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Survive to Make Money or Make Money to Survive?

John Shook
12/4/2008
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With GM’s demise becoming more real every day, many people have been asking me, “Why didn’t GM learn from Toyota when they had the perfect chance?” After all, NUMMI was an open door for GM, since Toyota provided GM full access to pretty much everything it does. GM has had the single best access, by far, of any competitor to learn from Toyota. I happened to be there at NUMMI in the beginning.

So, let’s go back, briefly, to that opportunity for GM to adopt the best lean practices. The first GM managers, a group of 10 mid-level executives led by Ed Muirhead, visited Toyota City to begin their learning process in February 1984. They were followed quickly by three GM production managers assigned to actually manage different production areas at NUMMI, Larry Spiegle in Stamping, Ken Souza in Paint, and Doug Katko in Quality Control (other areas were run by a combination of Toyota and direct NUMMI hires). From there dozens, hundreds, eventually thousands of GM folks from all levels and disciplines came to NUMMI, saw what they could see, and went back home.

GM had a lot to gain from NUMMI: a good small car (the Chevy Nova-badged Corolla), the chance to put an idle plant and workforce back to work, and an up-close gemba opportunity to learn TPS. Part of my very job was to help teach TPS to GM people. And so it went -- Toyota running NUMMI operations, GM selling Novas while dispatching people to NUMMI to learn.

I left Toyota in 1994. At that time, at least, GM still didn’t know how to make a small car profitably and still didn’t understand TPS. And here we are today. So the question remains: why not?

Some people say that Toyota didn’t actually open the door all the way. That they hid the best stuff. I can tell you that’s not true.

Others (including many people inside GM) say that the individuals who went to NUMMI to learn simply didn’t learn. They were looking at the wrong things. They just “didn’t get it”. This is the most common view – they just didn’t get it.

Secrets of Successful Change
But, I have a different view. I think many of the GM people who spent time learning at NUMMI did in fact learn a lot -- they got it, all right. But, “getting it” and knowing what to do with it back at GM to turn that monster around was a vastly different story. So, why didn’t GM learn? Or why didn’t they change based on what they learned about lean from NUMMI? I have a three-part answer.

First, actually, GM has learned. Or learned a lot, anyway. Sure, maybe GM is still no Toyota, but who is (is your company)? GM has done more to learn and to change themselves than most people will ever recognize.

But, it took them a very long time to change as much as they have. Perhaps that goes with the territory of being the world’s largest and most successful company for over half a century.

That’s actually the second part of my answer: the fact is that it takes far longer than we like to think to effect major change in organizations that are so large, with such entrenched cultures and patterns of operating and behaving. It may very well be that there is more for us to learn from GM than from Toyota -- what went right but also what went wrong, what doesn’t work. And why.

The third part of my answer is that while I argue that GM people have learned and changed a lot, it’s unclear how deeply the company has really learned, or changed as a company. Many of the tools and systems are in place. By all reports, GM’s newest plants are world class -- right up there with Toyota and the rest -- in both quality and productivity. However, the real secrets to Toyota’s success aren’t to be found in successful implementation of tools and techniques, systems or even “principles”. It really gets into basic thinking, the thinking each individual brings to each task, each team to each challenge, the organization to the achievement of its aims.

And what ARE those aims? Attainment of financial targets? That’s not the case with Toyota.

The Real Aim
“But,” you may say, “Toyota clearly wants to make money.” Yes, absolutely Toyota wants to make money as much as the next company, and they do it extremely well. However, the company’s real aim is something much deeper, and is the thing that has driven the company to be so successful for so long: the will to survive. Everything else -- tools, systems, even principles -- follows from that. A highly developed instinct for survival will take you a long, long way.

“But,” you may say, “the Detroit 3 also want to survive” -- that’s the whole reason they went to Washington. In fact, some argue that they’re trying to cling to life longer than they should, beyond their usefulness. I won’t even disagree with that point, but, there’s a difference.

Yes, GM wants to survive -- hence the humbling appearances on Capitol Hill by Wagoner and the two other Detroit CEOs. Yet had GM been seeking long-term survival a la Toyota, it would have made different decisions all along. GM wants to survive, all right, it wants to survive so it can continue to make money. Toyota on the other hand, wants to make money to survive.

Think about that: Toyota makes money to survive; the Detroit 3 exist (survive) to make money. Those contrasting senses of purpose will take you down very different paths.

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.

