published, along with Michael Flynn, "Automotive Quality Reputation: Hard to Achieve, Hard to Lose, Still Harder to Win Back," in the Fall, 2009 issue of the California Management Review (http://cmr.berkeley.edu/search/issueContents.aspx?issue=396&volume=52&Num=1&qtr=Fall&year=2010 ). He is a long-term member of the American Society of Quality and an elected member to the International Academy of Quality, an association of 60 global quality experts dedicated to quality improvement. So it is especially appropriate that Robert Cole share his thoughts now regarding Toyota’s current quality problems.

Robert Cole:
John, thank you for inviting me to share my thoughts. Let me start by commenting on the topic of quality that you and Jeff discussed.

With quality, perception is everything. By that criterion alone, Toyota has a serious quality problem. Customer trust in Toyota has been shaken. It doesn’t matter if the media have hyped the problems or the politicians have politicized it. It is what it is. To have a reputation for high quality, that is to say, strong perceived quality, is to have won the trust of the customer. I still recall an interview I had some 20 years ago with Nakatsuka Isao, Director of the TQC Promotion Office at Toyota Jidō Shokki (Toyota Industries Corporation, formerly Toyoda Automatic Loom Works), one of the original Toyota firms. "Our most important objective is to deliver superior products to satisfied customers whose trust we must win," he said to me, adding, "If we deliver a product to the customer whose quality creates trouble for them, this will affect their trust in us. If we betray their trust, they will not buy our products for a long time!"

His words may prove prophetic. Until recently, survey results showed that twice as many customers intending to purchase a new vehicle trusted Toyota (and Honda) as they did the Ford and Chevrolet brands. Toyota has now put that trust at risk.

Many factors are working against Toyota which will keep this issue in the public eye. Even Toyota insiders, for one, acknowledge that the response to their recent quality problems has been slow, which makes it easy for critics to claim they engaged in a cover-up, thereby eroding trust. Perhaps as a harbinger of events to come, The Chairman of the House Committee that questioned Toyota executives just accused the company of withholding documents while fighting lawsuits filed by crash victims. Second, it appears that Toyota kept selling specific models despite knowing about their problems. If this aspect becomes clearly framed in the public arena in this way, it will significantly add to Toyota's pain. Third, the ensuing litigation will keep the issue alive in the public mind for some time, reminding consumers of Toyota's culpability. Along with the litigation, lawmakers have signaled there will be continuing congressional hearings and probes over the next few months, again keeping Toyota's behavior in the limelight. Fourth, unlike the Ford Explorer/Mercury Mountaineer tire problem in the year 2000, Toyota's quality problems cut across many different models and there are multiple problems. This suggests that they do not have a specific model problem but rather this is a case of company failure-a far more damning blow. Moreover, because the problem affects multiple models, they can't quietly discontinue a particular faulty model and thereby make the problem disappear (as GM did with the Chevrolet Corvair). Fifth, the testimony by Toyota leaders at the congressional hearings did nothing to inspire trust on the part of consumers. At best, the company comes across as equivocal and not on top of the problem. Moreover, Toyota's responses to customer complaints, which were read at the congressional hearings, project an image of a company that treats its customer's callously. Sixth Consumer Reports (CR), calling it an unprecedented event, recently withdrew recommendations on eight Toyota models suffering from unintended acceleration despite their high reliability ratings. This is a powerful signal to consumers, from an organization that has had a love affair with Toyotas for some 30 years, and an organization which has the most influence on consumers when it comes to new vehicle purchase decisions. Seventh, while problems with unintended acceleration are hardly unique to Toyota, they are now the company most associated with this issue in the public mind. Toyota's handling of this extremely complex problem, thus, will be the continuing focus of the public's attention.

Finally, Toyota currently doesn't have all the fixes they need to make this problem go away. At the congressional hearings, Akio Toyoda claimed that Toyota vehicles are absolutely safe. Yet Jim Lenz, President of Toyota's U.S. Sales Operations, told a different congressional hearing the day before, that he couldn't be totally certain that all the problems that have led to sudden acceleration have been identified and fixed. They can't have it both ways. You can’t tell consumers your cars are safe but you don’t have all the answers. This is not a credible position and hardly inspires customer trust.

Until they do have all the fixes they need, Toyota's quality failures will be kept fresh in the public mind. In particular, if consumers conclude that, perhaps as a result of revelations in lawsuits, Toyota kept selling specific models despite knowing about their defects, then customer trust in Toyota will be severely impaired. All this suggests that the costs to Toyota's quality reputation are likely to be significantly larger than most analysts are predicting. It will take some time for them to fully regain customer trust. Fortunately, for Toyota, they have a long history of reliability with many long-term customers; that should make their task easier than it might otherwise be. Moreover, because of their low cost structure, they have the luxury of being able to aggressively price in order to win back customers.

None of this is to say that Toyota's quality or its quality reputation is in free fall. They still are an extremely strong quality performer. Yet, it is the trajectory that has to be worrying Toyota executives. Quite apart from the issue of recalls, we saw a fraying of Toyota's reputation in recent years. CR reported, in its April 2008 issue, that three Toyota models were being dropped from its 2008 recommended list. Whereas 100% of Honda's tested vehicles made CR's recommended list, Toyota's recommended percentage fell to 73%, down from 85% the previous year. Moreover, by some readings, Toyota's quality ranking in CR has fallen below Ford’s in recent years.

To try to minimize Toyota's quality problem by saying that Toyota customers misused aftermarket floor mats reminds me of way people responded to the Audi unintended acceleration problem years ago. Audi defenders argued that the problem was that clumsy drivers couldn't shift their foot properly between the brake and the accelerator. Blaming customers for quality failures is never a good idea! You need to design for all kinds of drivers including clumsy drivers. Similarly, if customers are misusing aftermarket floor mats, you need to give them incentives to acquire fool proof mats and find a way to warn them against buying those mats that don't meet your standards.

John Shook:
Yes, on the one hand it seems possible to assign the current specific problems to isolated, special causes. On the other, quality problems have been growing for years. Toyota wanted growth, but not that kind. One question to be explored is whether there has been a company-wide lapse in quality consciousness or was any lapse isolated organizationally.

Robert:
Indeed, this leads us to ask are Toyota's quality problems emanating from the manufacturing side of the business? It certainly appears that this is the case. Reports of unintended acceleration go back quite a few years and the Prius quality issue has been identified as a software problem. Note that no amount of kaizen on the assembly floor would have avoided these problems. These are not assembly problems.

Based on my own long term study of Toyota's approach to quality and the various experts I have consulted in Japan, the source of Toyota's quality problems lie in its hyper-growth and the growing complexity of autos (not unique to Toyota of course). I have addressed these issues in my recently posted Harvard Business Review blog (http://blogs.hbr.org/cs/2010/02/toyota_the_downside_of_hyper_g.html) , but I would like to pursue one theme here.

Toyota's hyper-growth has its origins in President Okuda's 1998 challenge to his managers to double Toyota's global market share to 15% by 2010. Toyota managers enthusiastically embraced that target and reached it early, a truly remarkable feat. Yet, it is difficult for any organization which elevates quantity to be a number one goal to simultaneously hold on to a focus of providing the highest quality. This is well recognized in the quality literature. If not managed carefully, a quantity focus will drive down quality. Organizational incentives, both formal and informal, have a way of skewing to the primary target. In the environment created by its aggressive pursuit of growth, quality mantras like Toyota's "Customer First," have a way of morphing from institutionalized commitments to empty slogans.

Toyota's philosophy has been Customer First, as exemplified in the popular term (in Japanese manufacturing firms) "QCD" - where quality (Q) is given priority over cost (C) and delivery (D) , with the understanding that a quality focus is not merely compatible with cost reduction and increased delivery but in fact will often enable both. Put more simply, the traditional Toyota view is that the successful pursuit of quality will enable volume increases and cost reductions.

No doubt, President Okuda never intended to reverse that formula. But aggressive top leaders like Okuda underestimate the way in which their directives get transmuted as they travel through an organization. So Toyota managers, for example, became so busy pressing their suppliers to increase capacity that in some cases they became less interested in listening to supplier concerns about what such rapid capacity expansion might do to quality. Engineers were so pressed to use common parts to reduce costs that they did not have the human resources to address all the design problems that this created. In a recent article, Prof. Takahiro Fujimoto notes a Japanese Ministry of Transportation study which concludes that "parts commonization is one cause of product recalls." In short, it was not only volume targets which now were driving their approach to quality but also cost reduction that was driving their approach to design quality. Both of these run counter to the Toyota philosophy.

