Evaluate Success and Failure of Toyota

Why choose Toyota?

Since Toyota’s founding they have adhered to the core principle of

contributing to society through the practice of manufacturing high-
quality products and services. Their business practices and activities
based on this core principle created values, beliefs and business
methods that over the years have become a source of competitive
advantage. These are the managerial values and business methods
that are known collectively as the Toyota Way. This is precisely the
reason that every one (in particular business graduates) must
essentially know about the Toyota way of doing things!!

The Toyota Way is a set of principles and behaviors that underlie the
Toyota Motor Corporation's managerial approach and production
system. Toyota first summed up its philosophy, values and
manufacturing ideals in 2001, calling it “The Toyota Way 2001.” It
consists of principles in two key areas:
1) Continuous improvement and
2) Respect for people

Overview of the principles

Continuous Improvement
The principles for continuous improvement include establishing a long-
term vision, working on challenges, continual innovation, and going to
the source of the issue or problem:
• Challenge
Form a long-term vision and meet challenges with courage and
creativity.

• Kaizen (continuous improvement)

Improve business operations continuously, always driving for
innovation and evolution.

• Genchi Genbutsu (go and see)

Go to the source to find the facts to make correct decisions, build
consensus and achieve goals at best speed.

Respect for People

The principles relating to respect for people include ways of building
respect and teamwork:
• Respect
 Respect others. Make every effort to understand each other, take
responsibility and do your best to build mutual trust.
• Teamwork
Stimulate personal and professional growth, share the
opportunities of development and maximize individual and team
performance.

Success of Toyota
In 2004, Dr. Jeffrey Liker, a University of Michigan professor
of industrial engineering, published "The Toyota Way." In his book Liker
calls the Toyota Way, "a system designed to provide the tools for
people to continually improve their work." The system can be
summarized in 14 principles.

Executive Summary of the 14 Toyota Way Principles

Section I: Long-Term Philosophy

Principle 1 Base your management decisions on a long-term

philosophy, even at the expense of short-term financial goals.

• Have a philosophical sense of purpose that supersedes any

short-term decision making. Work, grow, and align the whole
organization toward a common purpose that is bigger than
making money. Understand your place in the history of the
company and work to bring the company to the next level. Your
philosophical mission is the foundation for all the other
principles.
• Generate value for the customer, society, and the economy—it is
your starting point. Evaluate every function in the company in
terms of its ability to achieve this.
• Be responsible. Strive to decide your own fate. Act with self-
reliance and trust in your own abilities. Accept responsibility for
your conduct and maintain and improve the skills that enable
you to produce added value.

Section II: The Right Process Will Produce the Right Results

Principle 2 Create a continuous process flow to bring problems

to the surface.

• Redesign work processes to achieve high value-added,

continuous flow. Strive to cut back to zero the amount of time
 that any work project is sitting idle or waiting for someone to
work on it.
• Create flow to move material and information fast as well as to
link processes and people together so that problems surface
right away.
• Make flow evident throughout your organizational culture. It is
the key to a true continuous improvement process and to
developing people.
Principle 3 Use “pull” systems to avoid overproduction.

• Provide your downline customers in the production process with

what they want, when they want it, and in the amount they want.
Material replenishment initiated by consumption is the basic
principle of just-in time.
• Minimize your work in process and warehousing of inventory by
stocking small amounts of each product and frequently
restocking based on what the customer actually takes away.
• Be responsive to the day-by-day shifts in customer demand
rather than relying on computer schedules and systems to track
wasteful inventory.

Principle 4 Level out the workload (heijunka). (Work like the

tortoise, not the hare.)

• Eliminating waste is just one-third of the equation for making

lean successful. Eliminating overburden to people and
equipment and eliminating unevenness in the production
schedule are just as important—yet generally not understood at
companies attempting to implement lean principles.
• Work to level out the workload of all manufacturing and service
processes as an alternative to the stop/start approach of working
on projects in batches that is typical at most companies.