The auto industry is inherently inflexible. Producing a car requires huge investment in massive infrastructure that takes years to put in place. It takes about four years to bring a new car to market (yes, Toyota and some others have reduced the actual product development time line to well under four years, but the basic rhythm of the industry and the standard full product cycle is still four years). That means four years in advance, you have to predict or put in the capability to provide what a customer will want four years later. That’s risky business.

Here are some ways Toyota builds in flexibility to mitigate that risk and maintain flexibility to adapt to changing circumstances. Toyota will:
  • Design products through a set-based (as opposed to point-based) process that enables making better decisions later.
  • Install capacity in smaller increments and steadily increase that capacity as needed in smaller increments (just-in-time capacity).
  • Mix capacity together -- build multiple products in each factory, more than one product on each line (so they can mix and match capacity to meet changes in demand, enable each machine to changeover quickly and to easily produce a variety of parts.
  • Set the operating plan at two shifts per day with a gap in between shifts to enable day-to-day adaptability.
  • Build a certain level of overtime expectation in the initial operation plan for new capacity -- when (if) demand falls, it is then easy to just cut out the overtime.
  • If demand falls more, you can reduce the takt time. And then increase it again and you can do that from month to month.
  • Set (at the Toyota plant in Japan when I was there) the plan for production volumes (takt time) in the assembly plants (which control the rhythm of the entire value chain) only a week before the start of the month, revising those volumes every ten days throughout the month, yet set the actual production sequence only hours before the start of each production day.
  • Order parts replenishment at the last possible moment at the point of use when the worker actually needs them (kanban).
  • Hire employees carefully, thinking not only about how many you need to meet current demand but how many experienced employees you will need years down the road.
  • Use “temporary employees” to judiciously mediate uncertainty with short and long term employment needs.
  • Develop those employees to work flexibly, with multiple skills and ability to do various jobs; transfer workers as needs change.
  • Develop those workers to redesign their own work (standardized work with kaizen) to meet changing conditions -- 2,000 workers equal the job redesign capability of 2,000 industrial engineers.

Different Purpose
There is more, but you get the point. Note that every single one of the above methods is “inefficient” on the surface. Note also that conventional management thinking leads to the exact opposite conclusion on each and every one of them. That’s because they are manifestations of a business model that embodies the effective shift from command and control (tell people what to do, removed from the gemba, and seek compliance) to the directed engagement of each individual pursuing answers to questions that they own.

Taken together, that all represents the difference in developing the organizational capabilities that enable dynamic adaptation to changes in the environment. And that all stems from a different sense of purpose -- the difference between surviving to make money and making money to survive.

So, if we borrow LEI’s “Purpose, process and People” framework for understanding organizations, you could say that GM learned -- contrary to popular opinion -- quite a lot from Toyota about process, never really got very far at all into the people part (maybe a topic for another day) and, most importantly, all along its very purpose was utterly different. And, it just may be that purpose isn’t really something you “learn”.

See you next week.

John Shook
Senior Advisor, Lean Enterprise Institute

20 Comments | Post a Comment
Anonymous December 5, 2008
Does this apply to other companies?
Do most companies want to survive to make money? Are there any others that make money in order to survive?

B58M
Anonymous December 5, 2008
I absolutely agree with the points being made. My father worked for GM for 35 years and there were many "dinner time debates" between us about why Toyota was better at what they did than GM. What I can attest to, based on his statements, is that GM was never able to move Lean to the employee level. Many will argue that this is the fault of the UAW but the fact is that I have experienced Lean at the three basic levels (operator, champion, and management) and this apparent road block is really just a good excuse. In my previous job I worked for a company that started the Lean journey in 1993. Initially like many companies the managers and engineers are heavily innudated with Lean methodology. After seven years of slow implementation the company decided to implement a Lean rotation for employees. This was a group of six employees that would go through training and then hands on implementation for 90 days. Then a fresh group would be assigned for the next quarter. By 2003 we had excellent examples of TPM, Pull Systems, Kanbans, Standard Work and so forth culminating in the award of the Shingo Prize in the same year. I can attest that driving the Lean thought process to the employee in the work cell is the cornerstone for achieving the next level of Lean. When your operators are the ones asking Why five times you will start to see the improvements that you need to "survive".
There is no such thing as a brilliant process. December 5, 2008
I do not disagree with any of your explanation and I do not know much about GM or even Toyota for that matter. However, Norman Bodek's book Rebirth of American Industry seems to provide a simpler and more convincing explanation of the fundamental problems with GM's (and others) lack of success with lean. Perhaps the most important, our (Western) accounting practices treat people as a variable cost to be flexed with demand while Toyota's does not. As he might put the question "If people are really our most valuable asset, why do they only show up on the balance sheet as a cost?" Where do we account for the value of talent? With thousands and thousands laid off, clearly GM does not. But perhaps this is the "people part" topic for another day?
rsimonis December 5, 2008
John,

Excellent article. Thank you.