None of these problems (deviations from the Toyota way) are insurmountable and indeed production slowdowns should give Toyota the time they need to return to their root practices.

John:
The company has acknowledged that they've been slow. We should point out, however, that the kind of problem being scrutinized is extremely complex and vexing. Not just for Toyota, SUA (Sudden Unintended Acceleration) and concerns about EMI (Electromagnetic Interference) have plagued the industry for years. Still, difficult problem or not, the slow response seems uncharacteristic.

Robert:
That raises questions of efforts by Toyota to sustain and reproduce its work culture. As you and Jeff discussed, Toyota has made an enormous investment in training, creating manuals, videos, and other forms. The rapid pace of global expansion, however, has made the task ever more challenging. In keeping with my previous comments, I want to suggest that organizational culture is no match for diverging incentives. What do I mean by that? Consider the following postulate: Show me what people are rewarded and punished for in an organization, and I will show you how they will behave. To borrow a term from Dr. Deming, this is profound knowledge. In referring to incentives I don't limit the scope to explicit performance incentives, but focus on less formal incentives such as individual recognition and criteria for awarding challenging assignments and promotion. For much of Toyota's recent history, its powerful work culture has been reinforced and sustained through its alignment with its incentive structure. However, the focus on hyper-growth led to a growing divergence between its culture and its incentive system. Under those conditions, culture always loses. It starts to be deinstitutionalized. (As an aside I note that the use of the term DNA in this context (as in: quality is in Toyota's DNA) is misplaced since it doesn’t allow for deinstitutionalization.) Going forward, Toyota will need to realign its incentives with its traditional work culture before it can regain its footing.

John:
While I'm uncertain of the degree to which the company's formal performance incentives may have gotten off track - your reference to informal incentives is insightful here - it seems that the translation of the high level objective of growth came to overshadow everything else. Whether intended or not, whether reflected in skewed formal incentives or not, the effect was the same: behavior that betrayed the company's long-standing values.

Thanks, Bob, for your contribution not only today but for the past five-plus decades of groundbreaking work. Readers, I encourage you go to back and read the seminal work of Robert Cole.

john

John Shook
Senior Advisor, Lean Enterprise Institute

Just a month remains until NUMMI plans to close its doors for the final time on March 31. But, during Toyota's difficult congressional hearings this week, California congressman Jerry McNerney made a pitch for Toyota to keep NUMMI open. Who knows - anything is possible.

As you regular readers of this column know, my introduction to lean production was working for Toyota to help launch NUMMI over 25 years ago. Here are several previous columns that have shared my experience.

I'm very happy to report that I was able to collaborate with the editors at Sloan Management Review to adapt this material into a great new article titled "How to Change a Culture: Lessons from NUMMI," which appears in the just published Winter issue. You can click here for a pdf of this article.

Alternatively, you can access it through the on-line version of the Sloan Management Review at the following link (though the printed article does contain different photos and is worth getting!):
http://sloanreview.mit.edu/the-magazine/articles/2010/winter/51211/how-to-change-a-culture-lessons-from-nummi/

I encourage you to visit the Sloan site (registration is free on the site) and check out the entire issue. In addition to my NUMMI article, there are articles on supply chain, pricing, and an interesting article on managing star employees using the Boston Celtics as an example. There is also a nice interview with MIT Prof. Charles Fine on supply chain strategy.

I'd also like to introduce you to a couple of insightful perspectives on NUMMI that have appeared recently. PBS NewsHour with Jim Lehrer aired a great piece on NUMMI, showing excellent footage of the plant, numerous interviews with NUMMI workers and featuring an interview with Prof. Robert Cole of Berkeley (who I have previously introduced to you here).

http://www.pbs.org/newshour/bb/transportation/jan-june10/nummi_02-09.html

Another wise perspective can be found in a recent article by my co-author of Kaizen Express, Ms. Toshiko Narusawa. In "Arigatou NUMMI," published this month in the Japanese journal "Factory Management" ("Kojo Kanri"), Ms. Narusawa places the importance of NUMMI in historical context. For those of you who speak Japanese:

http://pub.nikkan.co.jp/mgz/kokan/zkok10020-114.pdf

She writes that NUMMI marked the beginning of the concerted expansion of TPS outside of Japan, even outside Toyota City. Prior to NUMMI, TPS had been "discovered" by a few non-Japanese, a few Americans (for example, Len Ricard of GM had discovered TPS through his benchmarking of Isuzu, which GM had purchased), the French (Freddie Balle, for one!), Brazilians (with direct guidance from Taiichi Ohno!), and no doubt others, but at that time understanding was rudimentary and implementation nascent. In 1984, the combined Japanese share of the U.S. auto market was a little over 18%. Twenty-five years later, Toyota alone had a US market share of over 16%.

In Arigatou NUMMI, Narusawa expresses regret that NUMMI is closing, and gratitude for the role NUMMI played. "NUMMI showed that Toyota levels of quality could be attained through establishing a Toyota-style culture in only one year" she says. For those of us working to learn and implement TPS on the North American side of the pacific, we wouldn’t ordinarily stop to consider the impact NUMMI had on Japanese manufacturers' philosophies and approaches as they entered an intense period of transplanting their operations overseas.

Even here within North America, while it makes sense to focus on NUMMI's role for Toyota and GM, NUMMI's influence spread far beyond the doors of Toyota and GM. Yes, NUMMI provided Toyota with validation that its production system would work in North America.

Toyota got what it basically wanted from NUMMI very early on. Toyota's ongoing involvement as GM's joint-venture partner at NUMMI has been a matter of loyalty as much as anything. Under ordinary circumstances, Toyota would never close an operation it had invested in. Toyota has a track record of proving time and again the lengths to which it will go to preserve jobs well past the apparent business need for them.

But, now NUMMI closes. It's unfortunate, but perhaps natural. Everything comes to an end sometime. The numbers just don't add up right now.

Toyota is getting some heat (when it rains ...) for finally pulling the plug, but NUMMI was never supposed to last this long to begin with. The Chrysler-led anti-monopoly lawsuit ended up in a ruling that limited the life of the joint venture (JV) to 12 years, so NUMMI should have closed up shop in 1996 (a ruling that was amended ten years later to allow the JV to operate with no legal time limit).

From a learning perspective, I think it is surely unfortunate for GM that they pulled out of the venture last year, foretelling NUMMI's ultimate closure. Toyota is GM's second most important rival (Ford will always be its first rival - as GM is Ford's), and the joint venture gave GM great access to keep tabs on Toyota. Longer-term, I have to think GM will miss a lot from not having access to NUMMI. I think that matters much less to Toyota. Toyota got what they needed from the JV long ago.

The biggest loss from the closing of NUMMI is for neither GM nor Toyota, but for the greater North American manufacturing community. NUMMI proved that the best manufacturing practices in the world could work right here in North America with a union workforce. And more than just prove that it could work, it showed how it could work. I think we will be discovering more about the impact of NUMMI on North American manufacturing for years to come.

john

John Shook
Senior Advisor, Lean Enterprise Institute

1. PDF: How To Change a Culture, Sloan Management Review


2. http://sloanreview.mit.edu/the-magazine/articles/2010/winter/51211/how-to-change-a-culture-lessons-from-nummi/


3. http://www.pbs.org/newshour/bb/transportation/jan-june10/nummi_02-09.html


4. Arigatou NUMMI in "Kojo Kanri" (Factory Management): http://pub.nikkan.co.jp/mgz/kokan/zkok10020-114.pdf

Jeffrey Liker is professor of Industrial and Operations Engineering at the University of Michigan and author or co-author of numerous books about Toyota that must total more than a million copies in sales. I met Jeff in 1992 when I was still with Toyota, at that time as general manager of planning and administration for the Toyota Technical Center USA in Ann Arbor, just ten minutes from the university's engineering campus. John Campbell in the College of Literature, Science and the Arts; Brian Talbot of the College of Business Administration; and Jeff garnered federal funds to begin a research and education program they called the Japan Technology Management Program. A long association between that program and Toyota began at that time, and one of the most important results - certainly the most well-known and influential - of that association has been Jeff's research and writing.

Quite naturally, with the appearance of Toyota's various quality and recall problems, Jeff and I have been meeting in coffee shops in Ann Arbor to discuss (usually amiably) and debate (often vigorously) the dimensions of Toyota's crisis, whether it is really a crisis, and what it all might mean to the company and to the Toyota Way. We thought it would be interesting to capture some of our dialogue to share it with you here in this space. You’ve been hearing from me, so now you can hear a different view.

How Big A Crisis Does Toyota Face? And What Is The Real Problem?

