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Chapter 6 - Japanese Toyotism Leads the

Way

The reversal
The beginning of the story
Toyota is one of the world's largest automotive groups and has established itself as
the leader in hybrid vehicles. This Japanese company has been so consistently
successful in the highly competitive space of the automotive industry thanks to the
development, in particular, of a model of industrial organization known as TPS
(Toyota Production System), which many companies have tried to copy, with, as we
shall see, more or less success.

The story begins in the 1950s, when the company's leaders traveled to the United
States to study American production methods, in this case, the Ford and General
Motors production lines. They realized then that they had neither the means nor the
luxury to afford so much waste of space, resources, excess stocks, quality problems,
or hyperspecialization. Indeed, what they saw were the ingredients of Taylorism as
we have described it; it had indeed evolved very little. They thus endeavored to set
up a different production system, by applying the systematic improvement approach
they had originally used in the manufacture of looms.

Witnessing an unevolved Taylorism

We have attempted to describe the extant situation in American factories in figure
6.1. We described, in a very simplified way, four operations on an auto parts
production chain: stamping, pressing, welding, assembly. The steps are separated
by stocks (represented by triangles) that serve as buffers to balance flows. These
narrowly-defined and specialized tasks were carried out by blue-collar workers.
Conversely, a considerable number of white-collar workers, in functional or technical
roles, were supposed to organize and manage all these operations. In particular,
specialists in work organization methods persisted in narrowly defining and closely
controlling blue-collar work, while white-collar workers and non-value-added
activities proliferated, with posts such as method technicians, central planning,
accountants (all inventory had to be maintained), handling, tooling, adjustment,
cleaning, maintenance, quality management, and so on.

Production lines were organized following a logic of advanced planning from top to
bottom, with a heavy hierarchy of 6 or 7 levels and an organization by trade and
specialization, grouped according to poorly-communicating vertical silos.

Here again was the pyramidal, command and control approach, focused on workers'
goals and results, with no hesitation in replacing them if they did not succeed.
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Central planning thus lacked cross-sectional vision, while each department or unit
imposed its requirements and constraints on others.

Figure 6.1 So much waste

So, what could be done? Towards greater focus on specifics

How did Toyota's executives address this accumulation of problems, sources of
waste and complexity? The first thing to do was to go back to the operational level as
much as possible. Each leader set out to understand the real situation by going to
see for herself what was actually happening on the ground (the method can be
summed up in a few words in Japanese, in this case, genchi genbustu).

Focusing on the production line and we can consider, for example, the stocks levels
between the presses and welding operations. The usual way to take these stocks
into account was to assess them as an abstract financial cost that needed to be
optimized and which blended in with other costs in the operating account. More the
pity, because stock levels are actually a very valuable symptom, that of a
malfunction between two operations, and this signal is as useful as fever is for a
doctor. It is important not to try to eliminate it, like a doctor advising aspirin for fever,
but rather to try to understand what the root dysfunction is.

Regarding the presses, these are massive, very expensive machines, about ten
meters high, where a matrix, which can weigh hundreds of kilos, is installed.
Whenever the two jaws of the matrix open, a stamped metal plate is inserted. It is
then pressed in the form of a door or hood element. Since only a limited number of
presses are available, the tool must be changed regularly to shape the 400 or so
components of a car's body. But each matrix tool change can take several hours due
to the complexity of the manipulations and settings. In one fell swoop, several weeks
of stock are manufactured to offset the costs of installation and modifications. Thus,
it must be understood that this huge stock, representing several weeks of production,
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comes from the fact that it takes about 8 hours to change settings. Toyota decided
that the only way to eliminate this waste was to reduce this to one minute. This major
innovation, unthinkable in the Taylorian system of separate trades, was undertaken,
step by step and with determination, over a period of several years. The challenge
forced specialists to cooperate transversally. Therefore, the solution is obvious: if it
takes a minute to change the settings, a stock level of a few dozen parts to balance
the chain is sufficient. Not only are stocks reduced by operating just-in-time, but
there is more space and accounting oversight.

Figure 6.2 The issue of changing press settings

Now, consider the stock between stamping and pressing operations. The parts stock
stamped before the press are due to the stamping machines being too fast
compared to the presses. The solution is therefore to balance the operating speeds
of the stamping and the presses, with the immediate effect of reducing the buffer
stock.

The same applies to stocks arising from low production quality or insufficient
maintenance. The stock is used to compensate for defective parts or production
shortfalls when the machine breaks down. The solution is, therefore, to aim for zero
defects and practice preventative maintenance.

Stock is actually an excellent ally, as it points towards specific problems, and it is

important not to distort this signal, the symptom of a problem to be solved.
Consolidating different types of stock into a global cost has long been a mistake,
stemming from a financial approach that looked at transactions from a very high level
and, in doing so, missed valuable information.

This approach can be generalized to all kinds of concrete measures such as wasted
space, unnecessary transport and travel, or excessive delays.
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A new style of leadership

When returning to the concrete side of operations, the leader must not only display
and communicate a clear long-term vision, but also share and teach it by leading the
way in daily work and by delegating greater authority to blue-collar workers. The
leader no longer remains at the level of the plan and the financial objectives, but
goes and sees for herself what is happening on the ground. She is resolutely
committed to a long-term learning culture, based on delegation and cooperation, to
decide and solve concrete problems, rather than ordering people around.

