Monday, December 11, 2006

Book Club: "The Toyota Way", Chapter 7

Chapter 7 of The Toyota Way explains the first of 14 principles: "Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals."

In this chapter, Dr. Liker breaks down the abstract principle of long-term thinking into smaller and more distinct ideas: a mission greater than earning a paycheck, doing the right thing for the customer, use self-reliance and responsibility to decide your own fate, create a constancy of purpose and place in history. In short, "do the right thing for the company, its employees, the customer, and society as a whole."

Two illustrative examples are given that show Toyota's commitment to long-term thinking. The first is the story of when Lexus tires began to wear-out quicker than expected, prompting Toyota to send all Lexus owners a $500 voucher for new tires. Toyota felt that even though the tires were within industry specs, they owed the customer an apology for not exceeding their expectations. They correctly realized that customer impressions have a ripple-effect on a brand, and that spending cash in the short-term was a good long-term investment.

The second example is the NUMMI story. Toyota established a joint-venture with GM at a factory in California known as NUMMI. They put in place their famed Toyota Production System, trained the GM managers on how to run it, and essentially invited the world's biggest automobile manufacturer to become lean. Why would they help their biggest competitor? The author explains that "by helping to raise the level of manufacturing at GM, they were helping society and community, as well as creating high-paying manufacturing jobs for Americans." Is this an extreme example of long-term thinking or what?

The chapter ends with "The Gutting of Chrysler's Culture: A Cautionary Tale." In this section, the author recounts the successful transformation of Chrysler by Lee Iacocca in the 80's, and the subsequent failures of his successors, Daimler, in the 90's. By focusing on short-term cost cutting, Daimler stymied the burgeoning Lean culture that Iacocca had established at Chrysler, leaving them far behind Toyota in the race to the top of the automobile world. Without a long-term philosophy, you can't establish a culture of problem-solving, learning, and improvement.

On a daily basis, homebuilders display an amazing amount of long-term thinking on the job site. Every time we beef up a support beam, double-check an electrical wire, or re-level a grade stake, we are thinking about the customer's long-term interests. Unfortunately, when it comes to business decisions (laying-off employees, buying equipment, offering new services, etc.), we often fall short of the gold standard set by Toyota. Not until an organization commits itself to long-term thinking, even at the expense of short-term financial goals, can it ever hope to become a lean enterprise.

16 comments:

Cindy A said...

Not only "long term thinking", you also must include accountability

Anonymous said...

Craig / MIT

It appears to be vital to have the total commitment of all levels of management in order to fully implement the lean philosophy. You are not just changing processes but also the culture to some degree.

M Smith said...

You not only need commitment from all levels of management (or better yet, leadership). Lean must be implemented in all departments as well. If we implement on the production floor only, and leave all other systems to continue on without change, lean will fail. By it's very nature, we cannot implement lean production processes, but continue to warehouse large amounts of inventory, engineer our homes in the same manner, develop new product, and sell homes as we always have. It is a top down and all around change.

Mike L said...

M Smith's comment is the truest statement that I've seen on this blog yet. It has been emphasized over and over again by the leading Lean writers, bloggers, etc. how important it is to accept Lean as a company-wide operating system. As Mike S. said, it can't be on the production floor only. It's almost impossible to even begin Lean on the factory-floor if you aren't simultaneously implementing it in in purchasing, engineering, and everywhere else.

Sean L said...

If we are all in agreement that we need all levels of our company to buy in on the lean management system for it to succeed. Then I would like to know what kind of feedback have you received from the corporate office on their implementation of lean?

Anonymous said...

Trump called. "You're Fired"

BRIAN K said...

To further exapand on what Mike S and Mike L stated about including all aspects of an organization, in order to create "flow" it would seem that Lean should be implemented starting at the beginning and proceed through the process. Starting to implement Lean in the Production portion of the building process seems to be starting in the middle. To better create flow, starting in the sales or product development areas, which are the first stages of homebuilding, would lend to better establish flow and then each of the other areas would follow in turn following step-by-step.

Mike L said...

I think everybody's comments are great. Brian makes a very good point that the sales & product development processes need to become lean.

It's debatable as to whether lean implementation should begin on the factory floor first, or at the beginning of the entire process (i.e. sales, product development). Many people say that it's easiest to start on the factory floor because you can physically see the problems and watch the transformation take place. On the other hand, it can be very difficult to implement improvements in the factory if upstream processes do not support the effort. It's complex.

So, where do you begin? I go back to Mike S's comment: "It is a top down and all around change." What do you think it will take for us to achieve what he describes?

Benny said...

Lean management will be like the QIP. It will be difficult to get true "buy in" by all unless all levels and departments are truely "walking the talk". Starting with production seems to be skipping around and might not be conceived as total commitment.

Craig said...

As Mike L mentioned, the production floor might be the easy target as to where lean should be implemented first due to it's high visibility. But, are there areas within the company that are less visible but have a greater need for lean implementation???? Sales and product development have been mentioned. Is there buy-in for lean in those areas?

Anonymous said...

Good Lean article in this month's Professional Builder. Discusses current downturn in building industry and a builder's typical MO of beating up suppliers for lower prices. Is this long-term or short-term thinking and how does it affect relationships with vendors?

Bill V. said...

Good examples of how all levels of management need a wake-up call, this is not new discovery, just more of us that need to be team focused on "A" pathway versus the many routes now currently taken individually.

Anonymous said...

While lean requires total committment from management, it also requires the rank and file to buy into the process. How has Toyota dealt with the Union mentality so common in production processes in the USA?

Rob D said...

With "long term thinking" in mind I would like us to use lean to produce an order confirmation that allows us to put items in the same location every time. We currently have to search several areas of the confirmation because the same type of information can be 2 or more locations. This leads to errors in the building process and a customers that may not truely no what they are getting.

Mike L said...

As for Gary's comment, I would say that Toyota puts a significant amount of effort into developing their human resources. I've heard stories of them putting job applicants through a full one year training period before they are hired permanently. Also, every aspect of an employee's job is clearly defined and visually displayed so that there is no question as to what is expected of them from the moment they walk in to the factory.

Mike L said...

As for Rob's comment, it seems like there are some great opportunities to streamline our order confirmations. What is the root cause of the "defects" that appear? Quality is conformance to requirements; do we have requirements for a streamlined order confirmation?