Jeff Liker: There have been many attempts in the media to explain why Toyota failed in quality and safety. Let's start by assessing the very problem that Toyota has been chastised for publicly, because I do not believe that the problem has been accurately framed in public discussion. In fact, I think the evidence suggests Toyota quality and safety may have been at a peak just when the media claims they have failed.

During the recent recession there was a "time out" in Toyota. Plants were shut down to let inventory drain, or slowed down, so 30 to 40 percent of the workforce were not needed to build cars. Rather than lay off people Toyota used a "shared pain" approach to reduce bonuses and use rolling layoffs. Extra people were put to work vigorously learning all the TPS basics and solving problems every day. At TMMK in 2009, as a result of these efforts, defects found in final assembly inspection were reduced by more than 40 percent. In R&D Toyota also did not lay off anyone and there were many opportunities for kaizen. In 2009 Toyota won 10 JD Power initial quality awards, more than any other automaker.

John, in your last blog, you seem to charge that over the last decade the Toyota Way has languished, and that a crisis would force a revival. I have been watching the company struggle with problems year after year and feel a sense of delight - for Toyota has always maintained an undercurrent of improving the way it develops people, with plenty of wins along the way. It certainly has not been linear, and there are people who are much more developed than others, but the progress has been impressive.

Just shortly before the recalls were announced, and the media frenzy started, I was ready to declare that Toyota had conquered the challenge of the worst recession in post-war history by using it to as an opportunity to develop people and come out stronger. I suspect that had it not been for a highly visible accident in California where a police officer got a Lexus loaner with the wrong all-weather floor mat not clipped down, and subsequently killed himself and three family members, Toyota would have in fact thrived during the recession facing all companies. The highly spectacular videotaped incident in California led to the spotlight on Toyota and on the National Highway Transportation and Safety Administration (NHTSA). This caused NHTSA to pressure Toyota to recall vehicles that in the past would have led merely to a technical service bulletin. For example, Ford issued a technical service bulletin on the Ford Fusion Hybrid brakes, a very similar problem to what led to Toyota recalling all of the 2010 Prius in the world.

I see the recalls as a very, very, very poor indicator of fundamental problems. They are rare isolated engineering issues that in this case seem to have nothing to do with the health of TPS in plants or even product development. So far the more than 6 million vehicles recalled revealed three problems - an aftermarket floor mat that was misused by the public, a sticky pedal based on a composite material selected with a supplier about six years ago, and a software coding error made early in 2009. For a vehicle with about 3000 parts per model that is not a lot of errors in six years. I realize there are more but the customer complaints to NHTSA about safety issues for Toyota over the decade of 2000 to 2009, when they were supposedly in decline, were the fourth best out of twenty automakers (Edmunds.com). Complaints about Toyota made up 9% of the database while Toyota sold 13.5 percent of the cars. Where is the evidence for this free fall of quality and safety?

Am I saying that Toyota has no problems and this is all media hype? Not exactly. I think the reason Toyota is in the spotlight and we all feel obliged to admit that Toyota has lost their way and needs major surgery is because of media hype, plain and simple. I also think that Toyota always has and always will have problems. I do admit that my greatest concern in all of this was the evidence of slow responses to customer safety complaints and the notion of "hidden" recalls. Fundamental to the Toyota Way is surfacing problems and solving them and hiding problems has always been one of the most fundamental sins.

Toyota has a far, far greater problem solving capacity than any other company I know. By that I mean the depth and breadth of people capable of skillfully solving problems. That was true 30 years ago and it is true now - in my opinion based on my observations. Akio Toyoda absolutely needs to bring that problem solving capability to bear on quality and safety. As you have noted John, this is a golden opportunity to use a crisis to advance the company and Toyota should never waste a good crisis. They used the recession effectively and now right on its heels is perhaps an even more threatening crisis. Use it, exploit it, get better than the competition. If Toyota emerges a smaller, but stronger company I would certainly be a happy Toyota observer.

John Shook: I agree with that last point, Jeff. As urgent as the immediate crisis may feel to Toyota, the important thing is that the company uses this opportunity to learn and improve. That's true even if, when the dust settles, this entire fiasco is the biggest mountain ever made out of the smallest molehill. (A product recall this huge, and congressional hearings, with 20 sticky pedals at the heart of the matter? Does anyone think there aren't 20 Fords out there with sticky pedals?)

But, the situation must be taken seriously. People have died. The company faces critics from all sides as never before. And, the quality problems didn't start with the three that are dominating news; nor are Akio's public apologies, bowing, and promises unprecedented. Four years ago, then President Watanabe was bowing to the press in Japan, making promises that sounded very much the same, vowing to fix quality problems and get the company back on track. Over the past couple of years, even Consumer Reports has taken core Toyota products off its recommended buy lists. So, it's hard to shrug this off as three isolated incidents.

I expect Toyota will draw upon its deep problem-solving skills to deal with these specific problems. But it won't be easy, even for Toyota. Understanding the true cause in situations like this is extremely difficult. No one wants people to die, and everyone wants to know that lives are not being put at risk unnecessarily. But, along with the congressional hearings, lawsuits are coming out of the woodwork, settlement-seekers will start blaming Toyota for random accidents ("the pedal in my Camry got stuck, man ..."). Separating the actual facts from the noise here is going to be extraordinarily difficult. But, that's what happens when this happens. Toyota said they wanted to be Number One.

I haven't talked with anyone at Toyota about the specifics of the engineering problems involved here, but you have, Jeff. Certainly, the company needs to be on top of all of these things, but at the same time surely these are the kinds of things that could happen to any company, any complex engineered system. Murphy is indeed everywhere. The more complex the system, the more he is present.

There are however deeper charges against Toyota that must be taken seriously. Charges that the company is slow in responding to safety complaints. And more specific charges that their electronic controls system is susceptible to electromagnetic interference. Those charges must of course be investigated fully. They will be and the facts will emerge.

I will confess that watching this unfold on the public stage also makes me want to ask: are we completely incapable as a species of waiting until the facts emerge before making declarations of what to do?

It has been almost humorous to watch management pundits who know nothing of the facts - and even acknowledge as much - yet have no hesitation of prescribing what the company should do. I can forgive reporters and TV talk show hosts for doing that. I suppose they are playing their role.

Ultimately, however, I cannot help but put on the hat of my Toyota sensei who taught me to always look critically at problems and learn from them. My critical eye says Toyota is in a crisis and customer trust is at stake. This is a huge problem and Toyota needs to get to the bottom of it. Unlike the reporters and pundits, they need to find the real facts and the root causes and take action. This will be the challenge that defines the company for this decade.

So Jeff, that's why I wrote that the issue here is not the crisis but how Toyota responds to it. The issue here is for the company to problem-solve its way out of this and then to move forward. In that sense what we are seeing for Akio Toyoda and the company is a crisis - and an opportunity.

Has Toyota Lost Its Way?

Jeff: John, this discussion raises a very deep question: has Toyota lost its way?

You suggested in your last blog that the company's misfortune is productive, that it represents an opportunity to deepen the Toyota way as you knew it when you worked for the company. You seem to argue that the Toyota Way has been watered down, and that the problems really started to become serious when former president Okuda began an aggressive campaign to focus on growth, and that this dilution continued with presidents Cho and Watanabe's Global Vision 2010 plan to gain 15 percent market share.

I have a slightly different view. Lets assume we could somehow calculate the density of the Toyota Way, measuring how much of the Toyota DNA is in a person. I suspect that, as you have implied, over the last two decades we would see a lower average and larger standard deviation. I think this was inevitable as the company globalized, lost most of the original generation, and took on hundreds of thousands of outside people. Short of remaining a Japanese company, when Toyota decided to globalize, it set in motion a more challenging path forward to maintain the cohesiveness of the Toyota Way.

The American executives and managers that I speak to de-emphasize the 15% target. They saw that challenge as a wake up call: demand for Toyota products was accelerating and they needed to be prepared. The more important part of Global Vision 2010 for them was to become the most admired auto company based on exceptional quality and customer satisfaction. Another major focus was the goal of regional autonomy, creating North America as a self-reliant entity. Toyota knew at times the Americans would have to be cut loose to struggle through issues with relatively little Japanese help.

To do that in a period of intensive growth would require developing people and suppliers more efficiently. What they actually worked on over this last decade was not growth per se but the fundamentals of standardized work, quality, flexibility, flow, and developing people.

I agree that as the company grew all the new people brought on could not be as mature as the original generation. Yet I am not so sure Toyota lost its way as much as they have been struggling to grow up.

