Toyota's Global Strategy — Moving toward Global Motorization

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Toyota's Global Strategy

The Best Principles of Management

When they were planting the Toyota seed many years ago, they knew what would appeal to our senses. They had a plan to get just that from us. Then, they emerged with fourteen strong management principles to take the plan right to us and to get all of our attention.

Today, they have executed that perfectly, which is the reason the Toyota brand has kept its enigmatic place in the global auto market. This is how the Toyota business philosophy was so brilliantly performed, that many are thinking its a mystery.

Jerry K. Lister explains why Toyota has become a global symbol of passionate commitment to continual improvement and efficiency. Toyota's success as the world's most profitable automaker is no accident and now, thanks to Liker's book. THE TOYOTA WAY, its no mystery, either. Liker drills down to the underlying principles and behaviors that will set your company on the Toyota way.

Fourteen principles are stated upfront, and then a chapter is committed to expatiating each of these principles. The writing is clear and many outside sources are acknowledged with a thoroughness that is uncommon in business books. beautifully, 28 Toyota executive are acknowledged or quoted-and they tell the lessons of how the automaker keeps to the path that has seen it to the top. And these management philosophies can't fail to work anywhere they are put to use in the business world.

The executive quoted in the book clearly feels that the philosophy is more important than the technical tools of production system. This insight, however, has come to them as a result of using the tools intensively for many years. and the reader should not be misled into thinking that it is possible to bypass the tools and go straight to the philosophy.

After studying the process at Toyota for over twenty years, professor Liker emerged with the 320-page "the Toyota way", revealing the fourteen fundamental management principles forming the pillar of the automaker's world-renowned system of "Lean production". Interestingly, the fourteen principles could easily be compressed into two broad categories that support Toyota's success formula: "continuous improvement" and "respect for people." And yet we know we don't improve to satisfy animals. We simply do to satisfy that rational man. being the case, it can never be bad to see the success of Toyota's management philosophy as a single piece-"Respect for people." This is the whole story behind "The Toyota way." We draw,perhaps, our biggest business lesson here: The sky is the starting point of business outfits that have learnt to respect the consumer in words and deeds.

The Toyota way insists on basing management decisions on a "philosophical sense of purpose", thinking long term, having a process for solving problems, adding value to the organization by developing its people, and recognizing that continuously solving root problems drives organizational learning.

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The Toyota Way- 14 Management Principles

Toyota's growth over the last decade is a blueprint for winning. They've increased their world market share and are now the dominate force in the automotive industry. They own the hybrid, the fuel economy and luxury markets, they have the highest resale value, and they're the most reliable cars on the road. It would seem that their strategy is working. These are 14 management principles owned by Toyota. Implementing this, you could achieve world class organization and increase market share and the final results bring you financial profitability.

The Toyota Way- 14 Management Principles

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The Toyota Way - Underlying Principles of the Toyota Production System

The underlying principles of the Toyota Production System have been called the Toyota Way. These principles revolutionized the manufacturing industry and helped develop Toyota into the company it is today.

The Toyota Way has been outlined by Toyota as continuous improvement, and respect for people. Continuous improvement encompasses challenge, kaizen and genchi genbutsu. Challenge means forming a long term vision and meeting challenges with courage and creativity to realize dreams. Kaizen is improving business operations continuously and always striving for innovation and evolution. Genchi genbutsu is going to the source to find the facts to make correct decisions. Respect for people encompasses respect and teamwork. Respect is for respecting others, making efforts to understand each other, take responsibility and doing the best to build mutual trust. Teamwork is stimulating personal and professional growth, share the opportunities of development and maximize individual and team performance.

Outside observers of Toyota and summarized the Toyota Way principles a little differently. They see the Toyota Way as basing management decisions on long term philosophy even at the expense of short term financial goals, the right process will produce the right results, add value to the organization by developing your people and partners, continuously solving root problems drives organizational learning.

The right process encompasses creating continuous process flow to bring problems to the surface, use the pull system to avoid overproduction, level out the workload, build a culture of stopping to fix problems to get quality right from the first, standardized tasks are the foundation for continuous improvement and employee empowerment, using visual control so no problems are hidden and using only reliable, thoroughly tested technology that serves your people and processes.