I would like to share my observations about the GM employees that went to work at NUMMI and their experience upon returning to GM. I have not had the chance to work or even visit NUMMI but I have met several former and current GM employees that have, and all of them have had similar experiences. They learned at NUMMI. They learned a tremendous amount. They learned so much that when they returned to GM excited to share and teach others they were crushed that the organization did not want hear about it, much less change to it. As evidence I would cite GM's decision to make GM employees going to NUMMI to sign an agreement not to leave GM after there assignment was complete because almost all the people that went to work at NUMMI quit after returning to GM and finding their work so dissatisfying and frustrating. Some quotes from GM salaried employees that I have had the pleasure to know; "At GM I had one year of experience repeated twenty-nine times"; and "I learned more in the 18 months at NUMMI than I had in 18 years at GM" and from a non-NUMMI employee at grad school with me "GM is paying for me to earn an MBA; not apply it."

The people sent to NUMMI did learn. The GM organization did not, but not because the people did not try.

I would by very interested in any data relating to turnover in GM from NUMMI cadre and non-NUMMI of similar grade and experience.
Anonymous December 5, 2008
Excellent letter. I have been asking the questions posed in this article. Why didn't GM embrace TPS?
Now they want us to save them!?
Lynn Northrup December 5, 2008
What a great post. In this economic environment you have to survive first. This was the point of a strategic planning session I held this morning with a client. We have a vision of where we want to go over the long haul, but in the meantime we have to make sure the boat floats. Every organization in this country should study the TPS. It is critical to their future survival. Maybe now when they are in crisis they will sense the urgency and overcome complacency.
Jeff G December 5, 2008
What role does the relationship between the folks that make the cars and the folks that run company play at GM?

It seems to me from watching Toyota over 20+ years from a connected company that for the most part, workers and management at Toyota have a functional relationship vs. what appears to be a dysfunctional dance between these constituencies at GM (or any of the Detroit 3 for that matter).

Can any company compete globally when a house stands divided? Or has relationships within GM improved?
AztecMichelle December 5, 2008
John,

Thank you, yet again, for your insights into Toyota, demonstrating that it's not just about the "tools" but how they are brought together with the people to make it all work.

The current going's-on are fascinating to watch; the Australian car industry also seems to be in a similar situation. It will be interesting to watch what happens next...

Michelle Brown
Melbourne Australia
Anonymous December 5, 2008
Send a copy of this to Congress!
Alan W. December 7, 2008
Thanks for a great article. It points out that there are many roadblocks to Lean and Change within any organization. However, one anonymous commenter dismissed the UAW as a key contributor to the failure. Certainly the unions are not the only roadblock but for the most part, particularly the UAW, they are by far the largest single problem. They have very little, if any, motivation to allow any sort of Lean improvements. Back in the 80's I had a friend who worked the line installing tailights. His screwdriver had the reverse disabled by the union steward so that if a screw was inserted incorrectly, he could not remove it. It had to wait to the end of the line for the rework crew to correct it. The union knew that if Lean was implemented, the rework crew would be unnecessary and that is counter to the union goals. Also, most have seen the video making the internet rounds regarding the Ford plant in Brazil which has all of the latest Lean and supply chain improvements. The last sentence in the video indicates that such a plant cannot be built in the US because the union will not allow it. If we dont' face the issues, we will never solve them.
Anonymous December 8, 2008
That GM et al don't get it is spot on. I'll wager that all, if not most of, those that went to NUMMI were well intentioned intelligent people. That they could not apply wholeheartedly what they learnt indicates that the "Purpose, Process and People" may have been fine but that the collection of processes - the SYSTEM - was not and consequently could not support them. More fundamental, though, is that the big 3 did not provide what the market wanted and this has been going on for years: I recall 10 or so years ago the whining about the "barriers" to entry to sell into the Japanese market, when the real issue was that even when the barriers were removed, no Japanese wanted to buy the US cars anyway.