John: Yes, the growing pains that Toyota has experienced are to be expected. On the other hand, I think it is okay for our expectations for Toyota to be extraordinarily, even unreasonably, high. Toyota has set extraordinarily high standards of performance, in terms of both results and process, for industrial organizations. I think Toyota would want us to have these high expectations. Toyota certainly has the same high expectations of itself.

I was taught by my Toyota mentors to never make excuses. What often sounds to us like an "explanation" is viewed inside Toyota as an excuse. So, yes, any struggles the company is experiencing are surely a matter of "struggling to grow up" as a global organization. It's perfectly understandable that they are where they are. But, to continue with the struggling to grow up metaphor, think of how to best deal with a maturing adolescent: pointing out areas of needed development need not be taken as a blow to the ego or a negative judgment of character.

In contrast to analysts who state that the company's problems were caused by over-expansion, I believe that the decision to pursue such incredible growth was the result of the company having already lost its rock steady focus. It's not the growth strategy that caused the problems; the problems were already there and led to the decision to pursue unbridled growth.

By the mid-90s, the challenge(s) that had guided and even defined the company had been met. Leaders knew the company needed new challenges and did the necessary thing by trying to define them. Toyota as we know it was built on meeting challenges laid down some half a century earlier. At that time the challenge issued by company founder Kiichiro Toyoda was to catch up with America. The company met that challenge, led by Eiji Toyoda and others, incorporating it in the fabric of the corporate culture interpreted as being the best automobile company, with "best" defined by quality, cost, and customer first.

As a result of this, in the mid-90s, leaders chose two new challenges: growth and environmental friendliness. Environmental friendliness led to the successful development of leading hybrid technology. But the focus on growth resulted in the problems we’ve seen due to an unprepared global management system.

How Do You Grow A Culture Organically in a Period of Extreme Growth?

Jeff: John, that might be the most important challenge: to stay consistent with Toyota values and principles at a time of extreme growth. Culture is not static. It is continually evolving. An organization cannot double in size, double again, and double again and simply maintain the culture. Human systems are constantly changing, adapting, and evolving.

This was a challenge recognized by Fujio Cho in the 1990s. Like you John, he saw that the Toyota Way was weakening without the legions of Japanese coordinators and trainers. The Americans needed to become self-reliant. And so when he was in America as president of TMMK he started an effort in America to develop a formal Toyota Way document. He and the committee struggled with this. They agonized over every word and there was disagreement over whether you could even productively write it down. After ten years of effort, and Fujio Cho selected as president of Toyota Motor Company, he led them to write The Toyota Way 2001. This was published as the guidebook to culture for the entire company globally. The very fact that Toyota produced and released such a document was significant: it was an open admission that the Toyota Way would not automatically sustain itself and a serious effort was needed to continually recreate the culture.

The Toyota Way 2001 was an attempt to explicitly transfer Toyota culture. Further efforts led to Toyota Business Practices, the concrete problem solving method to put the Toyota Way into practice, and a version of the Toyota Way for Sales and Marketing. There was intensive training. It started from the very top of the organization and in a train-the-trainer mode was cascaded down. Theory in the classroom was linked to practice at every step. At the top level, senior leaders met across geographic boundaries and did projects together which led to a bonding and networking that helped link together one culture of Toyota. Toyota Business Practices required rigorous problem solving, which included presenting A3s to seasoned experts. Even at the top of the company 80 percent of the executives who made their presentations failed the first time and had to go back and improve their A3s. It was a severe learning process. As the executives learned they became the coaches and judges for their people and learned more teaching and critiquing then when they did their own problem solving projects.

I have seen many companies attempt to become lean or high-performance organization; and The Toyota Way and Toyota Business Practices training was unique. The actual attitude and behavior change I witnessed ran far deeper in Toyota. While other companies seem to run out of gas after the initial burst of energy, Toyota's deployment was still going on eight years later as a serious, effort - what you, John, have described to me as a marathon, not a sprint.

There were many other innovations developed in Toyota to continue to evolve the culture. One notable achievement was the Global Production Center, an innovative way to deeply train fundamental skills in employees (described in Toyota Talent and Toyota Culture). The idea was that training employees in the more routine aspects of the jobs efficiently (e.g., through video manuals and progressively more challenging exercises) would provide more consistency and free up group leaders to focus more intensively on the tacit skills required. Toyota also developed training in how to do on-the-job development. In manufacturing Toyota continued to cycle back to the basics of standardized work, job-instruction training, and now Toyota Business Practices to reinvigorate the group leader level or the management level. Through hoshin kanri managers were continually challenged to bring their problem solving skills to another level.

As I watched all of this I was impressed by the continual dedication to developing people. Clearly one-on-one mentoring for years is superior, but Toyota would not give up on searching for a way to maintain the cultural and skill base of the company even when there were not enough Japanese to go around.

John: In my more impatient younger days, I thought many aspects of the development of a new, global Toyota Way should go much faster. But, it may well be that the process of deeply transplanting a culture or creating a new, hybrid one simply takes this much time and perseverance. And, by "this much time," we're talking about decades. So, yes, a marathon.

That leads me to a critical observation here, which is the sheer level of difficulty of what Toyota is attempting. If a company is not so concerned about transplanting culture, it is relatively easy to simply set up operations around the world, hire the best local managers, and turn them loose. "Turn them loose" that is, except possibly with tight financial controls and other results-based metrics. If you manage by results, to use Tom Johnson's model, it is relatively easy to set up controls to "manage" global operations. But In Toyota's case, since the company manages by means rather than by results, it is necessary to inculcate each global operation with the means by which the work is done, objectives achieved. And that is what Toyota, to the company's great credit, set about trying to do when establishing its first comprehensive operations outside of Japan at NUMMI. (Just as Tom Johnson's model highlights the difficulty, Mike Rother's description of the Toyota Kata introduces an important enabler to culture development. Even more important than specific training is the establishment of the basic ways and routines through which work is conducted.)

Anyone who has ever worked in any company has at some point marveled at how difficult it can be to get a small group to be truly on the same page regarding even a simple matter. Now multiply that by the level of difficulty entailed in developing a common way of thinking about work - the Toyota Way - across the geographical and functional complexity of a global automobile company. It is so much easier to simply say, "Here are the targets - do it your way."

Toyota has taught the world much about process control, quality, productivity, problem solving, employee development - but, I hope its biggest contribution in the end is to lead the way in developing the truly global integrated management system. This is the process that was begun 25 years ago and remains the greatest remaining internal challenge for the company.

The only greater challenge may relate to the second one laid down by Toyota leaders in the mid-90s - creating more environmentally friendly vehicles. This effort has gained great momentum in recent years at Toyota and elsewhere. But, what began as simply creating vehicles that were a bit more environmental friendly vehicles may need to extend to questioning even the very meaning of personal mobility.

Thanks, Jeff, for sharing your insights.

john

John Shook
Senior Advisor, Lean Enterprise Institute

Okay, so how do you respond to a "crisis"?

My recent encouragement to Toyota President Akio Toyoda that "It isn't the crisis, it's how you respond to it' was misunderstood by some.

Many prominent public relations pundits have been chiding Akio and Toyota for their ham-fisted handling of their current crisis. But, there is a vast difference between my suggestion and the suggestions of the PR Pundits. My intent was to admonish the company to respond to the crisis by addressing any problems and making itself a better company. I was not simply looking for a better public relations campaign.

I worked for Toyota in various capacities in the 80s and early 90s and have been somewhat critical of the company in recent years. Even prior to "recent years," I have always been quick to point out that Toyota is not perfect. In spite of the praise and study and mimicking by countless individuals and companies, Toyota was never perfect, never will be.

Yes, Toyota's public handling of the case has been bungling. But, Toyota the parent company in Japan has always been a tongue-tied country bumpkin. While that characteristic has hurt them - deeply - in this instance, is that weakness the fault that we want the company to address today? Surely not. The lessons to be learned here extend far beyond yet another study of poor handling of a PR crisis, petty assertions by PR consultants and professors to the contrary.

The opportunity here is deep and profound. This is the firm that led the way to a new paradigm in industrial organization! The most studied industrial company in recent history is struggling mightily and struggling in ways that seem on the surface to be in direct contradiction to everything that was thought about the company. Has something gone wrong, seriously wrong, to the degree that the company could even fail?

Were decades of observations by thousands of researchers and others - possibly the most studied company of our time - simply wrong, or did something happen to change this exemplary organization almost overnight? Or, are reports of Toyota’s fall from grace grossly overstated?

