Summary: The Toyota Way By Jeffrey K. Liker
Summary: The Toyota Way By Jeffrey K. Liker

Summary: The Toyota Way By Jeffrey K. Liker

Principle 1 Base Your Management Decisions on Long-Term Systems Thinking, Even at the Expense of Short-Term Financial Goals

Toyota’s mission goes far beyond short-term profitability, and Toyota is willing to invest for the long term.

Toyota thinks of its organization as a living sociotechnical system rather than mechanical parts guided by simple and direct cause-and-effect relationships. Investing in developing people allows them to locally control complex system dynamics.

Toyota is a model for the world in demonstrating how doing the right thing is a profitable business strategy.

What drives Toyota forward is people who believe there is always a better way and trust the company to do right by them.

The foundation of team member trust is job security, and Toyota goes to unusual lengths to protect the jobs of its employees.

Toyota has a deliberate culture that is consistent across locations, levels, and time. Toyota walks the talk.


Principle 2 Connect People and Processes Through Continuous Process Flow to Bring Problems to the Surface

The core concept in Toyota’s just-in-time system is struggling toward the vision of one-piece flow of value to the customer, with zero waste.

We often think of a process as if it were a physical thing, but it is actually an ideal to strive for, not a tool to implement.

Mass production thinkers often have the mistaken impression that if they minimize the cycle time of individual processes, they will make the overall operation more efficient, but more often than not they simply create mountains of waste, slow the speed of materials and information to the customer, and create a lot of confusion.

Not only does one-piece flow increase productivity, but it can lead to better quality, shorter lead time, enhanced customer responsiveness, higher morale, and better safety.

While there are immediate benefits of shifting from process islands to a flow line, longer-term benefits come from surfacing problems so they can be addressed quickly, enhancing continuous improvement.

The companion to one-piece flow is developing in people at the worksite a scientific mindset to solve problems as they surface.


Principle 3 Use “Pull” Systems to Avoid Overproduction

Most companies assume that they can use demand forecasts and complex scheduling algorithms to give instructions to each individual process.

The traditional way of production scheduling often leads to push systems where even small changes in demand or conditions can throw off the process, leading to inventory banks, parts shortages, and missed shipments.

Toyota uses scheduled systems, often to create leveled schedules, but prefers to schedule only at one point in the factory—the pacemaker.

Ideally, Toyota would only use one-piece flow operations without work-in-process inventory, but for many situations this is not practical.

When one-piece flow is not practical, Toyota pulls parts from small inventory buffers and then replenishes the buffers much like the modern supermarket does.

Kanban (a physical or electronic signal) is often used so the upstream process (customer) can inform the downstream supplier process when it is ready for more of a particular part.

The biggest value of the kanban system is to help visualize the flow, study it, and find ways to reduce inventory in order to get closer to one-piece flow.

Pull systems are frequently used in service environments, like hospitals and offices, to regulate the internal flow of materials and are also powerful to regulate information flow.


Principle 4 Level Out the Workload, Like the Tortoise, Not the Hare (Heijunka)

To get to lean flow requires seeking to eliminate the three Ms: muda (waste), mura (unevenness), and muri (overburden).

The three Ms are all interrelated. Eliminating muda alone when there are high levels of unevenness and overburden can actually reduce productivity and value-added flow.

Along with creating a leveled schedule, factories need to reduce setup time in order to quickly change over between products and build in small batches.

Sometimes it is best to hold extra inventory of high-volume finished goods as a buffer against fluctuations in customer demand and allow building to order low-volume product types while replenishing the inventory for high-volume items.


Principle 5 Work to Establish Standardized Processes as the Foundation for Continuous Improvement

Classical industrial engineering focused on efficiency by designing the “one best way” to do a job.

Toyota turned scientific management on its head, giving the stopwatch to work groups who were responsible for designing and continuously improving their work.

Job instruction training was taught to Toyota as part of Training Within Industry, and is the key to turning standardized work into a habitual way of working by focusing on key points for each tiny step.

Even in a customer-facing service business like Starbucks, with a myriad of drink combinations and customer demand changing by the minute, it is possible to create a steady work cadence that reduces stress and enhances the customer experience.

When standards become a tool owned by those who perform the work, bureaucracy turns from coercing to enabling.

