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Jeffrey Liker in Prague: The Toyota Way and Long-Term Competitiveness

Prague Interview
How Toyota is Working through Hard Times to Come out Stronger
How Toyota Develops Leaders Who Can Manage Change?



The Toyota Way described Toyota's underlying management principles to integrate long-term philosophy, lean processes, developing people, and problem solving. Now that Toyota finds themselves in a global crisis with sales down by about 35 percent or more how will they respond. Toyota’s reaction to the crisis is simple: continue to live the values that got them from a small, struggling company in the rice fields of Japan to the largest automaker in the world. Use the Toyota way values and principles to continuously improve quality and reduce costs and further develop people. For example, truck sales in the U.S. have plummeted and Toyota has over two times the capacity needed. Instead of firing employees Toyota shut down production for 3 months and kept 3000 people fully employed in training and kaizen. Toyota is one by one eliminating quality problems at a detailed level that they did not have time for in the past and getting every team member trained so that when the economy picks up their people will be stronger and their products will be higher quality. Toyota is continuing to invest in R&D, and particularly on fuel-efficient cars with zero emissions. This presentation will summarize the Toyota way model, how Toyota has developed leadership throughout the world that can lead to continuous improvement, and how Toyota is using its unique culture to navigate through the economic crisis.

Topics for talk:
  • The Toyota Way as a corporate philosophy
  • How Toyota develops leaders who can manage change
  • Developing Self-Reliant Leadership and Organizations Globally
  • Using Hoshin Kanri to Drive Large Change and Small Change
  • Using slow downs and economic crisis to further develop people and products
  • Cost cutting while developing people
  • Coming out stronger in post-crisis times

With over 400,000 books sold and translation to almost twenty five languages The Toyota Way has become an international best seller. The Toyota Way Fieldbook details how to apply Toyota methods and principles in your organization and further books delve into deeper aspects of the model (e.g., Toyota Talent, 2007; Toyota culture, 2008). The remarkable, sustained competitive advantage of Toyota has companies throughout the world recognizing that lean is indeed the next evolution in effective organization. Dr. Liker’s twenty years of study get to the root of what has made Toyota a global manufacturing powerhouse. The fourteen principles summarize the underlying philosophy, processes, people, and problem solving that drive excellence throughout the company. This integrated system of management starts with a philosophy of adding value to customers and society for the long-term. Waste is stripped away to quickly and efficiently drive value. Without the shackles of inventory and delays, value flows and any interruption in the flow is quickly detected and corrected through root cause problem solving. People are at the heart of Toyota’s system and are expected to think deeply about problems and solutions.

Dr. Liker will share his deep insights into Toyota’s system. He will provide an overview of Toyota’s management principles, with case examples. The audience will have an opportunity to engage Dr. Liker in a dialogue about how to best learn from the Toyota Way to become a high performance organization continually driving out waste.


PRAGUE INTERVIEW Q&A

Jeffrey Liker


1. What is Toyota doing now, during the crisis?

Slowing down production to match demand, reorganizing what products are produced where, developing new products for the future, and cost reduction in every square inch of the company. The central nervous system that guides Toyota is the Board of Directors in Japan, but the actual execution of plans and the kaizen is spread locally in every part of Toyota in the world.

2. What do you think about the government support for 3 car makers in Detroit?

It is purely desperation. The car makers do not want to be dependent on the government and the government does not want to be an owner of these businesses and make decisions for them. The U.S. believes in capitalism and would like free enterprise. Unfortunately Chrysler and GM are in such a bad condition, losing billions of dollars every month, and they cannot borrow money because of their awful credit conditions and the world banking situation. So the only place they can borrow money to stay in business is from the government… or go bankrupt. If they go bankrupt hundreds of thousands of people will be effected from dealers in every town to suppliers throughout the country to all the retirees who depend on GM and Chrysler for their pensions and health care. Fortunately Ford has not borrowed any money from the government because they had gone through a major capital refinancing of almost $30 billion two years ago before the crisis. However, even they are going to need help by the end of the year if sales do not pick up. sThey are all doing what they can to cut costs but that will not be enough unless the economy starts to recover within one year.

3. Your opinion on the headcount reduction in the companies today?

Toyota’s philosophy strictly forbids using headcount reduction as an easy way to deal with economic difficulties. They intentionally plan for labor hours that can be reduced by using a lot of overtime that they can cut and using temporary employees (variable labor) who they can eliminate. All team members who are regular employees are guaranteed that Toyota will do everything possible and only cut people as a last resort if the very existence of the company is threatened, which is not the case.

