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 / Summer 2008 / Issue 51(originally published by Booz & Company)


Jeffrey Liker: The Thought Leader Interview

The Essential Lesson

S+B: Why do so many companies find it so difficult?
Their leaders are unable or unwilling to grasp one essential lesson: that they should first understand the Toyota principles, and then build their own capabilities using these principles. And they must be willing to do it slowly, step by step. Take the case of kanban [the system of visual signals that Toyota uses to notify suppliers in a just-in-time arrangement that a part is needed]. An argument can be made that part of the learning curve is to develop the discipline to use a manual kanban [with simple cards and markers] effectively before you go to an electronic kanban, as Toyota did. This creates the discipline in the company culture to order parts as they are needed, and not in po­tentially erroneous anticipation of future demand. After Toyota had achieved this cultural transformation, it evolved to a more efficient electronic kanban.

But many Western companies prefer to skip over the learning curve by buying the software for an electronic kanban without first going through the manual process. Companies want to imitate solutions instead of developing the culture and building their own learning capabilities to ensure that the solution succeeds.

S+B: How does Toyota view its competition? Is it motivated by what other companies are doing?
LIKER: Toyota is always concerned that one of its competitors might have a breakthrough that it hasn’t thought of, a game-changing technology. But it’s not so concerned that it would change its internal emphasis on continuous improvement. Toyota’s view is that it has certain projects with which it is trying to move the company far ahead, but most of the company is trying to improve incrementally.

Toyota wants the people in paint to be improving the paint process and the people in welding to be improving the welding process. In the meantime, at headquarters in Japan, the company will be working on the larger breakthroughs. To Toyota, a breakthrough means: “Let’s take half the cost out of assembling an engine and let’s design it in half the time.”

S+B: You’ve described Toyota as a learning organization. What does that mean, and what does it take to become one?
When a learning organization takes a leap forward — for example, when it makes a breakthrough internally or with a new product — its people then slow down to see what they can gain in understanding from what they’ve just done. The only companies that are going to be able to learn in that way are those with an organizational structure that stresses a continuity of leadership, because each generation must carry forward what the prior generation has already learned.

Toyota highly values its brain trust, the people who have learned the Toyota way and understand it very deeply. The company considers the brain trust to be its competitive weapon. But lately there have been disturbing signs that Toyota is growing faster than it can develop that brain trust. And the brain trust is being stripped by companies who hire away its people. For example, Jim Press, the head of Toyota North America, was named the vice chairman and copresident of Chrysler in September of 2007. Losing the brain trust is probably the biggest threat to Toyota’s continued success.

But there’s also a part of the Toyota culture that is very optimistic, that says whatever the constraints are, whatever the challenges, they can be solved. In Toyota Culture, my coauthor, Mike Hoseus, who worked for Toyota for about 20 years, describes being very frustrated after developing a group leader who left for another auto company. Mike said to his Japanese sensei [his project leader and teacher], “This seems hopeless. Every time I develop somebody really good, they leave.” The sensei replied, “Mike-san, don’t think of it that way. That person is now better because of what you taught him, and that person is going to do good work out in the world. We have to think about our own plant; you have to think about the next person you’re going to develop.”

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