Principle 5 Build a culture of stopping to fix problems, to get

quality right the first time.
• Quality for the customer drives your value proposition.
• Use all the modern quality assurance methods available.
• Build into your equipment the capability of detecting problems
and stopping itself. Develop a visual system to alert team or
 project leaders that a machine or process needs assistance.
Jidoka (machines with human intelligence) is the foundation for
“building in” quality.
• Build into your organization support systems to quickly solve
problems and put in place countermeasures.
• Build into your culture the philosophy of stopping or slowing
down to get quality right the first time to enhance productivity in
the long run.

Principle 6 Standardized tasks and processes are the

foundation for continuous improvement and employee
empowerment.
• Use stable, repeatable methods everywhere to maintain the
predictability, regular timing, and regular output of your
processes. It is the foundation for flow and pull.
• Capture the accumulated learning about a process up to a point
in time by standardizing today’s best practices. Allow creative
and individual expression to improve upon the standard; then
incorporate it into the new standard so that when a person
moves on you can hand off the learning to the next person.

Principle 7 Use visual control so no problems are hidden.

• Use simple visual indicators to help people determine
immediately whether they are in a standard condition or
deviating from it.
• Avoid using a computer screen when it moves the worker’s focus
away from the workplace.
• Design simple visual systems at the place where the work is
done, to support flow and pull.
• Reduce your reports to one piece of paper whenever possible,
even for your most important financial decisions.

Principle 8 Use only reliable, thoroughly tested technology that

serves your people and processes.
• Use technology to support people, not to replace people. Often it
is best to work out a process manually before adding technology
to support the process.
• New technology is often unreliable and difficult to standardize
and therefore endangers “flow.” A proven process that works
generally takes precedence over new and untested technology.
• Conduct actual tests before adopting new technology in business
processes, manufacturing systems, or products.
• Reject or modify technologies that conflict with your culture or
that might disrupt stability, reliability, and predictability.
• Nevertheless, encourage your people to consider new
technologies when looking into new approaches to work. Quickly
implement a thoroughly considered technology if it has been
proven in trials and it can improve flow in your processes.
Section III: Add Value to the Organization by Developing Your
People

Principle 9 Grow leaders who thoroughly understand the work,

live the philosophy, and teach it to others.
• Grow leaders from within, rather than buying them from outside
the organization.
• Do not view the leader’s job as simply accomplishing tasks and
having good people skills. Leaders must be role models of the
company’s philosophy and way of doing business.
• A good leader must understand the daily work in great detail so
he or she can be the best teacher of your company’s philosophy.

Principle 10. Develop exceptional people and teams who follow

your company’s philosophy.
• Create a strong, stable culture in which company values and
beliefs are widely shared and lived out over a period of many
years.
• Train exceptional individuals and teams to work within the
corporate philosophy to achieve exceptional results. Work very
hard to reinforce the culture continually.
• Use cross-functional teams to improve quality and productivity
and enhance flow by solving difficult technical problems.
Empowerment occurs when people use the company’s tools to
improve the company.
• Make an ongoing effort to teach individuals how to work together
as teams toward common goals. Teamwork is something that
has to be learned.

Principle 11 Respect your extended network of partners and

suppliers by challenging them and helping them improve.
• Have respect for your partners and suppliers and treat them as
an extension of your business.
• Challenge your outside business partners to grow and develop. It
shows that you value them. Set challenging targets and assist
your partners in achieving them.
Section IV: Continuously Solving Root Problems Drives
Organizational Learning

Principle 12 Go and see for yourself to thoroughly understand

the situation (genchi genbutsu).
• Solve problems and improve processes by going to the source
and personally observing and verifying data rather than
theorizing on the basis of what other people or the computer
screen tell you.
• Think and speak based on personally verified data.
• Even high-level managers and executives should go and see
things for themselves, so they will have more than a superficial
understanding of the situation.

