The Toyota Way

14 Management Principles from the Worlds Greatest Manufacturer

by Jeffrey K. Liker
2003 McGraw-Hill
350 pages

Focus

Take-Aways

Leadership & Mgt.

The key concept in Toyotas production method is kaizen, a continual drive to improve.

Strategy

Toyota is the worlds most protable automobile manufacturer.

Sales & Marketing

Corporate Finance

It will probably overtake Ford in total vehicles produced in 2005, and soon will
surpass General Motors worldwide.

Human Resources

The key to Toyotas success is the Toyota Production System emphasizing lean production.

Technology & Production

TPS is a cultural way, a path and a commitment, not a set of tools to apply to a problem.

Small Business

Fourteen fundamental principles make up the Toyota Way, including: apply a long
term philosophy and grow leaders who live it.

Economics & Politics

Industries & Regions
Career Development
Personal Finance
Concepts & Trends

Other principles include: create continuous ow, avoid overproduction, level the
workload, standardize tasks, use visual control and use only tested technology.
The principles also include: respect your network, observe problems at the source,
decide slowly but implement rapidly, and practice relentless reection.
Waste comes from overproduction, delay, unneeded transport, over-processing, too
much inventory, unproductive movement, defects and unused employee creativity.
Map a system for creating an efcient ow of materials and processes, and avoid waste.

Rating
Overall

(10 is best)

Applicability

Innovation

Style

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Relevance
What You Will Learn
In this Abstract, you will learn: 1) The fundamentals of Toyotas approach to continual
quality improvement; 2) The 14 principles that comprise the Toyota Production System;
and 3) What your company needs to know to apply these ideas.
Recommendation
This book is like a Toyota vehicle: not necessarily fancy, but extraordinarily capable of
getting you from point A to point B. Author Jeffrey K. Likers thorough insight into
the continual improvement method known as The Toyota Way reects his experience
with the Toyota Production System (TPS) and his knowledge of its guiding philosophies
and its technical applications. He explains why Toyota has become a global symbol of
passionate commitment to continual improvement and efciency. Toyotas success as
the worlds most protable automaker is no accident and now, thanks to this book, its
no mystery, either. Liker drills down to the underlying principles and behaviors that
will set your company on the Toyota Way. The book reects years of studying Toyotas
philosophy: it is well mapped out, straightforward and exceedingly although not daringly
innovative. getAbstract.com highly recommends it to anyone striving to improve their
organizations operational efciency.

Abstract

The Toyota Way

can be briey summarized through
the two pillars that
support it: Continuous Improvement and Respect For People.

Toyotas 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 highvalue-added ow.

The Toyota Commitment

The secret behind Toyotas world-class quality and excellence is contained in a single
word: kaizen, which denes Toyotas way of life and its approach to business. Kaizen
is not just a set of tools; it is the commitment to strive for improvement continuously.
The value of this goal is obvious, but few companies even come close. Continual
improvement requires continuous learning in an environment that embraces change.
Toyotas second great principle is respect for its people. The combination of kaizen and
respect for workers makes The Toyota Way a powerful strategic weapon.
Today, Toyota is an international corporate giant, the worlds third-largest auto
manufacturer, after General Motors and Ford. Each year, it sells more than six million
vehicles. But its excellence doesnt stop there. In fact, Toyota is much more successful
than any other automobile manufacturer in terms of prot. Toyota earned a prot of $8.13
billion by the close of its scal year in March 2003. For perspective, this is more than
the combined earnings of GM, Chrysler and Ford. Toyota is far more protable than
its competition. Industry analysts generally agree that sometime in 2005, Toyota will
surpass Ford in global vehicles sold. Based on current trends, Toyota will eventually
overtake General Motors as well. Toyota is not just trying harder; it is succeeding more.

The Toyota Production System (TPS)

The Toyota Production System (TPS) reects the companys unique perspective on
manufacturing. TPS is central to the lean production movement that has sparked
manufacturing trends over the past decade. Most companies efforts to be more lean
end up being supercial because they focus too much on the tools used, such as just-intime delivery and 5S (sort, stabilize, shine, standardize, sustain). TPS, however, is an
entire system, not an add-on strategy or tool. It must become part of an organizations
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culture. Usually, senior managers are not involved in the nitty-gritty of becoming leaner,
the daily operations or continual improvement efforts. At Toyota, theyre involved.
Understanding
Toyotas success
and quality improvement systems does not
automatically
mean you can
transform a company with a different culture and
circumstances.