Factory and shop managers' offices are in the workshop, near the production lines,
which allows them to interact directly with operators when they encounter difficulties.
They have the most relevant information to quickly find a solution, at the most basic
level of detail, rather than abstract, financial aggregates.

Operators now have the power to act, to the extent that they are once more
responsible for tasks that had been devolved to white-collar workers. They can
adjust or carry out light maintenance on their machines; they are responsible for the
quality of their operations and can take initiatives, as evidenced by the cords that
hang from the ceiling on the assembly lines, which Toyota calls "andon". They can
pull these cords every time they notice an anomaly at their workstation, and the
chain may be stopped if the problem is not resolved quickly. These cords, which
have been replaced by more sophisticated tracking systems in today's factories,
function as alarm signals, sufficiently visible and prominent (since the whole chain
stops) to encourage a quick, definitive resolution of issues.

Context and culture

Kaizen, the continuous improvement method.
This style of leadership reduces the number of hierarchical levels, because
managers are committed to the field, and work is done as a team, as close as
possible to real conditions. This style also leads to fewer procedures and complexity,
because blue-collar workers are, once again, responsible for what they do: adjusting
machines, maintenance, and quality among other tasks that, in the Taylorian model,
were entrusted to white-collar workers.

But, above all, Toyota implemented a method of long-term, continuous improvement,

known as kaizen, which consists in redesigning the entire organization, by
dynamically aligning it with the end customer. This direction gives Toyota the means
to set inspiring and motivating goals over time, and then formulate concrete ways to
achieve them, step by step. It allows everyone to find meaning, understand the
goals, and identify with the group or team. Because it is difficult to plan and
anticipate the indirect effects of change on a whole system, Toyota, via this
approach, manages the consequences of local improvement without destabilizing
the system, since field-based experiments are done step-by-step, at the lowest level.
A new way of doing things is trialled, and, if relevant, it becomes the standard. Local
direct adjustment makes the system flexible and adaptable.
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Toyota has thus been particularly successful in adapting to a rapidly changing
environment through this systematic process of continuous adjustment, allowing it to
dominate the automotive sector in just a few years. This step-by-step evolution is
more effective, but more complicated than the process of creative destruction
described by economist Joseph Schumpeter, whereby less adaptable operations or
systems disappear in a highly competitive environment. Again, one is reminded the
case of Kodak which failed to change its vertical, rigid, tradition-bound structure for
the challenge of digital photography. Kodak made way for a multitude of new
companies, experts in digital image.

Let's take a closer look at the key principles of the DNA of continuous improvement.

The flow is driven by the downstream, and transversal cooperation,

the heijunka [ou alors: Heijunka: downstream-driven flow and
transversal cooperation]
We have seen how, on the production chain, operations follow one another just-in-
time, by reducing stock and controlling waste. This approach illustrates a basic
principle, heijunka, which is to orient the entire organization towards the end
customer's needs. Operations flow upstream to downstream, forcing transversal
cooperation between units and trades. Contrariwise, in the Taylorian approach,
central planning pushed the objectives from the top, down to the bottom of the
hierarchy. Toyota, therefore, smoothes the flow driven by end customer demand. It is
a matter of pulling very gradually on the flow, step by step, to identify which problems
emerge successively. Toyota often illustrates this principle by using the analogy of
the river that is not folowing smoothly, because it is hampered by a number of
boulders below water level. Stocks, like river water, cover hidden problems, in this
case, boulders. The principle is, therefore, to reduce the water level in the river, i.e.
reduce the level of stock enough to make a first boulder, or problem, appear, and
then solve it. In Figure 6.3, we see that these problems are the adjustment times of
some machines, which are too time-consuming. This matter being solved, it is then
possible to continue reducing the water level, i.e. stocks, to discover the following
problem, and so on. The progression occurs, step by step, to declutter the flow of
operations from one unit to another.
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Figure 6.3 Stocks mask problems

Jidoka: making problems visible

The second principle is to multiply visual controls in order to make visible usually
hidden problems. The fear of being at fault or guilty drives most people to hide their
mistakes. But if there is no mistake, there is no learning possible. Making problems
and deviations visible is accepting to learn from error. From an evolutionary point of
view, adaptation benefits from mistakes. Errors and problems must therefore be
made visible and controllable in the field, at the source, by immediate action. The
same logic means that machines and equipment are designed to stop automatically
as soon as a problem arises.

The 5S method is based on the idea that to make things visible you have to clean,
scrub, and buff; this seems simplistic at first glance, but is incredibly effective.

The 5S program

1. Classify (Seiri). Keep only what is needed and get rid of what is
not

2. Order and organize (Seiton). A place for everything and

everything in its place.

3. Make it shine and make it visible (Seiso). Deal with and

anticipate. Expose what is abnormal or what can break.