The only consolation is that, when the big 3 (or possibly 2) go under, those intelligent folks will be free to work elsewhere and will produce something truly amazing as a result in true American spirit. Short term pain, long term gain. Don't bail them out.
Gary F December 8, 2008
You provide interesting insight. My experience operating a tier one / two machining supplier to Chrysler and GM provides perspective that TPS philosophy is rare on the factory floor or in supplier relations at these US OEM's and many of the largest tier one suppliers. When confronting a problem, cross functional cooperation is often difficult or missing. Destructive attitudes relative to labor relations & job scope seem common within Chrysler and GM (flowing both ways between union members and management). Further, vendor relations are frequently managed with contentious attitudes, lacking honorable & productive behavior by purchasing agents and materials managers. Managers at all levels must believe they can change company culture at these US firms for TPS to become reality. I suspect when visiting Toyota or working with TPS at NUMMI, corporate cultures and individual attitudes did not receive sufficient focus. Cultural aspects of human resource management and supplier development requires considerable focus and clear action to drive productive change within the Big Three.
Steve from DC December 8, 2008
Thank you for this article and I am not suprised. I have helped to lead Lean implementations in several companies and only one has understood that the people side comes first and remains first. They had some extraordinary leaders. GM is a Titanic of a company with many levels of management who have been successful doing things a certain way. Many of these managers will not change and will overtly or covertly work to resist. Many of these people will need to be removed from their current duties. The UAW work rules can make these changes impossible. Ironically, most blue collar employees embrace Lean, the minority who don't can kill flow improvements and sabotage culture change.

I hope the right changes can be made for GM to be competitive again but they need revolutionary change...not evolutionary.
Anonymous December 8, 2008
An interesting perspective, and having worked at GM for many years and having worked briefly at NUMMI, I would offer a slightly different version.

Your comment about The Aim sound very familiar to The Goal, by Eli Goldratt. I would maintain that Lean and TOC work well together, but most of the Lean world would disagree. Perhaps you can post a blog on that topic.

The problem is that is you ask 10 members of GM's middle management what the goal of GM is, as I did in all my TOC classes taught there, you would get 9 or 10 different answers. Lots of mission statements get dug out. So your perspective that GM management has a consistent, incorrect aim is probably not as true as the fact they had many different, mostly incorrect views of the goal of the company they work for. (One of my bosses actually rejected the notion of GM making money as a goal or necessary condition). If you asked them how their goals and targets for the next year tied into the goal of making money, most could not make a logical, cause and effect connection. Most of their local goals were around local targets and cost cutting.

Thus, conflict reigns in GM, and when NUMMI people came back, they just were another group of people with a different sets of goals in a vast ocean of groups with different sets of goals. GM's "frozen middle" is not really inactive because of indecision, but because the decisions are in conflict with each other, and they often cancel each other out. Strong, common sense ideas like Lean do progress, but at a seemingly glacier-like pace.

Thus, the changes at GM have taken too long, but their has been positive change, as you noted. But only in manufacturing - Lean is not really concerned a Management or Engineering thing.

With Lean basically regulated to the plant floor, and with many, inconsistent goals still causing conflict, there is little reason to believe GM will survive long term.
Anonymous December 9, 2008
I had the chance to work 10 years for GM. Lean effort at GM is called Global manufacturing System. This effort started just 14 years ago; very good examples exists that indicates GM know how to make lean business, the problem is overall: a lot of plants and people with no willing to change. Lean is not yet in GM´s DNA.

Now I work for a tier one supplier of Chrysler and the situation is worst: No respect for suppliers, They are always trying to get your money in all kind os punishmentes, Absolutelly no business relationship, No help to solve issues and No planning activities that could be used to schedule ahead.

Conclusion: GM is in the rigth direction but so slowly, Chrysler doesn´t know how to do it. What about Ford ?
Anonymous December 11, 2008
In 1985 I was attending a class being led by Harry Levinson, formerly of Harvard, and founder of the Levinson Institute. He stated to our class that the primary goal of a publicly traded entity is to survive. That resonated for me - and still does. Good post!