Adding value to the organization encompasses growing leaders that thoroughly understand the work, live the philosophy and teach it to others, developing exceptional people and teams that follow your company's philosophy and respecting your extended network of partners and suppliers by challenging them and helping them improve.

The principle of continuously solving root problems encompasses seeing for yourself to thoroughly understand a situation, making decisions slowly by consensus, thoroughly considering all options and implementing decisions rapidly, and becoming a learning organization through relentless reflection and continuous improvement.

Instead of people resigning themselves to problems, becoming hostage to routine and no problem solving, the Toyota Way goes back to the basics exposing the real significance of problems and making fundamental improvements. This can be seen in the Toyota Production System.

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Where Did Toyota Go Wrong?

As I have been learning all of the wonderful tools and innovation that Toyota brought to manufacturing I am astounded to say the least. And up until now their quality was unsurpassed. What happened? I was reading an article from the Harvard Business Review by Sean Silverthorne on this very subject. Apparently, a significant contributor to this accelerator problem was Toyota leadership abandoned their quality driven system for increased market share. This wonderful thing called capitalism comes with an underlying price - manufacturer responsibility to the consumer's safety. Toyota let themselves be lured by increasing market share instead of their customer first ideals. I wonder if the leadership seriously considering the long term consequences of this direction.

"The flush of catching up to Ford and General Motors, coupled with a boom in demand, led Toyota's leaders to put sales growth above quality. Senior leaders became focused on becoming first in sales with a 15% share of global sales. This meant that new products had to be introduced more quickly, new plants had to be opened more rapidly, and supply networks had to be expanded more aggressively. We're now seeing the consequences of those decisions." - Learning from Toyota's Stumble by Steven Spear

Another automaker that lost its credibility was Audi. "Volkswagen AG's Audi luxury brand spent 15 years rebuilding U.S. sales after sudden-acceleration incidents in the 1980s almost wiped out demand, a possible sign of the difficult times Toyota Motor Corp. faces. Audi's U.S. deliveries plunged 83 percent by 1991 from their peak in 1985 following recalls of the German automaker's 5000 sedan. A class-action lawsuit in 1987 by Audi owners seeking compensation is still being fought." Audi 1980s Scare May Mean Lost Generation for Toyota by Andreas Cremer and Tom Lavell.

Toyota was the industry example of how to run a manufacturing business at optimum performance. When they upheld Lean principles of the customer first in on all levels of their processes it was reflected in the quality of their product. Not just in production, but design and marketing. This Lean philosophy was translated into profit, brand loyalty and an impeccable reputation. They were truly a lean enterprise. I fear that they have now become just another automaker. Toyota is reexamining what made them great. However, it will still take years to recover from the brand damage now done.

Toyota is a clear example of what not to do when you have a successful business model. All companies can be what Toyota was and hopefully will become again. Before this recall Toyota had 15% of the global market. Amazing. On a local level, think of what is would be like to increase your market share just by doing things Lean. If you were able to set up best practices, reduce or eliminate mistakes, full utilization of staff, etc. how would that help you become an industry leader? The question to ask yourself is am I the Toyota of yesterday or the Toyota of today? This applies for service business too. Which one are you?

Cynthia Marsh-Croll

Your Lean Path to Success!

Croll Productive Synergy
Westtown, NY 10998

845-649-2778
http://www.crollproductivesynergy.com
cmc@crollproductivesynergy.com

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Toyota's New Strategy

Businessweek reveals Toyota's New Strategy and presents in their online edition:

BETTER CARS
The stress is on flashier design and a broader range of models. Coming next: wireless PCs built into the dashboard.

DOT-COM DOMINATION
Idea is to use Toyota's 20 million customers as a base for a major presence in the Japanese Net. Gazoo.com will sell everything but help sell cars, too.

MONEY HANDLING
Toyota wants to sell mutual funds, credit cards, and loans to Japan's affluent consumers--who are often Toyota buyers.

PHONE GIANT
Toyota will back a major new player in Japan's cell-phone business and use the technology to connect the PC in Toyota cars to the Net.