Principle 13 Make decisions slowly by consensus, thoroughly

considering all options; implement decisions rapidly
(nemawashi).
• Do not pick a single direction and go down that one path until
you have thoroughly considered alternatives. When you have
picked, move quickly and continuously down the path.
• Nemawashi is the process of discussing problems and potential
solutions with all of those affected, to collect their ideas and get
agreement on a path forward. This consensus process, though
time-consuming, helps broaden the search for solutions, and
once a decision is made, the stage is set for rapid
implementation.

Principle 14 Become a learning organization through relentless

reflection (hansei) and continuous improvement (kaizen).
• Once you have established a stable process, use continuous
improvement tools to determine the root cause of inefficiencies
and apply effective countermeasures.
• Design processes that require almost no inventory. This will
make wasted time and resources visible for all to see. Once
waste is exposed, have employees use a continuous
improvement process (kaizen) to eliminate it.
• Protect the organizational knowledge base by developing stable
personnel, slow promotion, and very careful succession systems.
 • Use hansei (reflection) at key milestones and after you finish a
project to openly identify all the shortcomings of the project.
Develop countermeasures to avoid the same mistakes again.
• Learn by standardizing the best practices, rather than
reinventing the wheel with each new project and each new
manager.

Failures of Toyota
The automaker's refusal to pay attention to consumers was a
management failure that ultimately led to its massive vehicle recalls.

Amid the slow recovery of the global economy, we witnessed the

unlikely descent of one of the world's most admired companies:
Toyota. A pattern of deadly accidents has caused the slow-motion
crash of its reputation.

The entire scenario indicates that there is a systemic problem at

Toyota. But it's not with the engineers who design and make the cars.
Granted, no engineering enterprise is perfect. And anything with a
hundredth the complexity of a modern automobile requires constant
adjustment, retooling, and rethinking. Engineers experience failure
every day. But when something doesn't work, they fix it. They make
new designs. They fabricate workarounds. And to do that, they have to
be perfectly attuned to feedback from their systems.

Failure has never been part of Toyota's vocabulary, so the company

was unable to recognize or respond to the kinds of "normal" failures
that are inevitable in any large, complex business. Toyota learned little
or nothing between one recall and the next. It did not take early recalls
as information, but only as problems to be disposed of in the most
expeditious manner. In this way, it built its current mammoth
challenge through small incidents of neglect.

No one should doubt that Toyota will recover from this painful
interlude. Management is surely in deep learning mode these days,
having a great deal to catch up on. Here's what they teach in the
classes Toyota skipped:

• Always Solicit Outside Voices.

The overwhelming majority of corporate reputation failures result from
the Echo Effect—managers inside a company talking each other into ill-
advised strategies that bring substantial, hidden downsides. The
inclusion of diverse, independent points of view, including those of
outside advisers, will go a long way toward assuring that financial
interests do not overwhelm the company's judgment.

• Make Sure Corporate Decisions Align With Personal Values.

Much of the public's post-meltdown outrage at business focuses on
what we call the Corporate Exception—the apparent belief that
different standards of conduct prevail within the company than in the
outside world. In the age of scrutiny, managers and all employees
must bring their personal values to work. They have no other frame of
reference than their own experience to understand how the world sees
them. The standard quantitative measurements of business, while still
crucial, are no longer enough to protect the company—as Toyota has
learned.

• Be Skeptical of Your Own Story.

Every successful company has a narrative that explains its value and
its right to exist, and that often refers to a public good. Toyota's has
focused on building virtually every class of desirable auto for the world
—and doing it with utmost quality. Toyota's story about itself, while
utterly true, was incomplete. It addressed the product only, and it
therefore blinded the company to the extreme vulnerabilities that have
now appeared.
Toyota is hardly the only company that could benefit from these
principles. It's merely the current occupant of the spotlight, and its
experience should demonstrate to every manager that there are a
thousand ways to go wrong. Even building the world's favorite car—by
itself—is not enough to save you. That's what Toyota is learning.