Taiichi Ohno, founder of TPS, described lean production this way, All we are doing is
looking at the time line from the moment the customer gives us an order to the point
when we collect the cash. And we are reducing that time line by removing the non-value
added wastes. TPS proves many counter-intuitive conclusions:

Toyota designed
autos faster, with
more reliability, yet
at a competitive
cost, even when
paying the relatively high wages
of Japanese workers.

Equally impressive was that every time Toyota

showed an apparent weakness and
seemed vulnerable
to the competition,
Toyota miraculously xed the
problem and came
back even stronger.

In the Toyota
Way, its the
people who bring
the system to life:
working, communicating, resolving
issues and growing together.

Stop the production line Letting a machine go idle is often the best thing to do.
This avoids overproduction, the fundamental form of waste uncovered by TPS.
Build up inventory Amassing nished goods to level out the production timetable
is often better than producing in response to uctuating levels of consumer demand.
Support direct labor As you strip away waste, support your value-adding workers.
Dont try to max out the workforce Insisting that everyone on the assembly line works
faster often isnt the answer. It leads to overproduction and will actually increase costs.
Know when it is better to use manpower Using manual processes is often a better
idea than using information technology, even when automation is available. While
automation might reduce your headcount, people are a very exible resource.

The common forms of waste that Toyota continually seeks to eliminate are: overproduction,
delay, unneeded transport, over-processing, excess inventory, unproductive movement,
defects and unused employee creativity. When other companies try to adopt lean
production methods, they run into problems because they see this process as a series of
tools, not as a deep cultural adjustment that affects every aspect of the business. TPS is a
pervasive cultural transformation. The Toyota Way is about giving workers the tools they
need to strive for continual improvement. Under the Toyota Way, people become more
important, not less important, to the success of the organization. To put it another way,
TPS requires the company to become more dependent than ever on its workforce.
When Toyota formed a joint venture with GM in the early 1980s to set up Toyotas rst
overseas plant, a light truck factory in Fremont, California, it did two unusual things.
First, it agreed to teach GM the principles of the Toyota Production System because its
leaders realized that GM, the worlds largest automobile manufacturer, was struggling
with its manufacturing operations. By helping GM, Toyotas leaders believed they were
helping U.S. society in general and giving something back to the U.S. for its help in
rebuilding Japanese industry in the wake of World War II.
Secondly, they decided to work with the UAW local union, against GMs advice. Indeed,
they sent the skeptical shop committee, which thought TPS was a way to work people
to death and to suggest your way out of a job, to Japan for three weeks to study TPS.
The union leaders became converts. When the factory reopened in 1984, its productivity
surpassed all other GM North America plants.

The Toyota Way

Following the 14 principles of the Toyota Way is critical if you seek to go beyond the
surface and truly transform your organization. These principles are:
1. Apply a long-term philosophy Base decisions on your companys long-term philosophy, even if your short-term goals suffer as a result. Pursuing a long-term strategy is always the wisest course, but that long-range goal must be about more than just
making money. Your companys primary mission, properly conceived, is to generate
value for your customers and for society at large. As part of its long-term philosophy,
Toyota avoids layoffs at all costs. It emphasizes self-reliance and taking responsibilThe Toyota Way

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The biggest crisis,

from the perspective of Toyota
leaders, is when
associates do not
believe there is a
crisis or do not
feel the urgency
to continuously
improve the way
they work.

Base your management decisions

on a long-term philosophy, even at
the expense of
short-term goals.

Of all the institutions Ive studied

or worked for,
including worldclass companies
and major universities, I believe
Toyota is the best
learning organization.

Toyota is process
oriented and consciously and deliberately invests
long term in systems of people,
technology and
processes that
work together to
achieve high customer value.