Beyond Tainted Tylenol - Why This Crisis Has Been So Hard For Toyota
Remember, on the surface, this is all about accelerator pedals and floor mats. If so, then how could it have gotten so out of hand and hard for the company to respond? Some subject matter experts like Diane Sawyer and Yale Professor Jeff Sonnenfeld are comparing this crisis to that of Johnson & Johnson's Tylenol disaster (implying that Toyota should just take a page from their playbook) - yet the similarities are few and superficial. In the case of Tylenol, the cause was clear, had nothing to do with the company's own processes (so there was nothing to "fix"), and with the obvious danger to the public, the right course of action was clear. Heck, they could tell customers to throw away their old bottles of Tylenol. A car is a vastly different matter.

It is possible, of course, that Toyota is simply lying, as some critics are asserting. There are those who fear that there is a willful mass cover-up going on inside Toyota. It is possible - it happened at Mitsubishi - but I would be surprised. But we really don't have to guess. We will discover the truth of those assertions as the facts emerge. And they will emerge.

I do have a fear here, though it is not that dramatic. My fear is that Toyota may have succumbed to the pressure to declare a definitive fix by presenting one prematurely. The pressure to be decisive, to place the blame, to declare the problem and simple solution has been extraordinary, as it often is in American business culture. Remember Toyota is a vast organization, scattered geographically and organizationally around the globe. To piece together everything that has gone on here is a non-trivial matter.

Credibility Versus Spin
I am not defending any reluctance on the company's part to disclose critical facts. For the record, I should say that I have not spoken with anyone at Toyota about the specific problems that precipitated the current crisis. Given that, my guess (and it’s only a guess) is that the company may not exactly know all the facts yet. It may take some time to sort through the myriad actions, communications, assumptions, mistakes, and intentions that comprise this fiasco. It's my guess that, as a company, Toyota doesn't yet really know what went wrong, from either a purely engineering standpoint, or organizational decision-making or certainly a communications (internal and external) standpoints.

Some charges being made are serious and deserve to be treated as such, unlike the petty, easy pot-shots being taken by the PR Pundit crowd. I want to encourage us (all of us - accusers, Toyota, TPS practitioners, lean production researchers) to look at the facts as they emerge and try to understand dispassionately how the world's most passionate problem-solving company could find itself in this position. Toyota clearly has to take the lead here, beginning with making all the facts known. My suspicion is that the company may not yet have a full handle on all the facts. And before we jump on them for that, I would bet your pay check against mine that Toyota has a better handle on its facts than your company does on its own. I suspect that Toyota may not yet know exactly what has gone wrong. I'm referring to full understanding of the problem at all levels, the pedal and floor mat problem (which, they tell us they now understand) all the way to the broader question of how they got themselves into this mess.

It is my hope that Toyota will share with us the reflection and problem-solving that will take place in the deepest and broadest levels of the organization. What happened and why? If we lost our way, how? What lessons are there not just for Toyota but for all of us?

(Silly aside: There was – maybe still is – a bizarre practice in Japan known as "minoue soudan." In a TV show, individuals would spill their guts on TV to the great relish of the viewing public. It was more than entertainment. National viewers seemed to see themselves as vicarious participants in a national cleansing of shameful acts. Toyota could conduct the first open, corporate minoue soudan - just joking, of course, but I do hope Toyota shares as much with the public as possible.)

To that end, I hope Toyota IGNORES the petty admonitions of the public relations consultants - such as Professor Sonnenfeld - to do a better job of applying public relations Band-Aids: "In a crisis, follow these five rules, starting with getting out in front of the issue with an aggressive information campaign led by your well-coached CEO...” Understanding the deeper crisis as it plays out at Toyota will benefit us all. Better PR might get the public and government and media off Toyota's backs but will also rob us of an incredible opportunity to learn.

Akio Steps Forward
Pundits railed at Toyota president Akio Toyoda for not appearing immediately and throughout the company's sudden acceleration crisis. Caught by surprise by a reporter who tracked him down in Europe, Akio issued an impromptu apology for letting his customers down. For what seemed an eternity (but wasn't), the mess was handled by others, led in Japan by head of quality Shinichi Sasaki and in the U.S. by head of sales Jim Lentz.

Akio made his belated appearance, a hastily called press conference in Tokyo. As expected, the first headline was an apology. Not unexpected, the second headline was that his performance was deemed to be too little and too late. That was followed by an op-ed that hit the right notes in The Washington Post.

There is a long tradition in Japan of the heads of companies taking responsibility and resigning for crises of various sorts. When Japanese organizations go over a cliff it is expected that the company president or chairman issue a public apology, take responsibility for what has transpired, and resign. The leader takes the blame which constitutes a cleansing that is supposed to clear the way for others to start over with a clean slate.

I do not expect Akio to resign (by the way, the reason it is often the president who resigns rather than the chairman is due to the respective roles of the offices: the chairman deals with the outside world, often consisting of more ceremonial duties, leaving the running of the company in the hands of the president). It would be wrong for Akio to follow that path for two reasons. First it would be silly in this case since the mistakes that are coming to light were committed well before his watch (though the messy handling of the mess is a different matter). Secondly, what is the point? The point is less him taking the blame than him speaking and taking action to reassure the public. For that, he could take some lessons from his counterpart in Dearborn, Bill Ford.

Bill Ford is the great grandson of company founder Henry. Akio is the grandson of Toyota Motor founder Kiichiro Toyoda, and great grandson of the founder of the entire Toyota group of enterprises, Sakichi. Bill took over Ford Motor Company in 1999, to rescue it from floundering at the hands of executives who had headed the company in the wrong direction. His early stewardship of the company was defined by the Explorer rollover and Bridgestone-Firestone tire crisis.

In Akio's case, less than one year has passed since assuming the senior operating role - an eerily similar scenario to Bill's.

Bill Ford took on a very public role during his company's Explorer rollover crisis. But, unlike the ritualistic acceptance of blame followed by resignation (to take the shame away with him) that is common in such times in Japan, Bill Ford reassured the public, not in order to accept blame for the past, but to accept responsibility for the future. His role was to reassure, not to take the blame.

And, for the most part, it worked. He was reassuring. The work to unravel what had gone on in the past went on behind him, but he was clearly focused on the present and future.

I don't expect Akio to take such traditional Japanese action as to resign to accept responsibility for faulty accelerator pedals. But, he could certainly learn from Bill Ford's example of publically accepting responsibility to set the company right. Responsibility not for the past but for the future. I think his op-ed sets the foundation for that. More importantly, his broad experience should have him prepared for the real work of taking the company forward.

But, the point is not Akio versus Bill. The issue is not about heroic leadership, focused on the charismatic CEO who steps in and appears to take decisive control, as the PR Pundits advise. This is about nurturing a culture in which all levels of leadership embody the right thinking in their actions.

Doing the right thing
In his book The Toyota Way, Jeff Liker does a great job of spotlighting Toyota's admonition to managers to "do the right thing." Sometimes the "right thing" isn't the best thing from the standpoint of immediate or apparent business expediency. Jeff's accounting of his discussion with Jim Press is especially impressive:

"Can a modern corporation thrive in a capitalistic world and be profitable while doing the right thing? I believe that Toyota's biggest contribution to the corporate world is that of providing a real life example that this is possible. Throughout my visits to Toyota in Japan and the United States, in engineering, purchasing, and manufacturing, one theme stands out. Every person I have talked to has a sense of purpose greater than earning a paycheck. They feel a greater sense of mission for the company and can distinguish right from wrong with regard to that mission. They have learned from their Japanese sensei (mentors) and the message is consistent: Do the right thing for the company and for society as a whole. As Jim Press, President of Toyota Motor Sales in North America explained:

"The purpose of the money we make is not for us as a company to gain, and it’s not for us as associates to see our stock portfolio grow or anything like that. The purpose is so we can reinvest in the future, so we can continue to do this. That’s the purpose of our investment. And to help society and to help the community, and to contribute back to the community that we're fortunate enough to do business in. I've got a trillion examples of that."

Credibility, Not PR Style Points
THAT is the kind of "crisis management" I would love to see from Toyota - deepening even further the development of people and a culture in which everyone is focused on doing the right thing. Not PR style-points.

As I mentioned earlier, I used to work for Toyota, and 20 years ago even did a stint in their public affairs organization. But, honestly, in spite of my previous connections with the company, I was secretly somewhat pleased when the bad news began hitting the past few years and intensifying the past few weeks, not because I wanted to see the company hurt, per se, but I wanted the company to wake up, to recapture what I feared it was losing. As Taiichi Ohno said, you need a crisis.

