TOYOTA KATA

McGraw-Hill

Contents

Chapter One

The applause dies down as the next conference speaker approaches the podium. The presentation is going to be about Toyota, and in his first slide the speaker presents some impressive statistics that demonstrate Toyota's superior performance.

The audience is nodding appreciatively.

For about two decades now this scene has been repeated countless times. So many books, articles, presentations, seminars, and workshops have begun with statistics about Toyota just like these:

* Toyota has shown sales growth for over 40 years, at the same time that U.S automakers' sales reached a plateau or decreased.

* Toyota's profit exceeds that of other automakers.

* Toyota's market capitalization has for years exceeded that of GM, Ford, and Chrysler; and in recent years exceeded that of all three combined.

* In sales rank, Toyota has become the world leader and risen to the number two position in the United States.

Of course, such statistics are interesting and useful in only one respect: they tell us that something different is happening at Toyota. The question then becomes: What is it?

How have we been doing at answering that second question? Not so well, it seems. Books and articles about Toyota-style practices started appearing in the mid 1980s. Learning from such writings, manufacturers have certainly made many improvements in quality and productivity. There is no question that our factories are better than they were 20 years ago. But after 15 to 20 years of trying to copy Toyota, we are unable to find any company outside of the Toyota group of companies that has been able to keep adapting and improving its quality and cost competitiveness as systematically, as effectively, and as continuously as Toyota. That is an interesting statistic too, and it represents a consensus among both Toyota insiders and Toyota observers.

Looking back, we naturally put Toyota's visible tools in focus first. That is where we started—the "door" through which we entered the Toyota topic. It was a step in the learning process (which will also, of course, continue after this book). Since then I went back to the research lab—several factories—to experiment further, and present what I learned in this book. The visible elements, tools, techniques, and even the principles of Toyota's production system have been benchmarked and described many times in great detail. But just copying these visible elements does not seem to work. Why? What is missing? Let's go into it.

We Have Been Trying to Copy the Wrong Things

What we have been doing is observing Toyota's current visible practices, classifying them into lists of elements and principles and then trying to adopt them. This is reverse engineering— taking an object apart to see how it works in order to replicate it—and it is not working so well. Here are three reasons.

1. Critical Aspects of Toyota Are Not Visible

Toyota's tools and techniques, the things you see, are built upon invisible routines of thinking and acting (Figure 1-1), particularly in management, that differ significantly from those found in most companies. We have been trying to add Toyota Production System practices and principles on top of our existing management thinking and practice without adjusting that approach. Toyota's techniques will not work properly, will not generate continuous improvement and adaptation, without Toyota's underlying logic, which lies beyond our view.

Interestingly, Toyota people themselves have had difficulty articulating and explaining to us their unique thinking and routines. In hindsight this seems to be because these are the customary, pervasive way of operating there, and many Toyota people—who are traditionally promoted from within—have few points of comparison. For example, if I ask you what you did today, you would tell me many things, but you would probably not mention "breathing." As a consequence, we cannot interview people at Toyota and expect to gain, from that alone, the deeper understanding we seek.

2. Reverse Engineering Does Not Make an Organization Adaptive and Continuously Improving

Toyota opens its factory doors to us again and again, but I imagine Toyota's leaders may also be shaking their heads and thinking, "Sure, come have a look. But why are you so interested in the solutions we develop for our specific problems? Why do you never study how we go about developing those solutions?" Since the future lies beyond what we can see, the solutions we employ today may not continue to be effective. The competitive advantage of an organization lies not so much in the solutions themselves—whether lean techniques, today's profitable product, or any other—but in the ability of the organization to understand conditions and create fitting, smart solutions.

Focusing on solutions does not make an organization adaptive. For example, several years ago a friend of mine visited a Toyota factory in Japan and observed that parts were presented to production-line operators in "flow racks." Wherever possible the different part configurations for different vehicle types were all in the flow racks. This way an operator could simply pick the appropriate part to fit the particular vehicle passing down the assembly line in front of him or her, which allows mixed-model assembly without the necessity of changing parts in the racks. Many of us have been copying this idea for several years now.