ity for deciding your own fate. Honor, respect and dedication are important values.
Toyota feels a long-term responsibility as a global citizen and feels accountable for
the long-range stability of its business partners.
2. Create continuous ow Bring issues to the surface, where they can be addressed,
by creating a continuous or one-piece ow. With a lean ow, one problem may shut
down the entire assembly line. This appears very inefcient, but it means that problems
get addressed and corrected very quickly because everyone focuses on solving them.
3. Use pull systems and avoid overproduction A push system loads products onto
the retailer, regardless of how quickly the retailer can sell them. A pull system provides products just as the retailer needs them. This avoids the biggest source of manufacturing waste: overproduction.
4. Level the workload The Japanese word for leveling the workload is called heijunka.
You want the production level to be the same and to be constant. Output should not vary
from day to day. Although you seek to avoid overproduction, you cannot build product
efciently just as it is ordered because the production swings would be too inefcient.
5. Build the right culture The correct culture stops everything to x problems and
strives to get quality right the rst time. It refuses to compromise on quality.
6. Standardize tasks Make tasks similar and consistent wherever possible. People get
better at things they do repeatedly. Standard work sheets help to avoid defects.
7. Use visual control Some plants are so jammed with inventory and parts that no
one can see the actual work taking place. You should be able to see the processes
underway in your plant. Maintain visual control, so that no processes are hidden.
This is why a thorough clean up is a common early activity in TPS initiatives.
8. Use only tested technology Toyota rarely tries to use cutting-edge technology.
Rather, it looks for well-proven technology. Adopt technology only if it supports your
people, your processes or your values.
9. Grow leaders who live the philosophy Senior managers cannot let their egos stand
in the way of the organizations best interest. When organizational leaders earnestly
live the TPS philosophy, rather than just giving it lip service, they incorporate team
members ideas and they put customers rst.
10. Develop people and teams To have excellent teams, you need excellent team members. Respect for people means respecting their minds, ideas and capabilities. Teamwork is critical.
11. Respect your extended network Often a company is only as good as its partners
and suppliers. To obtain better suppliers, challenge your current suppliers to improve,
and help them. Toyota expects all of its supplier partners to rise to their high standards of excellence, and will help them to do so.
12. Observe the source Go and observe a situation yourself so that you can understand
it. Toyota managers commonly watch a business process take place and then ask
why over and over until they understand it. Go see for yourself.
13. Decide slowly, implement rapidly A sound organization takes its time making
decisions and decides issues by consensus, after thoroughly considering all the
options. Implement ideas rapidly once consensus is achieved.
14. Practice relentless reection Relentless reection, or hansei, leads to kaizen, or continuous improvement. Continuous reection means becoming a learning organization.
Be passionate about identifying the root causes of problems and developing solutions.

Applying the Toyota Way

When managers begin to see the advantages of the Toyota Way, they also start to consider
its broader implications for their organizations. They may become lean zealots, who eat
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Manufacturing
companies that
have implemented
lean with any
degree of success
have experienced
people who led the
transformation.

and breathe lean. They come to understand the lean philosophy and its power through
actual experience, and view the enormous waste in technical and service operations as
anathema. Naturally, they seek ways to apply the Toyota Production System, or lean
manufacturing approach, to other areas.
The rst challenge in applying the Toyota Way to service and technical organizations
is identifying ow. Toyota, for example, views employee development as a repeatable
process that can be continually improved. The challenge is that in an environment where
people are sitting in cubicles, it is difcult to dene the workow the way that you would
chart a physical manufacturing process.
The goal of TPS is one-piece ow. The key element is tightly linking processes so that
problems cannot hide in inventory or in queues where they wait to be processed. Each
department should get the information it needs, just when it needs it, from each supporting
department. With linkage, there is immediately feedback. If the supporting department
falls behind for some reason, that immediately disrupts the activities of the department
being served. Therefore the issue receives immediate attention. Similarly, if the information
being provided is faulty, it generates immediate feedback from one department to the next.
Your technical or service organization can create ow by following these ve steps:

Service processes are often

complex and
involve hundreds
or thousands of
activities. If you try
to map everything
all at once, it leads
to a mess.

1. Determine who the customer is and what the customer needs.

2. Separate repetitive processes (split those that continually recur from one-time processes that are unique) and learn how to apply TPS to those repetitive processes.
3. Study and chart the ow to determine which activities are value added and which are not.
4. Creatively apply the Toyota Way principles to these repetitive processes by using a
future-state value stream map.
5. Learn by planning, doing, checking on your results and adjusting your methods as
needed. Once you have a working model, expand it to your less repetitive processes.

Value Stream Mapping

Value stream mapping stems from a tool that Toyota calls the material and information
ow diagram. It helps manufacturing suppliers learn TPS. Value stream mapping shows
suppliers their current situation, and allows them to map a path to a future vision. The chart
indicates processes by connecting boxes with arrows. It uses tombstones to depict inventory
lingering between processes. The chart captures critical elements in the manufacturing
process, such as feedback loops, inspection points, project reviews and points of decision.
Value stream mapping can be adapted to an organizations service and technical aspects.
However, service processes can be incredibly complex to map, involving up to several
thousand decision points. An effort to map all service processes simultaneously would
end up looking like a big bowl of pasta a barely organized jumble. Instead, develop a
more general, macro picture of the current system, and use that macro value stream map
to assist you in identifying areas of waste.

About The Author

Jeffrey K. Liker, Ph.D., is cofounder and director of the Japan Technology Management
Program at the University of Michigan, where he is also a professor of industrial and
operations engineering. He has won four Shingo Prizes for excellence, and has written
extensively on Toyota in various management journals. Dr. Liker is also a principal of
Optiprise, a lean enterprise/supply chain management consulting rm.
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