So, my hope is that the company will overcome its current crisis, not just because I want the company to "do well." I want them to overcome this crisis because of the lessons that accomplishment would afford for us all, to demonstrate again the heights to which an organization can aim and attain. If the company is not up to that, so be it. Anyway, the great thing about this is, Laboratory Toyota continues to be there for us to observe and learn.

john

John Shook
Senior Advisor, Lean Enterprise Institute

Additional Reading:

"Toyota's plan to repair its public image," Washington Post, February 9, 2010. Akio Toyoda’s statement on the crisis. "The past few weeks, however, have made clear that Toyota has not lived up to the high standards we set for ourselves. More important, we have not lived up to the high standards you have come to expect from us. I am deeply disappointed by that and apologize." http://www.washingtonpost.com/wp-dyn/content/article/2010/02/08/AR2010020803078.html

"Inside Toyota's Epic Breakdown" by Nathan Layne, Taiga Uranaka and Kevin Krolicki, Reuters, February 9, 2010. One of the most detailed, factual accounts of the crisis, one which takes Toyota principles and history into account without giving the company a free pass. "The company's dictum holds that all workers have to ask why ("naze" in Japanese) at least five times to get to the bottom of a problem. It is not yet clear how many "nazes" have been asked by management." http://www.reuters.com/article/idUSTRE61851220100209

"What Should Toyota Do Now?" Business Week, February 9, 2010. Jeff Liker's follow-up column, offering personal hansei to the situation, and describing how the Toyota Way is the way that Toyota must approach its fundamental problems. "The point is that I do now know which of these problems is real, or where and why they occurred. (I would venture that journalist do not, either.) Toyota needs to use its own Toyota Business Practices, or TBP, to identify and solve its real problems."
http://www.businessweek.com/bwdaily/dnflash/content/feb2010/db2010029_723140.htm

"Why Toyota Won and How Toyota Can Lose," Jim Womack 2007 e-letter. "Toyota can fail and if it does the root cause will be a failure to propagate its management system"
http://www.lean.org/common/display/?o=750

"It's not the crisis it's How You Respond to It," previous Shook column. "Things can and do go wrong for any company. Yet Toyota has a special relationship with problems. The company has thrived for years by developing an obsessive focus on continuous improvement and problem solving. In Japan, they call Toyota people "problem-solving junkies." If any company can get to the bottom of an issue like this, a problem like this, it's Toyota."
http://www.lean.org/shook/2010/02/its-not-crisis-its-how-you-respond-to.html

"What’s Your Challenge?" Shook management column. "Toyota can’t exist - Toyota can't be Toyota - with a challenge." This really is an important column to highlight! "But, the bigger and somewhat ironic problem for Toyota is that the need and opportunity to respond to these immediate problems will come as a welcome distraction from having to face its true, deeper, crisis. That crisis is no less profound than facing fundamental questions such as who are we? What are we here for? What is our purpose? In short, identity crises that will manifest itself in practical matters such as how do we develop our people, maintain our principles, and/or adapt them going forward?"
http://www.lean.org/shook/2008/12/whats-your-challenge.html

"Survive to make money - or make money to survive" Shook column exploring purpose and long-term strategy. "If you aim for survival, your modus operandi becomes adaptability. How has Toyota pursued or demonstrated adaptability? When I first got a handle on how Toyota built flexibility into its operating (production) system design, I didn't realize how unique it was, but could immediately recognize its elegance, whole-ness, and power."
http://www.lean.org/shook/2008/12/with-gms-demise-becoming-more-real.html

He probably didn't ask for a problem of quite this magnitude, but like it or not, Akio Toyoda has his crisis. Akio took the reigns with a proclamation that he wanted to change the company, to rid it of (his words) "pervasive hubris and arrogance" or, (my words) the same Big Company disease that he saw grip GM so deeply for so long. For about a year now Akio has been saying that he wants to take the company "back to basics." No less an authority than Taiichi Ohno said you need a crisis to truly embrace TPS. So, Akio has his opportunity.

As always with things like this (Toyota's crisis, if it doesn't go without saying) it's not the crisis; it's how you respond to it. So far Toyota hasn't responded well. The company will pay a price for that. But, if they problem-solve their way out of the quality and cost issues, the public may forgive them quickly enough.

Murphy on Steroids
Things can and do go wrong for any company. Yet Toyota has a special relationship with problems. The company has thrived for years by developing an obsessive focus on continuous improvement and problem solving. In Japan, they call Toyota people "problem-solving junkies." If any company can get to the bottom of an issue like this, a problem like this, it's Toyota.

The first thing they have to do is protect the customer. For whatever reasons, through whatever set of complex circumstances, they have failed their customers. I know that fact is absolutely excruciating to the leaders of the company now. Secondly, they have to take care of their dealers, so that the dealers can take care of the customers.

Thirdly, the company must turn its attention back to itself, to examine the root causes of what has happened throughout this entire episode. Toyota must conduct this investigation on two levels. First it has to confirm the specific technical cause or causes. People have died here. The company tells us it has figured that part out. Secondly, it must look at itself deeply and ask whether there is something more systemic going on: is there something deeper inside us as an organization that has allowed this to occur? Knowing the company as I do, there is no question in my mind that it will go through this reflection, this deep self-examination.

If Toyota finds something seriously awry deep inside the company that it has become, will its people be able to resolve the issue? After all, human organizations are imperfect. Maybe even ... yours. The question is, can we look at ourselves honestly, challenge ourselves at the deepest levels, and try to take ourselves - as imperfect humans who work in imperfect organizations - to higher, better levels? Toyota has done that in the past. Toyota has shone a light on ways that a human organization can work at levels never seen before. So, if any company can do it in the face of a crisis such as this, I think Toyota can. But, we shall see. It is up to them.

First: Protect the Customer
We all know how this works in the factory. When you encounter a problem, your first responsibility is to protect the customer - in the factory this is the following process, the immediate downstream worker. That means, before you "encounter a problem" you have to know how to spot a problem, you have to know what a problem is. Then you need to know exactly what to do, what action to take, once you've spotted one. That action is to call for help, for someone to come help you decide what to do. Those two actions together are known as "stop and notify." Then you need to know what will happen next (if you expect to be blamed, you probably won't be eager next time to "stop and notify"!). So, what will happen is that someone (your team leader) will come to your aid. He or she will take a look and make a quick decision of whether to (1) apply a quick remedy, (2) stop the line, or (3) let it go through marked for remedy later (with 1 or 2 being BY FAR the preferable alternatives).

Having handled the immediate problem, the next step will be to stop and ask if there is a deeper root cause to investigate: Is this a repeating problem, is there a pattern to its occurrence, does engineering need to be notified? And so on.

That's in a factory.

The same sequence of steps is playing out now for Toyota with their massive accelerator, floor mat, sudden acceleration crisis. Right now, they are in the "stop and contain the problem to protect the customer" phase. They must protect the customer and take care of the dealers so the dealer can take care of the customer (reminiscent of the principle laid down by Shotaro Kamiya, developer of Toyota's approach to sales & marketing: "Customer first, dealer second, company third!"). Separately, they will need to go back and thoroughly analyze exactly what happened and why

Slow to Respond ...
Toyota's response to the gas pedal, floor mat, sudden acceleration problem has been slow and curiously ambiguous. What sounds simple enough on the surface (gas pedals and floor mats for crying out loud) has turned into a massive crisis for the company. One would think that if a simple mechanical fix could fix it, the company would have already done what it needed to do. Now additional technical issues are being raised.

Scrutiny of problems attributed to the accelerator pedal and floor mats is leading to scrutiny of the ETCS-i system it has used for the past eight years and could even lead to scrutiny of the electronic controls on vehicles going back even further. And that is an issue that is far too messy to want to deal with in the midst of a media circus like this.

Regardless, the result is that since Toyota failed to respond adequately in a timely manner to the acceleration problem, the company now finds itself in a credibility crisis. EMI has been a smoldering issue for the entire industry for a long time. Whether Toyota's sudden acceleration crisis trail leads to EMI is yet to be determined. But the underlying problem with EMI (as I understand it) is that it is indeed problematic and no one fully understands it. Not just Toyota, no one in the industry.

Credibility
Sounds like a long way from floor mats. And, technically, it is. But, perception is now one of the most important matters at play here - perception and reputation and credibility. And credibility along with the trust it has engendered with its customers has been Toyota's greatest strength. That credibility and associated trust equity has carried them a long way. But, now the company is expending much of that equity. It may come down to, "What did the company know and when did it know it?"

So, Akio has his crisis.

Crisis gives occasion to greatness. Without the crisis of 1950 and Toyota's determination to be the best in spite of its disadvantages, Taiichi Ohno would have been just another good production manager, remembered fondly by those who worked for and with him, not revered throughout the global manufacturing world. All accounts are that there was nothing to indicate that Abraham Lincoln would be a great leader - it took a national crisis to bring out the greatness.

