Toyota is a Great Company for a Reason
How The Best Company Differentiate Themselves: Flow Flow Flow
There is only one best company and it operates at Six Sigma because of the System approach. Toyota’s Operational Excellence is a result of the Toyota Production System. The best business is best because it continually strives for perfection at a rate of about one improvement idea per every person, per month. Toyota has not always made the best decisions but it has learned from all its decisions. The following list represents the reasons that Toyota is the best run company.
Know What Your Business Is
Subsequently Toyota knows exactly what their business is. They focus the whole company on making that business successful. Therefore, they understand where they add value and what they should outsource.
- Maniacal focus on Value Add
- Use the whole company as a competitive advantage (TPS)
- Go to the Gemba (management goes to where value is added)
- Decrease cost every year (sets a cost reduction target for themselves and their suppliers)
- Focus on customers (in Japan, keeps a detailed profile of each customers family)
- Surprise value (the Lexus will maintain a constant speed when coasting down a steep hill)
- Continuous focus on increasing flow
- Improve every process every day
- Utilize first tier Suppliers as a Competitive Advantage
Toyota has not always been the best business. The Toyota Production System in an immature state started supporting Toyota since they have been manufacturing automobiles, starting when World War II ended. Two major reasons that they have been successful. They have learned automobile manufacturing faster than their competitors and they have been willing to take risks.
- Don’t hide failures and hence learn
- Take risks (because it could be a big risk to not take risks)
- Believe in yourself (management must commit to leadership)
The Best Business will look at the business as a system. Consequently Toyota is a business system like every other company. This system contains overhead entities such as HR and IT. Value Streams represent all value-added entities. Value Streams spread beyond the walls of Toyota.
Path to Greatness
Set the Course with Ground Rules
Define the Value Delivered
Map the Value Stream from Customer Order to Customer Delivery
Flow from one Process to Another Seamlessly
Pull as Need Rather Than Push
Perfection Seeking at a Rate of about One Idea from Every Person Every Month
- Engage the whole company, create a culture of greatness (There are many parts of Toyota that are used to create a competitive advantage. Some are obvious and some aren’t.)
- Look outside the box (improve your business by looking outside of your core business, railroads defined their business as railroad, not transportation)
- Constantly think (this applies to everybody)
- Build and listen to Guiding Principles (define how to run your business and then use that to run your business)
That is to say this could be number one on the list. There is nothing more important at Toyota than the concept of learning. This accelerates the growth of everybody in the company.
- Lean Production (removes the wasted inventory of Mass Production, it was developed over a long period of time)
- TPS (this is the system structure built around Toyota’s value add)
- Continuous Pushing with Learning (this is a key to improving Toyota)
- Learn from failures (every failure has value)
Toyota Production System People
Toyota does not look at people as carbon units but as the secret to success. Subsequently every individual at Toyota believes it is their responsibility to make Toyota a better company and Toyota believes it is their responsibility to deliver full employment. Finally this responsibility comes with willful authority from management.
- Andon (it is not only the responsibility of every individual in manufacturing to stop the manufacturing line if they find a defect but also to be involved in determining the source of the defect and eradicating it)
- Continuous Improvement (with a focus on learning).
- Lifetime employment (Toyota was forced into a situation where they guaranteed lifetime employment but they have taken that situation and used it as a competitive advantage)
Toyota Production System Risk
Risk is strategic. When Toyoda went from automating looms to manufacturing cars they took a huge risk on becoming Toyota the automobile manufacturer. Risk did not stop there. By special circumstances they initiated a full employment program. We generally read about the risks that Toyota took that worked out. Not all of them worked out.
Toyota Company Risks
- andon/defect reduction (Toyota could not afford the “waste” existing in American automobile manufacturing. The fact that they had to do something different was not a risk because they could not manufacture the American way. However, there was risk in implementing an andon cable that employees used to halt the manufacturing process when they discovered a defect)
- Lexus (this was a NEW car line designed to compete against Mercedes, BMW, Audi, and other high-end established cars)
- Prius (Toyota had no experience with the batteries needed to power the Prius but realized that the battery could create a competitive advantage so they did not outsource this, they had no in-house battery expertise.)
- Lifetime employment (during a time of terrible financial performance Toyota negotiated with a strong union to release some employees, have some management quit, and give the remaining employees lifetime employment)
- World War II (Toyota had barely gotten started in the automobile business when World War II started and they were required to make trucks for the Army. Changing their manufacturing focus after that entailed risk)
- Japanese market à US market (Toyota felt that the best way to grow was to bring a car into the American market. Toyota’s first model sold in America sold 300 vehicles total.)
- Loom production to automobile production (Toyoda performed groundbreaking innovations in looms, what would ever make you think you could produce a car?)
Advantages of Stress
Stress is positive and stress instigates innovation. Stretching your mind, generates stress.
- Continuous Improvement creates stress (Toyota employees average 4 improvement ideas a year, each)
- Constant thinking (when you move a person’s mind out of their box you create positive stress)
- Assembly-line improvements (the “improvement” bullet above when applied to an assembly line means that it is constantly under the stress of change)
- Stress is measured by an increase in andon calls.
Fortuitous Unintended Consequences
As a result of some of the actions of Toyota the resulting unintended consequences are positive. Taking risks in a strategic direction leads to positive unintended consequences. Subsequently some of Toyota’s unintended consequences are now contributing to their accelerated improvement.
- Toyota put in an andon system designed to rid their products of defects. The manufacturing line users the andon system to measure assembly line stress. If they receive significantly more than 800 andon pulls a year then they feel they are stressing their manufacturing line too much. If, on the other hand, the andon pulls are much less than 800 then they feel they are not pushing their assembly line fast enough.
- The Toyota Production System was not always great. Toyota had a period of poor financial performance that require them to cut costs. The company and the union realized there was a reason to lay off some employees. The union required that Toyota also remove a significant portion of upper management and put the remaining employees in a position of lifetime employment. This has led to a feeling of Toyota employees that they have a responsibility to improve Toyota. This is part of the culture that enables Toyota to receive a company average of four improvement ideas a year.
I remember listening to a British commentator during the Afghan war. To clarify He was commenting on how to make Afghanistan better. He said Afghanistan was the poorest country in the world and it should be our goal to make it the second poorest country in the world. To sum up the message I received is that sometimes it’s best to start slow.
The above comment has meaning for any company that wants to achieve what Toyota has achieved. The message is to start immediately because the process to greatness requires time. Therefore, the good news is that we can use the model of Toyota to compress time.
Above all the path to building a great company is a result of many things including:
- Profound Knowledge of you current system model,
- corporate ability to accept change,
- vision oriented management, and
- finally a non-blaming culture.
Excellence is within your grasp – let’s discuss.