When my friend recently returned to the same factory, he found that many of the flow racks along that Toyota assembly line were gone and had been replaced with a different approach. Many of the parts for a vehicle are now put into a "kit" that travels along with the vehicle as it moves down the assembly line. When the vehicle is in an operator's workstation, the operator only sees those parts, and she always reaches to the same position to get the part.

My friend was a little upset and asked his Toyota hosts, "So tell me, what is the right approach? Which is better, flow racks or kitting?" The Toyota hosts did not understand his question, and their response was, "When you were in our factory a few years ago we produced four different models on this assembly line. Today we produce eight different models on the same line, and keeping all those different part variations in the flow racks was no longer workable. Besides, we try to keep moving closer to a one-by-one flow. Whenever you visit us, you are simply looking at a solution we developed for a particular situation at a particular point in time."

As we conducted benchmarking studies and tried to explain the reasons for the manufacturing performance gap between Toyota and other automobile companies, we saw at Toyota the now familiar "lean" techniques such as kanban, cellular manufacturing, short changeovers, andon lights, and so on. Many concluded—and I initially did too— that these new production techniques and the fact that Western industry was still relying on old techniques were the primary reasons for Toyota's superior performance.

However, inferring that there has been a technological inflection point is a kind of "benchmarking trap," which arises because benchmarking studies are done at a point in time. Our benchmarking did not scrutinize Toyota's admittedly less visible inner workings, nor the long and gradual slope of its productivity improvement over the prior decades. As a result, those studies did not establish cause and effect. The key point was not the new production techniques themselves, but rather that Toyota changes over time, that it develops new production techniques while many other manufacturers do not. As Michael Cusumano showed in his 1985 book, The Japanese Automobile Industry, Toyota's assembly plant productivity had already begun to inch ahead of U.S. vehicle assembly plant productivity as far back as the early 1960s! And it kept growing.

A deeper look inside Toyota did not take place until Steven Spear conducted research at Toyota for his Harvard Business School doctoral dissertation, which was published in 1999. It describes how Toyota's superior results spring more from routines of continuous improvement via experimentation than from the tools and practices that benchmarkers had seen. Spear pointed out that many of those tools and practices are, in fact, countermeasures developed out of Toyota's continuous improvement routines, which was one of the impulses for the research that led to this book.

3. Trying to Reverse Engineer Puts Us in an Implementing Mode

Implementing is a word we often use in a positive sense, but—believe it or not—having an implementation orientation actually impedes our organization's progress and the development of people's capabilities. We will not be successful in the Toyota style until we adopt more of a do-it-yourself problemsolving mode. Let me use an example to explain what I mean by an implementation versus a problem-solving mode.

During a three-day workshop at a factory in Germany, we spent the first two days learning about what Toyota is doing. On the third day we then turned our attention to the subject of how do we wish to proceed? During that part of the workshop, a participant raised her hand and spoke up. "During the last two days you painted a clear picture of what Toyota is doing. However, now that we are trying to figure out what we want to do, the way ahead is unclear. I am very dissatisfied with this."

My response was, "That is exactly how it is supposed to be." But this answer did not make the workshop participant happy, which led me to drawing the diagram in Figure 1-2.

There are perhaps only three things we can and need to know with certainty: where we are, where we want to be, and by what means we should maneuver the unclear territory between here and there. And the rest is supposed to be somewhat unclear, because we cannot see into the future! The way from where we are to where we want to be next is a gray zone full of unforeseeable obstacles, problems, and issues that we can only discover along the way. The best we can do is to know the approach, the means, we can utilize for dealing with the unclear path to a new desired condition, not what the content and steps of our actions—the solutions—will be.

That is what I mean in this book when I say continuous improvement and adaptation: the ability to move toward a new desired state through an unclear and unpredictable territory by being sensitive to and responding to actual conditions on the ground.

Like the workshop participant in Germany, humans have a tendency to want certainty, and even to artificially create it, based on beliefs, when there is none. This is a point where we often get into trouble. If we believe the way ahead is set and clear, then we tend to blindly carry out a preconceived implementation plan rather than being sensitive to, learning from, and dealing adequately with what arises along the way. As a result, we do not reach the desired destination at all, despite our best intentions.

