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Steven Spear

Steve Spear: What to learn from Toyota for those who already haven’t … Improvement and Innovation needed now more than ever

By Steven Spear, - Last updated: Monday, July 12, 2010 - Save & Share - Leave a comment

BACKGROUND: WHY LOOK AT TOYOTA?  BECAUSE IT CAME FROM BEHIND TO DOMINATE ITS COMPETITION!
Understanding the tremendous commercial success of Toyota, rising from an uncompetitive auto maker in the 1950s and 1960s, to the most dominant in the world by 2000s, and understanding the vast benefit that has come to some that have diligently sought to emulate Toyota–sharp reductions in time and cost, with vast improvements in quality and responsiveness, is reason for others who have not yet to look more closely.

Toyota’s success, after all, is rooted in its ability to generate and sustain broad based, high speed, relentless improvement and innovation, thereby by being quicker and better and getting product to market well suited to market needs.  As important as such a capacity is under any circumstances, all the more so when existing approaches to doing business have been terribly disrupted and new ones have to be discovered regularly.

TOYOTA: HALF THE EFFORT, TWICE THE OUTPUT
The lessons that get drawn from looking at Toyota and its high-fidelity, successful imitators are twofold: first, a set about making stable processes that are inherently chaotic, unpredictable and hence wasteful and non competitive and second, a set of lessons for generating and sustaining high speed broad based improvement and innovation.

The ‘lean manufacturing’ movement has its origins in efforts to understand the commercial success of Toyota, beginning in the mid 1980s.

Before then, Toyota was largely off of people’s radar screens.  It had first entered the US market in the late 1950s, but its products were so unreliable that it made little commercial headway.  Less obvious than were its quality issues was that its productivity was one-eighth that of the Americans.

Toyota had closed the productivity gap by the late 1960s, but unbeknownst to most.  It wasn’t until the oil price spikes of the early 1970s that Toyota reemerged in people’s awareness.  It’s sub compact cars were first attractive for their fuel efficiency, but were then quickly recognized for their reliability and affordability.

That was Toyota’s competitive opening.  Sub compacts were followed by every larger models so that by the mid 1980s, it was “stealing”–that was the term that was used–significant market sharp from the domestic producers.  When people tried to figure out how, there was a realization that it was something fundamentally different in the management of design and production processes that was occurring as, on any given day, Toyota and its suppliers were accomplishing twice the output with half the people, laboring in half the space, with half the equipment and material on hand.

LESSON SET 1: FROM CHAOS TO STABILITY
One round of research revealed a series of approaches Toyota used to establish stability in processes that were inherently chaotic.  In effect, this is what Toyota seemed to be doing that its processes operated so well. (We’ll look below at what was discovered about Toyota’s behavior when those processes didn’t work well.)

For instance, a job shop approach to organizing production flows were replaced by ‘continuous flow’ on focused ‘factories within the factory.’  Inherently fragile and inflexible ‘push’ production schedules were replaced by self-pacing pull systems, and work method improvisation was replaced by well choreographed standard work.

Those who employed those and similar tools found their performance improved dramatically as less time and effort was needed to get work done.

There was a problem with these approaches, however.  Those who used them didn’t fully emulate Toyota’s achievements.  While others got better quality and productivity, Toyota was able to introduce new models, introduce new brands (e.g., Lexus and Scion), expand its design and production efforts with increased local self sufficiency to North America and Europe, and assume technological leadership with the hybrid drive.

In effect, Toyota demonstrated that is ability to achieve exceptional performance was not rooted ‘just’ in a set of system design tools to move from chaos to stability.  Rather, it had a capacity for continuous improvement and broad based innovation others were not replicating.

LESSON SET 2: FROM STABILITY TO RELENTLESS BETTERMENT
How Toyota achieved such high levels of productivity came from asking the question: What were they doing so differently in these plants that ran as well as to have twice the output with half the effort.

How Toyota achieved breakneck improvement and innovation came from reformulating the question from what are they doing when everything is working so well to what do they do when things are not?

For many would be imitators, process stability was seen as the end point of a becoming like Toyota, a ‘lean implementation.’  Understandably so, it was SO much better than the previous state.  I turned out, stability was confused as the terminus of efforts rather than as the first way station.  Inside Toyota, great effort was exerted to make processes predictable.  But this was transitory.  This investment in standardization, specification, and stabilization was not to invent a best-for-ever approach, it was to capture a temporarily ‘best known method’ for achieving success, the use of which would reveal problems and further opportunities for improvement, both small and big.

Tied tightly to this first capability to see problems when and where they occurred was a second to solve problems that were seen, not just in some make do kind of way.  Rather, Toyota–at its best–developed and deployed a capacity to do disciplined problem solving so new knowledge was relentlessly being generated.

This was a precursor for a third capability–sharing and incorporating systemically that which had been discovered locally.

Finally, was a fourth capability–leadership.  Whereas in so many organizations, ‘leaders’ saw themselves as delegators and decision makers, within Toyota, successful leadership demanded developing the discipline of these various capabilities in the minds and hands of those for whom they were responsible.

CONCLUSION
Toyota was initially a source of great inspiration in how to manage complex operations based on its capacity to ‘steal share’ from the market incumbents.  This was attributed first to system engineering tools effective at stabilizing chaotic systems so they could be more productive.  However, in fact, Toyota’s success is rooted in four capabilities that make it an exemplar learning organization.

There are myriad examples of organizations that have benefitted just from the stabilization effort.  A fewer number have had considerably more gain by emulating the improvement, innovation, learning behaviors, discovering ever better ways to create value and pursue perfection.  This has not just been in activities that look like auto industry work–high volume, relatively low variety, repetitive processes, but across the board–high tech and heavy industry, production and design, manufacturing and services like healthcare.

For further examples, please see The High Velocity Edge.
• Pursuing perfection in primary metals production (Alcoa)–Chapter 4
• Creating high velocity improvement and innovation far from manufacturing–Pratt and Whiteny engine design, aQuantive internet advertising, and nuclear propulsion in the US Navy–Chapter 5
• Process design, problem solving, knowledge sharing, and leadership at Toyota–Chapters 6 to 9.
• Healthcare–chapter 11.

Best wishes,
Steve Spear
Sr. Lecturer, MIT Sloan School of Management
Sr. Fellow, Institute for Healthcare Improvement
Author: The High Velocity Edge <http://thehighvelocityedge.mhprofessional.com/apps/ab/>

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