Robert Cenek
Minerals Technologies, Inc.
SpiralOut December 15, 2008
John,

Great article. If this is a people and learning issue, we need to look at the people involved with these companies. People learn from each other. People in this country (which makes up a majority of the workforce of the Big 3) have been educated in this country. The education system in this country falls short of the educational system in Japan. The ideas Toyota uses are understood by the Toyota worker because he/she has been taught how to think that way from a young age. Americans are not taught to think in the Toyota fashion at a young age. The transition to a TPS mind must begin in elementary school. Change your education, and you will change your learning, change your learning, and you will change your people, change your people and you will change your company.
Anonymous December 18, 2008
I agree with the insight John has regarding the cultural aspect of change. Other than offering tools to the workforce that make change easier and a method to measure how effective change is occurring, then the real essence of a truly great company is its culture.

Many companies ‘say’ they want to improve and then provide window dressing to appease shareholder interests. Window dressing may manifest as new or reorganized factories seeming to promote lean practices, measurement dashboards (which measure lagging metrics), supply chain improvements or various other lean camouflage. To the person standing on the outside of these companies…everything looks great.

But, when a lean expert starts to assess these facilities, we can quickly see if the company really wants to change.

Usually, I start with the top management and assess whether they really understand what continual improvement and lean is. I’m amazed that many executives just don’t know. In the USA, being an executive is usually synonymous with being an oracle; so many executives won’t ask if they don’t understand. (Be careful…they still may be able to “talk” concepts…but not understand the details of a lean concept.) This adds to even greater cultural confusion.

Next, I walk the Gemba and talk with the employees. I’m usually amazed by the quantity of excellent ideas the people on the gemba have submitted, either formally, or informally, only to have these ideas dismissed because the employee is not a degreed engineer! It’s no secret that the most value any company derives is from their employees…they apply the science behind the theory that engineering defines.

Finally, if we dig deeper, we start to understand that, even though we (…and I mean the USA) as a culture say we want the best for our company, we find that that statement just isn’t true. It’s evident every day when we ’re at the time clock 15 minutes before the bell rings to go home; when we rush to get a job out the door, instead of following standard work; when we try to build quality into a part; when Union leaders promote an anti-management culture; and so many more examples.

When I asked my sensei, Mr. Nagata, what he though about American quality as compared to Japanese quality, he stated, “Americans make burnt toast, then scrape off the burnt part and serve the toast to the Customer. Japanese always try to make toast perfect the first time, and only if it’s good, serve it.” I believe this analogy has more merit than we give it.

The degree of positive, career-minded, want-to-make-my-company-always-better cultural aspect of a company will make or break the company. Companies whose employees are all ‘Company Men’ will remain viable companies in the future. Companies that have employees who “Have a job” will eventually fall.

So, with all that GM has done in the past, has their culture changed? Does every employee -- management through rank-in-file -- really want to make GM the best company in the world? I think the answer is imminent.

Glenn Ford, VP Quality, B&E Group LLC.
Anonymous December 18, 2008
An excellent article that illustrates very nicely the gap that exist between strategy and execution. In my experiences with the implementation of the lean philosophies and during the recent study for a MBA degree this gap exist in all businesses; however, for some the gap is very large.
First hand experiences at the front lines of business with the lean philosphy is earning trust so that the gap can be reduced to a distance that can be bridged.
Carl Nash January 18, 2015

   All this is very nice, but Toyota has fundamental cultural problems:

  o  The design of the electronics of its products (i.e. the "drive-by-wire" acceleration system) was defective because Toyota was not up-to-date on potential problems with these electronic systems.

  o  Toyota seemed to lack a system for tracking and responding to the substantial increase in unintended acceleration (and other defects?) that took place after the change to a drive-by-wire system

  o  Toyota seriously violated U.S. Federal law in not reporting problems it was aware of with unintended acceleration (for which it paid dearly).

  o  Toyota relied on advice from its U.S. managers and attorneys concerning the response to product liability lawsuits, denying responsibility and using questionable "experts" (such as Exponent Failure Analysis) in responding to lawsuits concerning defects in their vehicles.

    All of this goes to the question of whether all parts of the Toyota organization is committed to lean principles as originally defined by Dr. Deming.  They may be very lean in their production end, but their design, management and legal arms are not totally lean, and the company suffers from it.

   The Lean Enterprise Institute is simiiarly wearing blinders in that it refuses to acknowledge that an important aspect of lean management is how a company diagnoses and avoids potential problems of this sort, and how it responds when it makes a major mistake -- because of mis-management, rogue employee or suborganization behavior, bad luck, or whatever.   Why does LEI have this blind spot?

                              CN