If someone claims certainty about the steps that will be implemented to reach a desired destination, that should be a red flag to us. Uncertainty is normal—the path cannot be accurately predicted—and so how we deal with that is of paramount importance, and where we can derive our certainty and confidence. I can give you a preview of the rest of this book by pointing out that true certainty and confidence do not lie in preconceived implementation steps or solutions, which may or may not work as intended, but in understanding the logic and method for how to proceed through unclear territory.

How do we get through that territory? By what means can we go beyond what we can see? What is management's role in this?

What Is the Situation?

As most of us know, the following describes the environment in which many of our organizations find themselves.

* Although they may seem steady state, conditions both outside and inside the organization are always changing. The process of evolution and change is always going on in your environment, whether you notice it or not. The shift may at times be so slow or subtle that your way of doing things does not show up as a problem until it is late. Try looking at it this way: if your working life was suddenly 100 years long instead of 35, would you still expect conditions to remain unchanged all that time?

* It is impossible for us to predict how those conditions will develop. Try as we might, humans do not have the capability to see the future.

The future is fundamentally different than it appears through the prospectiscope. —Daniel Gilbert, Stumbling on Happiness

* If you fall behind your competitors, it is generally not possible to catch up quickly or in a few leaps. If there was something we could do, or implement, to get caught up again quickly, then our competitors will be doing that too.

The implication is that if we want our organization to thrive for a long time, then how it interacts with conditions inside and outside the company is important. There is no "finish line" mentality. The objective is not to win, but to develop the capability of the organization to keep improving, adapting, and satisfying dynamic customer requirements. This capability for continuous, incremental evolution and improvement represents perhaps the best assurance of durable competitive advantage and company survival. Why?

Small, incremental steps let us learn along the way, make adjustments, and discover the path to where we want to be. Since we cannot see very far ahead, we cannot rely on up front planning alone. Improvement, adaptation, and even innovation result to a great extent from the accumulation of small steps; each lesson learned helps us recognize the next step and adds to our knowledge and capability.

Relying on technical innovation alone often provides only temporary competitive advantage. Technological innovations are important and offer competitive advantage, but they come infrequently and can often be copied by competitors. In many cases we cannot expect to enjoy more than a brief technological advantage over competitors. Technological innovation is also arguably less the product of revolutionary breakthroughs by single individuals than the cumulative result of many incremental adaptations that have been pointed in a particular direction and conducted with special focus and energy.

Cost and quality competitiveness tend to result from accumulation of many small steps over time. Again, if one could simply implement some measures to achieve cost and quality competitiveness, then every company would do it. Cost and quality improvements are actually made in small steps and take considerable time to achieve and accumulate. The results of continual cost reduction and quality improvement are therefore difficult to copy, and thus offer a special competitive advantage. It is highly advantageous for a company in a competitive environment to combine efforts at innovation with unending continuous improvement of cost and quality competitiveness, even in the case of mature products.

Relying on periodic improvements and innovations alone—only improving when we make a special effort or campaign—conceals a system that is static and vulnerable. Here is an interesting point to consider about your own organization: in many cases the normal operating condition of an organization—its nature—is not improving.

Many of us think of improvement as something that happens periodically, like a project or campaign: we make a special effort to improve or change when the need becomes urgent. But this is not how continuous improvement, adaptation, and sustained competitive advantage actually come about. Relying on periodic improvement or change efforts should be seen for what it is: only an occasional add-on to a system that by its nature tends to stand still.

The president of a well-known company once told me, "We are continuously improving, because in every one of our factories there is a kaizen workshop occurring every week." When I asked how many processes there are in each of those factories he said, "Forty to fifty." This means that each process gets focused improvement attention approximately once a year. This is not bad, and Toyota utilizes kaizen workshops too, but it is not the same thing as continuous improvement. Many companies say, "We are continually improving," but mean that every week some process somewhere in the company is being improved in some way. We should be clear:

Projects and workshops ≠ continuous improvement

(Continues...)

Excerpted from TOYOTA KATAby MIKE ROTHER Copyright © 2010 by Rother & Company, LLC.. Excerpted by permission of McGraw-Hill. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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