Friday, January 12, 2007

How Does Toyota Do it? (Book Review)

When Matthew May was asked to help translate the Toyota Production System for the knowledge worker, he thought: “Huh? It doesn’t make any sense. Everyone knows factory work isn’t creative, right?”

How wrong he was. He found that factory workers were more engaged and creative than their corporate counterparts. Their jobs weren’t creative, their job were to be creative. He found that the Toyota organization implements a million new ideas a year – three thousand ideas a day. May notes that these new ideas are the real reason Toyota makes over twice as much money as any other carmaker, with under 15% of the market. These thousands upon thousands of implemented ideas are the engine of Toyota’s innovation.

Who needs another book on innovation? May asks in the introduction to his book, The Elegant Solution: Toyota’s Formula for Mastering Innovation. You do. This book is a great read – short lessons, lots and lots of case studies and examples both in the text and in the sidebars liberally sprinkled throughout the book. This is a book unlike any other on innovation; it is the result of May’s deep thinking and experience in trying to identify for Toyota University what innovation in Toyota actually means.

The book outlines three principles and ten practices for driving innovation in knowledge work, and concludes with a couple of brief chapters on how to get started down this path.

  1. The Art of Ingenuity. The pressure to innovate falls on the individual – every single individual in the company. First, ingenuity means connecting with your work, whatever it is, understanding why it is important, and making sure that it is a good fit with your skills and interests. If it isn’t create a job that is. Second, ingenuity means constantly experimenting to figure out how to do that job better. Third and most important, everybody is expected to use their ingenuity – everybody – all of the time.
  2. The Pursuit of Perfection.  There is no such thing as perfection – but aspiring to achieve perfection is nevertheless the goal. A good example of this principle can be found in the Fast Company article No Satisfaction at Toyota, an article about constant innovation at the Georgetown Kentucky factory. Read the article, it does a fantastic job at explaining the pursuit of perfection.
  3. The Rhythm of Fit. Innovation is always obvious – after the fact. But discovering the obvious is not such an easy task. It requires that you are grounded in today, yet have a clear vision of tomorrow. It requires systems thinking, rather than program thinking. And it requires the right social context – one that inspires rather than suppresses creativity.
  1. Let Learning Lead. Real learning is not about books or lectures or workshops. It is about constantly trying things and finding out what works. Learning involves asking the right questions much more than finding the right answers. Learning means moving the Scientific Method from PhD programs in Universities to the shop floor and the knowledge worker. Learning comes first.
  2. Learn to See. Walk in the shoes of the front line worker. Live the life of the customer. Data is important, but it’s interpretation that converts data into information. Learn to walk around and observe what is really happening. Watch your customer, become your customer, involve your customer.
  3. Design for Today. As good as Toyota is at anticipating the future, their innovations are always grounded in clear and present needs – demographic shifts, energy shortages, safety concerns. The idea is, as hockey great Wayne Gretzky once said: “Skate to where the puck is going to be, not where it has been.” Market leaders don’t so much create markets as they understand where the market is going to go, and skate there.
  4. Think in Pictures.
  5. Capture the Intangible. The most compelling solutions are often perceptual and emotional.” May says. For example, when the Lexus team was designing the car, the entire team spend three months living in luxury in southern California, just to feel what their customers felt. They learned that luxury cars were not transportation, they were a safe sanctuary and quiet escape. Provide an ‘experience’ instead of a ‘product’.
  6. Leverage the Limits. This chapter centers on a wonderful story about Toyota’s North American Parts Operations (NAPO) stretch goals. In the year 2000, Jane Beseda, newly appointed vice president and general manager, challenged NAPO with ten audacious and mutually competing goals, including inventory reduction, response time reduction, and waste reduction. The goals were such that they could only be achieved by departments working together across what had been organizational boundaries, and the results were nothing short of amazing.
  7. Master the Tension. A McKinsey study on global productivity in the late 1990’s found that the companies which improved productivity the most were invariably companies in highly competitive industries. These companies had to find a better way of doing things – it was a matter of survival – but could not afford to throw money at the problem. We agree with May – constraints coupled with challenge provide the breeding ground for innovation.
  8. Run the Numbers.There is a place for instinct, but temper it with facts. Think hard about what the important numbers are – and they are often not the obvious ones. With insight into what numbers are important, capturing and analyzing data will confirm instinct (or not) and uncover patterns that are otherwise invisible. 
  9. Make Kaizen Mandatory. Standards exist to be challenged and changed. They are the current best-known way of doing things, and they are documented and followed by everyone. But they objective is to change the standard, to keep on improving the way things are done. Taiichi Ohno once said “Something is wrong if workers do not look around each day, find things that are tedious or boring, and then rewrite the procedures. Even last month’s manual should be out of date.”
  10. Keep it Lean. Scale it back, keep it simple, make it flawless, let it flow. May notes “We are hardwired to hunt, gather, and horde. To think more. So lean runs counter to human nature. Getting lean requires fighting the basic instinct to add, accumulate, store. Lean requires a precise understanding of value: the who, what, when, where, how, and why of the customer’s need. It means getting that value to them without complexity creeping in.
Get this book. Read it. It will change the way you think about innovation.