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Article | McKinsey Quarterly

(Still) learning from Toyota

A retired Toyota executive describes how to overcome common management challenges associated with applying lean, and reflects on the ways that Toyota continues to push the boundaries of lean thinking.
February 2014 | by Deryl Sturdevant

In the two y ears since I retired as president and CEO of Canadian Autoparts Toy ota (CAPTIN), Iv e had the good fortune to work with many global manufacturers in different industries on challenges related to lean management. Through that ex posure, Iv e been struck by how much the Toy ota production sy stem has already changed the face of operations and management, and by the energy that companies continue to ex pend in try ing to apply it to their own operations. Y et Iv e also found that ev en though companies are currently benefiting from lean, they hav e largely just scratched the surface, giv en the benefits they could achiev e. Whats more, the goal line itself is mov ingand will go on mov ingas companies such as Toy ota continue to define the cutting edge. Of course, this will come as no surprise for any student of the Toy ota production sy stem and should ev en serv e as a challenge. After all, the goal is continuous improv ement.

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Room to improve
The two pillars of the Toy ota way of doing things are kaizen (the philosophy of continuous improv ement) and respect and empowerment for people, particularly line workers. Both are absolutely required in order for lean to work. One huge barrier to both goals is complacency . Through my ex posure to different manufacturing env ironments, Iv e been surprised to find that senior managers often feel they v e been v ery successful in their efforts to emulate Toy otas production sy stemwhen in fact their progress has been limited. The reality is that many senior ex ecutiv esand by ex tension many organizations arent nearly as self-reflectiv e or objectiv e about ev aluating themselv es as they should be. A lot of ex ecutiv es hav e a propensity to talk about the good things they re doing rather than focus on apply ing resources to the things that arent what they want them to be. When I recently v isited a large manufacturer, for ex ample, I compared notes with a company ex ecutiv e about an ev aluation tool it had adapted from Toy ota. The tool measures a host of categories (such as safety , quality , cost, and human dev elopment) and av erages the scores on a scale of zero to fiv e. The ex ecutiv e was describing how his unit scored a fiv ea perfect score. Where? I asked him, surprised. On what dimension? Ov erall, he answered. Fiv e was the av erage. When he asked me about my ex periences at Toy ota ov er the y ears and the scores its units receiv ed, I answered candidly that the best score Id ev er seen was a 3.2 and that was only for a y ear, before the unit fell back. What happens in Toy otas culture is that as soon as y ou start making a lot of progress toward a goal, the goal is changed and the carrot is mov ed. Its a deep part of the culture to create new challenges constantly and not to rest when y ou meet old ones. Only through honest self-reflection can senior ex ecutiv es learn to focus on the things that need improv ement, learn how to close the gaps, and get to where they need to be as leaders. A self-reflectiv e culture is also likely to contribute to what I call a no ex cuse organization, and this is v aluable in times of crisis. When Toy ota faced serious problems related to the unintended acceleration of some v ehicles, for ex ample, we took this as an opportunity to rev isit ev ery thing we did to ensure quality in the design of v ehiclesfrom engineering and production to the manufacture of parts and so on. Companies that can use crises to their adv antage will alway s ex cel

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against self-satisfied organizations that already feel they re the best at what they do. A common characteristic of companies struggling to achiev e continuous improv ement is that they pick and choose the lean tools they want to use, without necessarily understanding how these tools operate as a sy stem. (Whenev er I hear ex ecutiv es say we did kaizen, which in fact is an entire philosophy , I know they dont get it.) For ex ample, the manufacturer I mentioned earlier had recently put in an andon sy stem, to alert management about problems on the line. Featuring plasma-screen monitors at ev ery workstation, the sy stem had required a considerable dev elopment and programming effort to implement. To my mind, it represented a knee-buckling amount of inv estment compared with sy stems Id seen at Toy ota, where a new tool might rely on sticky notes and signature cards until its merits were prov ed. An ex ecutiv e was ex plaining to me how successful the implementation had been and how well the company was doing with lean. I had been v isiting the plant for a week or so. My back was to the monitor out on the shop floor, and the ex ecutiv e was looking toward it, facing me, when I surprised him by quoting a series of figures from the display . When he asked how Id done so, I pointed out that the tool was broken; the numbers werent updating and hadnt since Monday . This was no secret to the sy stems operators and to the frontline workers. The ex ecutiv e probably hadnt been v isiting with them enough to know what was happening and why . Quite possibly , the new sy stem receiv ing such praise was itself a monument to waste.
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Room to reflect
At the end of the day , stories like this underscore the fact that apply ing lean is a leadership challenge, not just an operational one. A company s senior ex ecutiv es often become successful as leaders through y ears spent learning how to contribute inside a particular culture. Indeed, Toy ota v iews this as a career-long process and encourages it by offering ex ecutiv es a div ersity of assignments, significant amounts of training, and ev en additional college education to help prepare them as lean leaders. Its no surprise, therefore, that should a company bring in an initiativ e like Toy otas production sy stemor any lean initiativ e requiring the culture to change fundamentally its leaders may well struggle and ev en v iew the change as a threat. This is particularly true of lean because, in many cases, rankand-file workers know far more about the sy stem from a toolbox standpoint than do ex ecutiv es, whose job is to understand how the whole sy stem comes together. This fact can be intimidating to some ex ecutiv es. Senior ex ecutiv es who are considering lean management (or are already well into a lean transformation and looking for way s to get more from the effort and make it stick) should start by recognizing that they will need to be comfortable giv ing up control. This is a lesson Iv e learned firsthand. I remember going to CAPTIN as president and CEO of the company and wanting to get off to a strong start. Hoping to figure out how to get ev ery one engaged and following my initiativ es, I told my colleagues what I wanted. Y et after six or eight months, I wasnt getting where I wanted to go quickly enough. Around that time, a Japanese colleague told me, Dery l, if y ou say do this ev ery body will do it because y oure president, whether y ou say go this way , or go that way . But y ou need to figure out how to manage these issues hav ing absolutely no power at all. So with that adv ice in mind, I stepped back and got a core group of good people together from all ov er the company a person from production control, a nightshift superv isor, a manager, a couple of engineers, and a person in financeand challenged them to dev elop a sy stem. I presented them with the direction but asked them to make it work. And they did. By the end of the three-y ear period wed set as a target, for ex ample, wed dramatically improv ed our participation rate in problem-solv ing activ ities going from being one of the worst companies in Toy ota Motor North America to being one of the best. The beauty of the effort was that the team went about constructing the program in way s I nev er would hav e thought of. For ex ample, one team member (the production-control manager) wanted more participation in a surv ey to determine where we should spend additional time training. So he created a story board highlighting the steps of problem solv ing and put it on the shop floor with questionnaires that hed dev eloped. To get people to fill them out, his team offered the respondents a hamburger or a hot dog that was barbecued right there on the shop floor. This mov e was hugely successful. Another tip whose v alue Iv e observ ed ov er the y ears is to find a mentor in the company , someone to whom y ou can speak candidly . When y oure the president or CEO, it can be kind of lonely , and y ou wont hav e any one to talk with. I was lucky because Toy ota has a robust mentorship sy stem, which pairs retired

