Are we in the Lean Community lacking imagination and creativity? Indeed, do we take away the time and space for creativity and imagination from employees with our focus on standardizing work and our relentless process analysis in every activity from production to product development? Or maybe this is backwards. Is it possible that in the same way a stable foundation is needed for sustainable kaizen, a stable organization with stable processes enables successful innovation? Let’s look at the history of Toyota for evidence of this possibility.
When Toyota entered the auto industry in the 1930s it had no background in automotive technologies and no ability to create innovative products. The first Toyota, launched in 1937, was a collection of reverse-engineered components from many vehicles from established foreign producers. During World War II, when Toyota produced a small number of low-quality trucks, things did not get better. By the 1950s Toyota was no closer to the frontier of technology in the auto industry than it had been twenty years earlier.
Other Japanese producers tried to catch up by licensing both product designs and production technologies from European companies. But Toyota took a different route. The company concentrated on the creation of a stable production process plus a stable product development process resting on the foundation of a stable management system. Doing this actually required a remarkable amount of innovation – TPS, Toyota’s lean product and process development system, and what we now call lean management. This was all to create competent, high-quality, low-muda products – first visible with the Corolla in 1966 — that were decidedly notinnovative.
And for many years this was the strategy of Toyota: Strengthen management, design, supplier development, and production systems in order to design and build boring products with me-too technologies that had fewer delivered defects, better durability, and lower cost than the more innovative products of other manufacturers. It was a successful strategy that produced steady growth and ample profits. But it also created the impression that “lean” as developed by Toyota could not create innovative products for customers.
This situation began to change with the Prius project in the late 1990s. Toyota was observing that competitors were making steady progress on matching Toyota’s quality and durability, metrics where there is no further room for differentiation as a company nears perfection. And the world was changing, with growing environmental concerns and waning interest from smart, young engineers in a seemingly stodgy, mechanical engineering company. Thus, it seemed as if product innovation was an unavoidable need. The Prius was the result. However, the most interesting thing about the Prius, from the perspective of the current moment, was that it launched on time with nearly perfect quality. No managers flying out the door, no nervous exhaustion amongst those who stayed, and no “production hell” for the first truly innovative product from Toyota after more than sixty years in business.
Today, with the auto industry facing disruption due to government demands for vehicles producing less carbon dioxide and from new entrants from the software world offering asset sharing, autonomy, and hyper connectivity (which work best in combination), Toyota once more faces the need for product innovation, and not just for goods but for services too. But it is doing this on the foundation of stable and robust product development, production, supplier development, and general management systems. In the normal course of business history, the firm that is best at the currently dominant technologies often finishes far back in the pack in the new era or even fails altogether. And that could happen to Toyota. But because of its foundational strengths, I’m seeing signs of a different outcome.
A couple of examples:
- Toyota believes that the winning energy technologies cannot be known in advance, so it is concurrently experimenting with a range of low carbon technologies – fuel cells (the Mirai passenger car and Kenworth semis equipped with two cells from the Mirai project that have been hauling containers out of the Port of Los Angeles for the past six months), solid state batteries (which may double battery power density by 2022), and further enhancements to hybrid technology (which has gotten a big boost in sales due to recent problems with diesels.) Concurrent exploration of alternative countermeasures for a problem is, of course, Toyota’s standard approach to any business or development problem as captured in A3 analysis
- Toyota realizes that vehicles in the future, whatever their core technologies, will require massive amounts of software for energy-management, autonomy, navigation, and connectivity. This is a cost challenge and a quality challenge. Software written using today’s methods for major modules such as autonomy is costly and development is slow despite the introduction of agile and scrum, based to some extent on lean thinking. And software acceptable today for many consumers products such as cell phones and PCs (and for their periodic upgrades) is too buggy for autonomous, shared, hyperconnected vehicles. (The vehicles of the future may be cell phones with wheels but you and your family are now inside the cell phone.) So Toyota is making a massive investment in applying TPS principles to software writing and quality verification.
- The winning approach to autonomy is also unclear. So Toyota is investing heavily in both its Guardian Angel concept and in higher levels of autonomy. Guardian Angel leaves the driving to the driver but prevents drivers from doing anything dangerous and is a giant leap ahead even if Level 4 and 5 autonomy prove to be long-term rather than near-term possibilities. (I personally look forward to a Guardian Angel equipped vehicle that I can drive as fast as possible knowing that the vehicle won’t let me run off the road in the next curve or hit the pedestrian walking out from between two cars on a dark night.)
Given the amount of risk inherent in Mobility 2.0, Toyota has accumulated a mountain of cash (nearly three times the level of comparably-sized GM and Volkswagen) to finance experimentation while protecting its employees from the inevitable mistakes of managers backing the wrong solutions in a time of discontinuity. (The cash comes from the brilliant performance over the last decade of Toyota’s development, production, and supplier management for conventional products. A virtuous circle.)
Contrast Toyota’s methods with those of other companies generally believed to have brilliant, innovative ideas but no robust development, production, supplier management or even customer support processes, and which are short of funds. Not just Tesla but the whole VC-backed auto start-up industry come to mind.
So, would “creative” organizations like Tesla and the many other new entrants in the mobility sector do better to proceed as quickly as possible in pursuit of their innovative ideas, back-filling mature and robust design, production, supplier management, and support processes? Or should they be realistic about the time and cost involved and move more slowly, building the processes they need first before they commit to launch of new product concepts? In one specific case we may well have an answer soon. But surely the larger issues of stability versus innovation merits further consideration in the Lean Community.
Join Jim Womack this June 19 & 20 in Traverse City, MI at the Designing the Future Summit, with speakers from Ford, Menlo Innovations, and MIT D-Lab. Plus Jeff Liker, John Shook, and many more.