Survive to Make Money or Make Money to Survive?
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.
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.
Lean Enterprise Institute
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