Standardized work is something to be achieved through continuous improvement and rigorous training based on practice until the new way becomes a habit.


Principle 6 Build a Culture of Stopping to Identify Out-of-Standard Conditions and Build in Quality

The customer is the final arbiter of how good a job the company is doing.

The voice of the customer must be driven through every process from design to manufacturing.

Toyota’s famous andon system of stopping to fix problems is one of a number of ways to surface problems immediately so they can be solved quickly.

One of the most dramatic examples of facing and addressing problems for Toyota has been its response to the sudden acceleration recall crisis. Over a decade later, Toyota is still using it to raise quality consciousness.

Designing in quality also applies to digital companies. The best companies have built processes for getting rapid feedback as code is being written and to run experiments with customers to get continual feedback to improve the software.

Quality is more than tools; it is a matter of creating a culture where even negative feedback is valued and used for continuous improvement from design through customer use.


Principle 7 Use Visual Control to Support People in Decision-Making and Problem Solving

Humans are naturally visual creatures and are more likely to recall and use information if it is in a visual format, preferably pictures.

5S—sort, straighten, shine, standardize, sustain—is a powerful tool to help create a visual workplace, but it is most powerful as part of a lean system with stable operations, standardized work, and continuous improvement.

Visual control at the worksite should make it clear at a glance what the standard is and if anything is out of standard.

For project management, Toyota uses a big visual meeting room, the obeya, so each specialty group can present up-to-date information on project status and any problems the group needs help on.

Many companies see physical visuals as a waste of paper and inefficient and view the use of digital tools as modern and admirable. Computers often distract a group rather than enable it, but when properly designed and used, computer systems can help provide visual control.


Principle 8 Adopt and Adapt Technology That Supports Your People and Processes

Toyota has had bad experiences loading up plants with automated equipment only to find in a business downturn that the company had too much money tied up in fixed capital costs.

After several such experiences, including in the Great Recession, the mantra became “simple, slim, and flexible,” with the right balance of people and automation.

Kaizen does not end with automation, but rather continuous improvement of automated equipment can help organizations move closer to the lean vision of one-piece flow without interruption.

The internet of things has the potential to build on TPS principles and take operations to a whole new level of performance, with people being fed real-time and continuous information to accelerate and amplify kaizen.

People in Toyota are still viewed as master craftsworkers who use all their senses to understand the state of the process and can perform even automated processes manually.


Principle 9 Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others

Toyota has a history of great leaders, grown from within, who believe in and model the values of the Toyota Way.

The core values can be traced back to the company founders, Sakichi Toyoda and Kiichiro Toyoda, and were formalized in the Toyota Way 2001 under the direction of President Fujio Cho.

Jim Collins’ study identified 11 “great companies,” and all 11 had level 5 leaders who shared the duality of personal humility yet intense professional will, and who had many of the same characteristics as those of Toyota leaders.

Leadership and culture are intertwined—through their behavior and coaching, leaders at all levels spread the culture broad and deep.

Toyota’s longstanding culture has had many influences, including some distinctively Japanese, but the company has had success in spreading the culture in countries where it has set up shop.


Principle 10 Develop Exceptional People and Teams Who Follow Your Company’s Philosophy

Toyota culture is based on a growth mindset that with the right leadership anyone can develop and grow to face new challenges with dedication and passion.

Toyota embraced servant leadership long before it was fashionable, turning the organization chart upside down, with value-added workers at the top.

The Toyota standard is to develop work groups who own their processes and are served by support organizations.

The standard structure is a group leader who is viewed as a managing director of a company’s small businesses with team leaders who lead their small work teams.

The “mysterious” team leader is a pivotal role responsible for supporting team members, ensuring standardized work, responding to abnormalities, and leading kaizen, with a small enough team (ideally four people) to allow for daily coaching.

Developing and sustaining effective leadership is even challenging for Toyota, and the company is regularly experimenting with new approaches to reenergize the work group.


Principle 11 Respect Your Value Chain Partners by Challenging Them and Helping Them Improve

Toyota carries respect for people and continuous improvement to the value chain, challenging and developing its key outside partners.