I believe many companies use headcount reduction as an easy solution to any economic difficulties, even simply because profits for the year do not look as favorable as they forecasted. I believe this is an easy way out but a bad way for the long term because employees will not be loyal to a company and give their best if they know they can lose their jobs whenever it is convenient for the company.

4. Do you know some clever solutions for the crisis?

There are no clever solutions. There is just hard work. You must carefully look at your entire product portfolio, your future sales, your current economic conditions and make decisions about what to keep and what to cut. Toyota believes that cost reduction is best done throughout the company by every individual team member. They use hoshin kanri, which is policy deployment, to set goals that get cascaded down to every level in the company. Every work group of 20 team members has signed up for specific targets for quality improvement and safety improvement and cost reduction and they figure out what the gaps are between actual and goals and solve those problems one by one. It is through daily kaizen at every level of the company that Toyota ends up reaching huge improvement targets for the entire company. They also use this kaizen as an opportunity to strengthen the capability of all their team members.

Currently for example in their plants in Indiana and Texas they have about twice as many people as they need to build trucks and large sport utility vehicles. Instead of laying off thousands of people they have half the people working on the line while the other half work on kaizen and training and then they switch. They are doing all the training and kaizen that they had difficulty finding the time to do when they were running at full capacity.

5. How to develop Kaizen culture in western companies?

It starts by believing in it. Senior management must believe that people are not variable costs but are valuable assets who appreciate in value. Then they will make the investments needed to strengthen their people and strengthen kaizen. Unfortunately most companies start and stop kaizen programs about every 1-2 years. Just when they start to get momentum there is a change in management or their profitability is reduced and immediately the emphasis on people development and kaizen goes down. Toyota is very, very consistent in investing in people and kaizen. In fact when business is down you have the best opportunity to invest in people and kaizen.

6. Your opinion on the differences in Kaizen activities in Japan and in the western companies?

In Japan they have been consistently involving people in kaizen for decades and it comes very natural. They do not need special programs and training as much as we do in the west. In the west it is much natural so we need special training, and special weeks devoted to kaizen workshops, and continuous improvement departments to facilitate kaizen. Certainly in the west we have the intelligence and capability to do excellent kaizen. We often lack the leadership and commitment and it takes more work as it does not come as naturally.

7. Your recommendations for current hard times in industry?

One tip is to continue to focus on new product development and quality improvement so you can come out of this stronger than your competitors. Since most companies approach hard times simply by cutting—people, R&D, marketing—if you can maintain as much of your people and R&D as possible you will certainly come out ahead of your competition when the economy begins to recover. Whether it is one year or two years you have to try to survive this period as intact as possible. Take every opportunity to eliminate waste, but make every effort to strengthen your capability for kaizen and innovation. Now is a time to invest in your people not destroy your intellectual capital.

8. What do you think about the electro powered cars and the market development?

In the future there is no doubt that alternative fuels will dominate and we will get away from reliance on fossil fuels. When in the future is the question? Is it two years or ten years or twenty years? Unfortunately nobody is going to get themselves out of financial difficulty today by investing in electric cars. That may be a good investment for the future five years out and it may be good for public relations, but in the short term gas powered cars and hybrid cars will dominate sales. Plug-in hybrids offer great promise when Lithium ion batteries can be built safely and operated safely.

9. Leadership and values - what are the main ideas of your new book with G.Convis?

We argue that Toyota truly believes the strength of its people is people and people development depends on actively engaging in kaizen. Kaizen does not come naturally to anybody. We are all preoccupied with daily production and to spend the extra time and energy to work on kaizen we need leaders guiding us and helping motivate us. Toyota wants leaders who live the values of the company and who are experts on kaizen so they can develop others to participate in kaizen. Leaders must first develop themselves and Toyota provides many opportunities and challenges to do that. Then they must go further and develop others. When there is a strong chain of leadership from top to bottom and sideways who are all focused on the customer, living the values, and skilled in kaizen, they can achieve almost any company goals.


For more information about the seminar "How Toyota Copes with the Period of Crisis" see: http://www.ipaslovakia.sk/udalost_view.aspx?id_u=156
or http://www.ipaslovakia.sk/en/udalost_view.aspx?id_u=56

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