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 / First Quarter 1997 / Issue 6(originally published by Booz & Company)


The Art and Practice of Japanese Management

In fact, the trouble with mass production is that it usually produces its economies of scale by reducing jobs to drudgery. By contrast, lean production continues to engage at least some of the intellectual gifts of the workers. The employee can see the impact of his workmanship -- good or bad -- on the company's manufacturing process. Pats on the back from his colleagues result from a job well done, scowls from a job skimped.

Lean production also involved rethinking the boundaries of the firm -- in particular its relationship with its suppliers. In the West, auto makers have been through two stages. First, they tried to make virtually all of the car themselves, setting up their own parts-making divisions. When the fashion turned against such "vertical integration," Western companies then opted for a second system based on competing suppliers. They provided a large number of suppliers with a detailed drawing of what they wanted and then offered a one-year contract to the supplier who could come up with the best price.

The classic form of Japanese supply-chain management, again pioneered by Toyota, works in a different way. The suppliers can be formally separate companies, or they can be members of the same keiretsu (linked by cross-shareholdings). Either way, the parent company treats them as partners, rather than playing them off against one another. The suppliers provide the goods "just in time," in return for long-term relationships with the main manufacturers. Companies cement these relationships by sending mid-career managers to high-level positions in supplier companies or other members of a keiretsu. This means all parts of the supply chain can pool resources and also share information -- thus once again cutting down on time-wasting. Even today, Toyota can design and build a car twice as fast as Detroit can.

Kaizen and Consensus

If lean production represents the core of "the Japanese miracle," there are two other ingredients that, until relatively recently, were also considered indispensable parts: the doctrine of continuous improvement, or kaizen, and the value of consensus, especially when applied to long-term strategic thinking. A good way to look at both is through the work of Kenichi Ohmae.

Mr. Ohmae is now best known inside Japan for his attempt to set up a new political party. But he began to write the books that made his name in the rest of the world while working as a consultant for McKinsey & Company.

For most of the past quarter century, outsiders, particularly American business people, have been fascinated and frightened by Japan. Mr. Ohmae has explained it to them -- showering his books with good insider examples of how Japanese companies work and usually criticizing American firms in the process.

Mr. Ohmae has generally tended to exalt the Japanese way of making new products through continuous improvement. Innovation, he argues, is useless unless it adds value for consumers. He tends to pour scorn on big R.&D. projects, such as high-definition television, and revels in meeting challenges incrementally, particularly in mundane fields. Can you make a better coffee machine -- i.e., not just one with lots of fancy gadgets but one that makes better coffee? Yes, we discover, if you add a water purifier, because the taste of coffee depends as much on the quality of the water as it does on how you percolate the beans. Can you make a better camera? Yes, if you get it to do the focusing for you (i.e., removing the human error that ruins most pictures) and include an automatic flash.

A strategy of churning out products with lots of minuscule improvements fits in quite nicely with lean production. After all, one advantage of a flexible assembly line is that it can be altered quite easily to incorporate a new insight and include a new innovation. It also means that you can smother your market with new versions of the same old thing. One classic example of this process was the Sony Walkman, which came in hundreds of different shapes and sizes. Japanese companies such as Sharp and Canon have often jumped ahead by mixing different sorts of technology, such as photography and office machines. One way Japanese car makers have generally outfoxed their rivals is by rapidly updating their model range and adding extras such as vanity mirrors and intermittent windshield wipers. By contrast, American and European manufacturers have seemed obsessed with a "one big solution'' approach to research.

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