4. Memorize (Seiketsu). Create rules and standards to maintain

knowledge

5. Persist (Shitsuke). Discipline and habits allow to consolidate

gains and prepare for the next improvement.
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Consolidating achievements: Simplification and standardization

The third principle is to master and consolidate operations by simplifying and
standardizing tasks. It is the foundation of continuous improvement and learning.

Creating standards keeps a trace of the way things are done; it's knowing the
starting point so the next step can be taken.

Simplifying means removing uncertainty and ambiguity. This responsibility belongs to

those who do the work. They write and apply the procedures themselves,
progressing with the help of their supervisors, who guide them and teach them the
philosophy of continuous improvement.

The new norms are expressed as memory in the present, the new traces erasing the
old ones. Thus, procedures must be simple and practical enough to be used, erased
and updated by those who do the work on a daily basis. An operator who encounters
a problem must immediately react and ask for support. If the operator is left to
decide when to call for help, the problem may get bigger until it is solved, while the
information on the real causes will have disappeared. Operators and supervisors
thus cooperate to improve the system. Managers, in this system, act as trainers and
facilitators by implementing problem-solving methods at all levels, including the
lowest ones. Making an employee responsible for a problem does not solve it
because it is the system that needs to be changed.

As for supplier-customer links from one position or unit to another, they must remain
direct and unambiguous. Interactions always occur with the same, well-known
person, as when runners pass the baton in races. This allows people to know their
correspondent well and develop a close relationship with them. Similarly, each
product and service follows a simple, direct path. It does not go to the next available
person or machine, but to a specific person or machine.

Implementing a culture of collaboration and learning

These principles allow a strong culture of collaboration to be established in a climate
of trust. People get to know one another better thanks to regular contact. This
experimentation gives operators the opportunity to question and update their own
operations by trial and error, under conditions of immediate reaction, making the
system flexible and adaptable. Making a error is not considered a mistake. On the
contrary, correcting errors is a source of learning and progress, with the help of
supervisors who provide direction and assistance. In a way, it is not the error that is
sanctioned, but the fact of not declaring it.

Developing skills
A precious social capital
For Toyota, human resources are the most important social capital. The company
applies considerable effort to the hiring and development of employees capable of
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adapting to teamwork culture, and ready to develop their skills through
experimentation and continuous improvement. They initially have a very good level
of education which they continue to develop through multiple internal training
courses. The company therefore seeks to retain them, and recruits and trains its
executives from its own ranks to perpetuate the culture. It should be noted that
Toyota initially relied heavily on Japanese social structure and the fact that unions
strongly identify with the company. The Japanese have long been hard workers and
eager to learn. The strong team spirit and intense internal communication promote
teamwork and mutual adjustment to reach consensus.

A center to orchestrate and disseminate training and philosophy

This center is essential to orchestrate the coherence of the whole. Most of the
consultants involved with the center have received intensive training in the Toyota
division specially created to develop and disseminate the philosophy and
management system throughout the organization. Many executives and senior
managers have developed their skills in this center. As their attendance can last for
months, they are released from their hierarchical responsibilities to lead
improvement and training projects in-house and with suppliers.

All receive multiple trainings that cascade from senior executives to first-level team
leaders. Teams of consultants are available to deal with complex issues and to help
senior managers orient their units in line with the philosophy advocated.

Back to the global vision

Competitors were quick to notice Toyota's success and sought to copy its methods.
But copying and imitating certain practices is insufficient, because it is the entire
organization which participates in the movement and which must be copied.

As we have just seen, the TPS approach has focused on leadership style and on
reorganizing context and culture. However, we must not forget the third part of our
global approach, reflection and strategic vision. This reflection must focus on the
three essential challenges facing the automotive industry: supply management,
innovation and differentiation through services.

Thus the TPS approach was extended to the entire supply chain. This led Toyota to
drastically reduce the number of top tier suppliers and to develop a solid partnership
with them.

Regarding the innovation aspect, the design and development of new products no
longer occurs sequentially, but via teams working in parallel and a very strong
interaction between services. This has made it possible to considerably reduce the
launch time of a new model, from five years to less than three years. The traditional
sequential mode, where a project went from department to department, or, in fact,
from silo to silo, has been abandoned, after analysis and performance tests, in favor
of a multidisciplinary approach, whereby different departments remain in interaction
throughout the project in developing a common culture. Strategic reflection, in
conjunction with the evolution of mentalities and current economic challenges, is
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focused on the development of electric cars, a major evolution. Toyota thus seems to
have taken a decisive turn, by being first out of the gate with hybrid technology.

Innovation also extends to services, to escape the hell of commoditization and

develop a bespoke relationship with the customer. Nothing looks more like a car than
another car, and to differentiate itself, Toyota has made, and is making, a huge effort
on the quality of services offered and customer loyalty.

In summary, the Toyota case allows us to highlight the three main aspects of a
potentially ideal leadership model. First of all, questioning and strategic vision, to
lead actors where they would not have gone by themselves. Then the leadership
style to mobilize them. Finally, the establishment of an appropriate context and
culture to convince them to do things well, and improve what they do. It is these
three aspects, these three priorities, that we will describe in detail in the next three
chapters.
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