Akio was born the year before his company first tried and failed to sell cars in the US. Those cars were so bad - they couldn't sell them and they weren't worth sending back to Japan - they ended up dumping a bunch of them in the Pacific Ocean.

So, for Akio now, this is his crisis. And his opportunity.

john

John Shook
Senior Advisor, Lean Enterprise Institute

Jim Womack's most recent e-letter titled "Beyond Toyota" has sparked a lively and even rancorous debate. "We all, even including Toyota, need to go beyond Toyota," Jim wrote, adding, "the wonderful days of Toyota sweeping all before it as it reveals more and more aspects of its value-creating methods are done."

Many have reacted strongly to these words. Actually, re-reading Jim's letter now, I find that those two sentences, the most provocative of his comments, aren't really all that provocative.

Anyway, debate is a healthy thing, right?

As for "Lean". . .
Yes, "lean" is in many respects the wrong term. I think most of us have recognized that for a long time.

And, regardless of the term, the typical interpretation of "lean" became far too narrow. Lean is more than just tools.

As for "TPS" or the "Toyota Way", I have previously distinguished between the Toyota Production System and "Toyota's production system." I say that "I distinguish..." but I didn't distinguish anything until taught to do so via a difficult lesson from Mr. Ohba, my boss at the time at TSSC. To my great frustration as I tried to argue in response to some of Mr. Ohba's specific lessons that, "look, Toyota doesn't actually do all of those things...", Mr. Ohba admonished me to "never confuse the 'Toyota Production System with Toyota's production system'." I was furious, because that effectively killed the debate I was trying to engage him in. Later, upon calming down, I realized that it was one of the most important lessons he provided me.

That lesson is critical to the current raging debate which centers partly on the question, "Is there more for us to learn from 'TPS' or the ‘Toyota Way'?". Well, I don't know about you (or your company or clients), but for me and mine there certainly is - we're still scratching the surface!

As for Toyota ...
If, on the other hand, you ask, "Is there more to learn from "Toyota" (the company) and its production and management?" again, I think the answer is clearly "yes," though it is equally clear that Toyota is stumbling. And it is POSSIBLE that the company has more than merely stumbled, it's possible that Toyota has lost what once made it so special. I say it's "possible" because only time will tell. Time WILL tell.

Detroit Auto Show: Toyota Versus Hyundai
Here's a fascinating sidebar to the debate of "Toyota versus lean and Toyota's decline versus what remains to learn." Mike Rother and I attended the Detroit Motor Show (always lots of fun, even for recovering gearheads, as we each claim to be - "recovering" that is). We went on an "industry preview day'" a day for auto industry professionals (they let us in anyway) to check out the products up close before the show opens to the public.

The nameplate that was getting all the attention of industry engineers was Hyundai. Competitor engineers were absolutely crawling all over the Hyundai vehicles, measuring, taking notes, taking photos, taking videos. It so happens that the CEO of Hyundai NA is John Krafcik. John Krafcik is the member of the Womack-led MIT team who actually coined the embattled term "lean." (John also happens to be one of the first two American engineers hired by NUMMI in 1984!)

Krafcik may indeed be a close observer of another new frontier in so-called lean - for the rise of Hyundai raises interesting considerations about whether there is more to learn from Toyota.

We know that, mainly, Toyota competes with itself and doesn't participate in a lot of typical "benchmarking" (they do benchmark, but in very specific concerted ways). Instead they look in the mirror and ask, "How can we get better?"

But, Toyota as a company is paranoid by nature, and at significant times, it peers outside itself to set major challenges. In 1950 the company determined to "catch up with Detroit in three years," which was arguably the stake in the ground that led to 50 years of relentless continuous improvement. That challenge was inspired by looking outside first, and then looking inside to see what needed to be done, what improvements were required.

One occasion for Toyota to look outside itself was in evidence on the first working day of 1984 at the first annual Toyota President's message I had a chance to hear. Dr. Shoichiro Toyoda had been president since 1982, so this was the second occasion for him to deliver such an important message to the company.

For Toyota, the president's annual speech is far more than a ceremonial pep talk. The annual speech marks the occasion for the president to announce the direction (hoshin) for the year, laying out the challenges to overcome, and rallying the organization to attain higher levels of achievement.

His message on that day was remarkable, coming as it did following a year in which the company had set record profits, not just for itself but for any Japanese manufacturer ever, at a time when Japanese manufacturers appeared truly unstoppable. The way I heard it was simply, "the Koreans are coming, the Koreans are coming!" Decades later we know that the Korean auto industry is formidable. In the early 1980s, concern about Hyundai and Daewoo seemed like a joke. The impression I received on that day was that the challenge from the Korean auto companies was imminent. We Toyota employees needed to meet the challenge by redoubling efforts to develop better products, provide better service, to satisfy customers.

I think Dr. Toyoda already knew, even at that time, that his company had surpassed the industry pioneers in the U.S. and Europe. He knew Toyota could no longer find its challenges there. And he knew his company needed challenges. As I wrote in a posting in December 2009, Toyota isn't Toyota without challenges:

"Toyota can't exist - Toyota can't be Toyota - without a challenge. That's true at the micro level - each work group and each individual - and for the company as a whole."

"There's little doubt that Toyota will weather this storm and in fact come out the other end stronger than ever. But, the bigger and somewhat ironic problem for Toyota is the fact that the need and opportunity to respond to these immediate problems will come as a welcome distraction from having to face its true, deeper, crisis."

Perhaps you can't visit the Detroit Auto Show, but you can read Alex Taylor's cover story for the current issue of Fortune magazine. For Dr. Toyoda, the challenge of the Korean auto industry was a challenge that demanded attention from his company in January 1984. In January 2010, the rest of the industry agrees.

But, Toyota's crisis has nothing to do with the Koreans.

"Lean" - What's in a Word?
Toyota is Toyota and they do what they do to achieve their aims. The rest of us observe that and try to understand it, in order to achieve goals in like manner. Some among us try to understand it in order to describe it, using words. "Lean" is a Rorschach -it means what you think it means.

Steven Spear suggests in his blog that "lean" is less than what Toyota does, and that the term "lean" has come to represent only the tools to improve operations, stating:

"…the issue is not 'getting beyond Toyota.' The issue is getting beyond 'lean' and converging on the full management system Toyota invented, used with such success, as have others–an approach to creating organizations capable of self diagnosis, learning, adaptation, improvement and innovation. Lean, alone, does not make that possible."

Jon Miller, among others, responded by suggesting the opposite, that "lean" must be more than that:

"Commenting on Steven's post, not Jim's e-mail, I would firmly say that the aim should be to "surpass Toyota" and not "surpass lean." The argument of whether we need to refresh the definition of lean is valid but this is not a question of going beyond lean to lean plus, but to rename and expand its boundaries and to pry it away from the dogma of a few. Shared purpose and principles are what we need."

The word "lean" can, of course, be used to mean either - something less than Toyota or something more. I have always found use of the word "lean" to be convenient and, as I think Jon Miller is suggesting, useful. I don't like going into companies and talking on and on about Toyota this and Toyota that ("Toyota is Toyota, we can't BE Toyota, but we can learn from them, etc."). So, for me "lean" has always been a convenient way to talk about "an ideal" that is bigger than just Toyota (though Toyota is our only or best empirical model, so we have to be careful about talking about an "ideal" that doesn't even exist.)

But, to argue the other side, I recall a caution many years ago from Robert Cole (now a professor emeritus at Berkeley, who I mentioned briefly last week - check out his book Managing Quality Fads or his classic Japanese Blue Collar) who warned that whenever you define a term too broadly, you take away any meaning it may have had. It becomes like air. You end up saying it encompasses all of life. It loses meaning. So, I can understand an argument to confine the term "lean" to just the tools.

The thing is, it would be very hard for me to do that. And, as Miller suggested in his reply to Spear, it has always seemed to me to be more productive to simply try to do a better job of defining lean, rather than try to offer an alternative term. I have experimented with different terms. If I talk to you about "lean," you and I both know roughly what we are talking about. But, if we talk about "world-class manufacturing," the discussion immediately becomes so watered down that it's hard to even have a focused conversation ("Oh yes, world-class manufacturing - you mean like GE or Dell, right?").

Hah, you know, the best term for the essence of all this ("this" = Toyota Way, TPS, Lean, WCM, etc.) remains good old "PDCA." PDCA as described at a high level by Deming and operationalized by Toyota.

