With a market capitalization greater than the value of General Motors, Ford, and Chrysler combined, Toyota is also, (by far), the world s most profitable automaker. Toyota s wellknown secret weapon is Lean production the revolutionary approach to business processes that it invented in the 1950s and has spend decades perfecting. Less well known are the management principles that underlie Lean production, Lean product development, and all of Toyota s business and service processes. Today businesses around the world are attempting to implement Toyota’s
radical system for speeding up processes, reducing waste, and improving quality. But are they getting beneath the surface of Lean tools and techniques to the real foundation of Toyota s success? The Toyota Way, explains Toyota’s unique approach to Lean management the 14 principles that drive Toyota s quality and efficiency-obsessed culture. You will gain valuable insights that can be applied to any organization and any business process, whether in services or manufacturing. You will discover how the right combination of long-term philosophy, processes, people, and problem solving can transform your organization into a Lean, learning enterprise the Toyota Way.
When I joined Toyota after 18 years in the U.S. automobile business, I didn’t know exactly what to expect. But I was hopeful. I knew that I wasn’t comfortable with the direction that American automobile manufacturing was taking, and I felt Toyota might be different. In no time at all I noticed a fundamental difference between Toyota and my previous employers. At a Toyota/GM joint venture plant in Fremont, California, called NUMMI (New United Motor Manufacturing), I witnessed the transformation of a workforce from one of the worst in the General Motors system to one of the best in any manufacturing facility in the United States. The difference was the Toyota
Way. In this book, Dr. Liker explains the management systems, thinking, and philosophy that form the foundation of Toyota’s success, providing the reader with valuable insights that can be applied to any business or situation. While there are many books that provide insight into the tools and methods of Toyota’s Production System (TPS), Professor Liker’s book is unique in its explanation of the broader principles at work in the Toyota culture.
The Toyota Way is not the Japanese Way or the American Way or even the Gary Convis Way of managing. It is the fundamental way that Toyota views its world and does business. The Toyota Way, along with the Toyota Production System, make up Toyota s DNA. This DNA was born with the founders of our company and continues to be developed and nurtured in our current and future leaders.
The Toyota Way can be briefly summarized through the two pillars that support it: Continuous Improvement and Respect for People. Continuous improvement, often called kaizen, defines Toyota s basic approach to doing business. Challenge everything. More important than the actual improvements that individuals contribute, the true value of continuous improvement is in creating an atmosphere of continuous learning and an environment that not only accepts, but actually embraces change. Such an environment can only be created where there is respect for people hence the second pillar of the Toyota Way. Toyota demonstrates this respect by providing employment security and seeking to engage team members through active participation in improving their jobs. As managers, we must take the responsibility for developing and nurturing mutual trust and understanding among all team members.
I believe management has no more critical role than to motivate and engage large numbers of people to work together toward a common goal. Defining and explaining what the goal is, sharing a path to achieving it, motivating people to take the journey with you, and assisting them by removing obstacles those are management s reasons for being. We must engage the minds of people to support and contribute their ideas to the organization. In my experience, the Toyota Way is the best method for fulfilling this role.
However, readers of this book should understand that each organization must develop its own way of doing business. The Toyota Way is the special product of the people who created Toyota and its unique history. Toyota is one of the most successful companies in the world. I hope this book will give you an understanding of what has made Toyota successful, and some practical ideas that you can use to develop your own approach to business.
Managing Officer of Toyota and President,
Toyota Motor Manufacturing, Kentucky
In 1982 when I first arrived as a new assistant professor at the University of Michigan, Ann Arbor, the automotive industry was in serious turmoil in the midst of a national recession. The situation seemed dire. The Ford Motor company was seriously flirting with bankruptcy. The Big 3 were losing market share fast.
There was a lot of debate at the time over the root cause. The party line among Detroit auto executives was that the cause was the Japanese invasion. Japan, Inc. had banded together with industry and government colluding to set up trade barriers to prevent American cars from being sold in Japan and artificially lowering prices of Japanese cars in the United States. Of course, in the minds of U.S. companies, as long as the root cause was unfair business practices, there was no need to seriously change the way they built cars. Instead, political channels would right the wrongs.
Around this time I was fortunate to be invited by David Cole and Robert Cole (two University of Michigan professors who were leading the study of the Japanese quality movement) to work on a U.S.-Japan automotive study. This research was an effort to help U.S. companies learn from the Japanese automakers. My project focused on how automakers worked with their suppliers on new product development in the U.S. and Japan. The numerous studies that made up the overall U.S.-Japan auto study covered many aspects of the industry, and all the studies collectively pointed to a single conclusion. Whatever was going on with Japan s government and the value of the yen and other macro-economic factors, Japanese auto companies were very good at engineering and building cars. They were not necessarily financial or marketing whizzes.