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company ex ecutiv es with activ e ones. But ex ecutiv es any where can find a sounding boardsomeone who speaks the same corporate language y ou do and has a similar background. Its worth the effort to find one. Finally , if y oure going to lead lean, y ou need knowledge and passion. Iv e been around leaders who had plenty of one or the other, but y ou really need both. Its one thing to create all the energy y ou need to start a lean initiativ e and way of working, but quite another to keep it goingand thats the real trick.

Room to run
Ev en though Im retired from Toy ota, Im still engaged with the company . My ex periences hav e giv en me a unique v antage point to see what Toy ota is doing to push the boundaries of lean further still. For ex ample, about four y ears ago Toy ota began apply ing lean concepts from its factories bey ond the factory floortaking them into finance, financial serv ices, the dealer networks, production control, logistics, and purchasing. This may seem ironic, giv en the push so many companies outside the auto industry hav e made in recent y ears to driv e lean thinking into some of these areas. But thats v ery consistent with the deliberate way Toy ota alway s striv es to perfect something before its ex panded, looking to add as y ou go rather than do it once and stop. Of course, Toy ota still applies lean thinking to its manufacturing operations as well. Take major model changes, which happen about ev ery four to eight y ears. They require a huge effortchanging all the stamping dies, all the welding points and locations, the painting process, the assembly process, and so on. Ov er the past six y ears or so, Toy ota has nearly cut in half the time it takes to do a complete model change. Similarly , Toy ota is innov ating on the old concept of a single-minute ex change of dies and apply ing that thinking to new areas, such as high-pressure injection molding for bumpers or the manufacture of alloy wheels. For instance, if y ou were making an aluminum-alloy wheel fiv e y ears ago and needed to change from one die to another, that would require about four or fiv e hours because of the nature of the smelting process. Now, Toy ota has adjusted the process so that the changeov er time is down to less than an hour. Finally , Toy ota is doing some interesting things to go on pushing the quality of its v ehicles. It now conducts surv ey s at ports, for ex ample, so that its workers can do detailed audits of v ehicles as they are funneled in from Canada, the United States, and Japan. This allows the company to get more consistency from plant to plant on ev ery thing from the torque applied to lug nuts to the gloss lev els of multiple reds so that color standards for paint are met consistently . The changes ex tend to dealer networks as well. When customers take deliv ery of a car, the salesperson is accompanied by a technician who goes through it with the new owner, in a panel-by -panel and option-by -option inspection. They re looking for actionable information: is an interior surface smudged? Is there a fender or hood gap that doesnt look quite right? All of this checklist data, fed back through Toy otas engineering, design, and dev elopment group, can be sent on to the specific plant that produced the v ehicle, so the plant can quickly compare it with other v ehicles produced at the same time. All of these mov es to continue perfecting lean are consistent with the basic Toy ota approach I described: try and perfect any thing before y ou ex pand it. Y et at the same time, the philosophy of continuous improv ement tells us that theres ultimately no such thing as perfection. Theres alway s another goal to reach for and more lessons to learn.
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Deryl Sturdevant, a senior adviser to McKinsey, w as president and CEO of Canadian Autoparts Toyota (CAPTIN) from 2006 to 2011. Prior to that, he held numerous executive positions at Toyota, as w ell as at the New United Motor Manufacturing (NUMMI) plant (a joint venture betw een Toyota and General Motors), in Fremont, California.

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