Nowadays, I talk a lot about the A3 process, as do others, including Durward Sobek, Art Smalley, David Verble, and David Meier. "Problem solving" gets a lot of attention now, often in conjunction with the A3. Jeff Liker has popularized a view of "The Toyota Way." Mike Rother has introduced "Toyota Kata." Spear is introducing the "High-Velocity Organization." Tom Johnson has his "Manage-By-Means," contrasted with "Manage-By-Results," likening TPS to natural systems. Peter Senge and others still work on articulating and developing the "Learning Organization." Doc Hall has his concept of "Compression" (though with Compression, Doc is addressing matters at a little different level...). I think all of these (except maybe Doc's) are simply different ways of expressing and attempting to operationalize PDCA.

And, of course, PDCA is best understood simply as a means of structuring focused, operational learning cycles.

So ...
As has been suggested (don't know who said this first), TPS (or the Toyota Way) is less a matter of what Toyota does and more a matter of who Toyota is. No other company can "BE" Toyota. The point is that through a variety of historical happenstances Toyota as an organization has shined a bright light on the way organizations can function, can make the most of the talents of the people who comprise it, and can respond flexibly to adapt to changing circumstances. Toyota has been an organization that behaves as an organism.

I can't speak for Dr. Womack, but seems to me that he was saying simply that "lean" (whether defined broadly or narrowly) has always been about Toyota. And now it is time for organizations to stop looking at Toyota so much. I don't think Toyota - or Kiichiro or Taiichi Ohno or Mr. Cho or Akio - would disagree with that.

john

John Shook
Senior Advisor, Lean Enterprise Institute

Whew, what a year! Most everyone I know is eager to escort the hard times of 2009 out the door in hopes of a more prosperous 2010. While hope has never been a very effective business strategy, I remain optimistic for a good year ahead.

It's been a month since I posted a new column. I did want to let the healthcare column sit there for awhile – not a month, but for a couple of weeks – to see how people would react. Hah – I'll take no credit nor accept any blame for the passage of the two "healthcare reform" bills that occurred in the interim.

I haven't been idle, though! We have big plans for this space going forward. As year's end marks a good time for reflection, I plan to continue the Column and add new functionality, resources, and enlist the help of some friends. Let's review where we've been.

Getting Started
I started this "eColumn" in October 2008 as a dialogue to explore lean management. I wrote in the first column:

"Lean management is not about quick answers, but about going through a thinking process to investigate, analyze, and understand. To try, perhaps to fail, and learn."

In short, lean management is very much about asking questions and trying things, or encouraging others to try things. Lean management itself is not much about providing the right answer but it is very much about asking the right question.

So, what we'll do in this space is just explore. What to expect -- exploring questions. What not to expect -- answers. Here's a great quote that captures the spirit of what I'll aim for:

“The scientific mind does not so much provide the right answers as ask the right questions.”

That quote (from the anthropologist Claude Levi-Strauss) remains the driving spirit of this column.

We decided originally not to call this a "blog" as the term seems to imply two things: frequent postings by the author and an expectation of an ongoing, lively, frequent give and take of questions, comments, and replies. I didn't want to post more than once per week (a cadence that we kept pretty well, excepting this past month) and, more importantly, had no confidence that I would be able to respond promptly to comments and questions.

Eventually, though, I decided to encourage more interaction. I've enjoyed the give and take, and hope you have, too. I want to continue and intensify that aspect of this space in 2010.

From the beginning, this has been a management column, concerned not just with the book Managing to Learn, or with Toyota the company. The first column in fact discussed neither. But, most of the columns have been comprised of either elements of MTL or aspects of management as I learned it at Toyota.

Managing To Learn
MTL has been quite successful as a product. It is in its third printing, received the Shingo Prize for Research, and was reviewed to gratifying praise in corners from the Financial Times, IndustryWeek, to numerous blogs and newsletters including Business Process Trends, Learning about Lean, Training within Industry, Lean Printing, and The Lean Thinker.

The most gratifying words of all came from Toyota Chairman Mr. Fujio Cho, who, praised MTL for "redefining the meaning of 'learning' in organizations." I was delighted, first of all that he even took the time to read it, but also that he chose to focus on the meaning of learning in organizations since that redefinition was an explicit goal for the book from the beginning - translating "organizational learning" into "operational learning" can help organizations and individuals transform high-level ideals into practical gemba-level action

Following publication of the book, last year my long-time colleague from Toyota days, David Verble, partnered with me to create a new two-day Managing To Learn workshop as a means of meeting the demand for the material discussed in the book. Over the course of the year two highly experienced Toyota veterans, Marek Piatkowski and Tracey Richardson, joined us to make the workshop available as a standard LEI monthly public offering and - upon request - on-site at your company. So far, we have offered the course about 15 times and I must say, we have been VERY pleased with the enthusiasm and learning demonstrated by the participants. And, of course, we instructors are learning JUST as much as the students!

But, it's not all good news. Another long-time Toyota veteran colleague - Australian Tony McNaughton - complains that he finds "A3 Madness" has taken over some companies. Ouch. As feared, there have indeed been too many cases of companies that lock onto the A3 as yet another TOM - Tool Of the Month - hammers looking for nails; A3 templates looking for data and solutions. The last thing I wanted from MTL was to find A3s turned into corporate wallpaper alongside outdated SPC charts and unused value-stream maps. I think most companies have so far avoided this malady. Has yours?

Management
The topic of "management, whatever that is" seemed to come to the fore more than ever in 2009. Walking through the business aisle of even "Books a Million" reveals title after title of books on management and leadership. I can't help but think that most of them are no help.

But, some interesting books have appeared in the Lean Community. I featured LEI's Follow the Learner by Sami Bahri in this space and LEI also published Michael Balle's The Lean Manager, which has received broad acclaim as a practical and easy read. My Learning To See co-author Mike Rother, finished his Toyota Kata, completing several years of hard work, which can represent a new door for people to grasp essential dynamics of the lean approach to working and improving. Closer to the end of the year Doc Hall gave us Compression, his rallying call to senior leadership to lead firms to places far beyond the limited scope of today's even most progressive enterprises. I hope Doc takes his "Doc's Cubby Hole" - the informal discussion forum that Doc debuted at AME's annual conference - on the road. Although released in '08, Jeff Liker and Mike Hoseus' comprehensive look at Toyota Culture made quite a well-deserved splash this year.

And more great book news, H. Thomas Johnson's Profit Beyond Measure is available in paperback. It's hard to believe that ten years have passed since first publication of Prof. Johnson's groundbreaking work. The community is finally catching up to his thinking on lean and system sustainability.

Toyota
The lean community's traditional exemplar Toyota stumbled mightily in 2009. In case you missed it, I wrote about "the Crisis and Toyota" shortly before their bad financial numbers began hitting the news over and over.

While the company will probably recover in terms of leadership in industry performance, much damage has been done to its sterling reputation. For a look at how long-lasting poor reputation can be and how difficult to shake, especially in a slow clockspeed industry like autos, read the article by my colleagues Bob Cole and Mike Flynn in the current issue of the California Management Review: Automotive Quality Reputation: Hard to Achieve, Hard to Lose, Still Harder to Win Back, (subscription or purchase required) Cole, Robert E., and Michael S. Flynn.(Bob Cole, by the way, is a long-time sensei of mine, the first American academic to really dive deep inside the auto industry in Japan, working on the plant floor of a supplier back in the 1960s. Long before I even met him, his articles and books were a huge inspiration to me to follow in his footsteps back in the mid 1970s.)

If their analysis is correct, and if Toyota's woes continue much longer, the company may find that the halo effect it has enjoyed (and earned) with the buying public will erode. Check out the following observation from the CEO of China's Geely Automobile, Shufu Li: "Why should I want to be like Toyota? They're losing billions."

Very interesting quote, from a number of standpoints. Betrays an arrogance, for one thing. But, does that make him wrong? What's most interesting about it to me, is that just as Toyota began by copying Ford and GM, Geely began by copying Toyota. And now he's saying that Toyota doesn't even matter.

And so …
John’s Lean Management Column began as an experiment. As year's end marks a good time for reflection such as this, I plan to continue the Column and add new functionality, resources, and enlist the help of some friends. In the works: a "User’s Guide" to assist in creating A3s, a website re-design including the debut of the "A3 Dojo", the (maybe) "The continuing Adventures of Porter & Sanderson." And, of course, questions. Lots of questions.

To quote again from the first column:

Lean management is very much about asking questions and trying things, or encouraging others to try things. Lean management itself is not much about providing the right answer but it is very much about asking the right question.

So asking and exploring questions is what we'll continue to do.

john

John Shook
Senior Advisor, Lean Enterprise Institute