They were not the leaders in advanced manufacturing technology, at least not in complex automation. They designed in quality and built in quality at every step of the process, and they did it with remarkably few labor hours. Not only were Japan s automakers good, their top suppliers were also world class in engineering and manufacturing, and they worked together as a team.
But even in these early stages of my introduction to the auto industry in Japan, there were indications that Toyota was different from the other Japanese automakers. While the basic product development process seemed similar across the three automakers, and the top tier suppliers were all integrally part of the product development process, there was a sense of partnership between Toyota and its suppliers that we did not see as strongly in the keiretsu of Mazda and Nissan.
Later, in 1991 John Campbell and I received a grant to create the Japan Technology Management Program at the University of Michigan, Ann Arbor, which I am still directing. The goals of this program are to learn about the practices that have helped the best Japanese companies become strong globally, teach what we learn to our students and industry, and encourage technically oriented students to learn about Japanese language
and culture through courses and internships in Japan. This research program allowed me to continue my studies of the Japanese auto industry, and I chose to focus more intensively on Toyota, in particular its product development process and the Toyota Production System. The U.S. government grant focused on transfer of learning so I began studying Toyota’s efforts to transfer its practices to its U.S.-based subsidiaries and American companies efforts to learn from Toyota.
By the early 1990s all of the Big 3 auto producers had woken up to the
reality of Japanese quality and concluded that Toyota was the company to beat. They were all actively studying Toyota and creating their own versions of Toyota’s systems. They benchmarked the company on its production system, product development system, and supplier relationship management.
Their great interest in Toyota’s systems has given me an opportunity to teach about Toyota’s production system and product development process, and get my hands dirty consulting to implement these systems. I have had opportunities to work in America, the United Kingdom, and Mexico in industries including automotive, paint manufacturing, nuclear fuel rod assembly, ship building, ship repair, an engineering professional organization, and lawncare equipment. I have taught lean change agents from over one thousand companies worldwide, and my participation in lean transformation has given me a deeper understanding of what is involved in transforming a culture and learning from Toyota.
My studies of U.S. companies working to implement versions of the Toyota Production System led to a book I edited called Becoming Lean: Experiences of U.S. Manufacturers (Liker, 1997), winner of a Shingo Prize (in honor of Shigeo Shingo who helped create the TPS) in 1998. Articles I co-authored on Toyota’s product development system and supplier management in Sloan Management Review and Harvard Business Review also won Shingo Prizes. But it was not until I was invited to write The Toyota Way that I had an opportunity to pull together in one volume 20 years of observations of Toyota and companies learning from Toyota.
Reading this book might give you the impression that I am a strong advocate for Toyota. As a professor and social scientist, I work at being objective, but I will admit I am a fan of the Toyota Way. I believe Toyota has raised continuous improvement and employee involvement to a unique level, creating one of the few examples of a genuine learning enterprise in human history—not a small accomplishment.
Much of the research behind this book has come from 20 years of visits to Japan and interviews in Toyota facilities there and in the United States. When I was asked to write this book, I immediately asked Toyota for support through additional interviews specifically focused on the Toyota Way. They graciously agreed. As it turned out, they had just launched their own internal version of the Toyota Way to keep the “Toyota DNA” strong as they globalize and entrust international team members to run subsidiaries. This was the pet project of Fujio Cho, President of Toyota Motor Company,
who learned the Toyota Way from one of its inventors, Taiichi Ohno, and he agreed to a rare, personal interview. I asked him what was unique about Toyota’s remarkable success. His answer was quite simple.
The key to the Toyota Way and what makes Toyota stand out is not any of the individual elements…. But what is important is having all the elements together as a system. It must be practiced every day in a very consistent manner—not in spurts. Over a one-year period I was able to interview over 40 Toyota managers and executives from manufacturing, sales, product development, logistics, service parts, and production engineering. I gathered over 120 hours of interviews, all transcribed. Included in these interviews were several former Toyota managers who left to apply what they learned to U.S. Companies and several suppliers to Toyota. I visited many Toyota plants, supplier plants, Toyota’s sales offices, a parts distribution center, a supplied parts cross-dock, the Arizona proving ground, and the Toyota Technical Center.
I have thought about what impact I would like to make on readers of The Toyota Way. First, I have had a special opportunity to get inside the culture of a unique and high performing company and wish to share my insights. Second, Toyota is a model to many companies throughout the world so I wish to provide a different look at what makes Toyota so successful. The fundamental insight I have from my studies of Toyota is that its success derives from balancing the role of people in an organizational culture that expects and values their continuous improvements, with a technical system focused on high-value-added “flow.” This leads to my third and more challenging goal: to help other companies learn from Toyota and themselves so they can continuously improve on what they do.