From the customer’s perspective, it is a Toyota vehicle, and so all supplied parts have to be of the same quality of design and function as Toyota parts. Similarly, independent dealers are still viewed as Toyota by consumers, and they must reflect the Toyota brand.

Toyota challenges suppliers with perfect delivery of parts and aggressive cost targets.

The first-tier suppliers of large component systems are engaged early in the cycle to design in components, collaborating with Toyota engineers and working toward the same aggressive targets of cost, quality, weight, and functionality.

Toyota has a variety of ways to develop suppliers, including regional supplier associations; direct support from knowledgeable professionals in purchasing, quality, and manufacturing; and model-line projects coached by master TPS trainers.

Despite the pressure of Toyota challenges and high standards, suppliers typically rate Toyota the most trusted and respected customer.


Principle 12 Observe Deeply and Learn Iteratively (PDCA) to Meet Each Challenge

In the rapidly changing environment of the twenty-first century, organizational learning and adaptation are becoming critical for success.

The concept of a learning organization can remain an abstraction until it is translated into a mindset and behavior of scientific thinking. People naturally prefer certainty and want to believe they are right, without taking the time to think deeply or study the actual condition.

Fujio Cho recognized this and realized that as Toyota grew and globalized, it needed to develop people through practice and coaching. He led the creation of the Toyota Way 2001, Toyota Business Practices, and OJD. Individuals were coached in these methods through projects, one by one.

Mike Rother has developed a non-Toyota-specific approach for developing scientific thinking based on his research into Toyota’s management system. It includes a practical, scientific thinking model and “starter kata,” which are practice routines. Using this approach and through repetition and corrective feedback from a coach, the learner builds the neural pathways to think and act scientifically.

There is some evidence that the shock of Covid-19 pushed many companies to cut through coercive bureaucracy and become more people centered, quickly adapting and learning and even changing values toward higher levels of trust, engagement, and communication. Unfortunately, those changes often did not reach the thinking in the C-suite, which makes them unlikely to sustain over the long term.


Principle 13 Focus the Improvement Energy of Your People Through Aligned Goals at All Levels

Hoshin kanri (aka policy deployment) is Toyota’s approach to jointly aligning goals and plans at all levels to lay out the challenges and targets for the year.

Hoshin kanri is more than a business realization tool: it is a process for developing people through coaching and problem solving.

Hoshin kanri uses a planning period to lay out challenges and milestones, which provide a framework for the step-by-step improvement process of experimenting and learning.

The process of working toward breakthrough objectives to achieve new standards (PDCA) is supported by daily management to identify and eliminate deviations from standard (SDCA).

The simple A3, one side of an 11-inch x 17-inch sheet of paper, is a great way to summarize thinking about plans, actions, and results, so leaders can coach and develop people and build consensus around plans and actions.

Use constant hansei (reflection) to openly identify weaknesses and prioritize areas for improvement.

As we move from the executive suites to the work groups that execute, each level takes responsibility for its own business—planning and working to meet the plan.

The cascading process is far more than breaking down desired outcomes and assigning them to groups. The planning requires causal reasoning. What do I need to work on to help my boss achieve his or her targets?


Principle 14 Learn Your Way to the Future Through Bold Strategy Some Large Leaps, and Many Small Steps

To be successful, organizations need a well-thought out strategy to provide a distinctive product or service executed with appropriate operational capabilities.

Each firm must develop its own strategy based on its unique situation and characteristics of the environment it faces.

In the auto industry, Tesla was the first to develop an exciting battery-electric vehicle and took a first-mover advantage with sufficient sales and pricing to overcome production, quality, and delivery problems.

Toyota has the size and resources to develop a more nuanced strategy, selling in parallel battery electric, hybrid, plug-in hybrid, and hydrogen fuel cell vehicles, with the proportions shifting over time.

The Prius is an example of how Toyota took a bold step, developing the first mass-production hybrid, and then refined it through large leaps and steps to make it a bedrock for profitable growth.

The competing small values model can help conceptually identify where a firm needs to be externally and internally and how the strategy relates to execution.

For a startup firm, it is most important to be strong in the open systems quadrant with a breakthrough product or service, while as the company matures, it becomes increasingly important to have strong internal capability for execution.

Each organization is in a unique position and needs its own strategy; copying benchmarked companies can stunt creative thinking and set you back.