Pearls of Wisdom: Taiichi Ohno on management

It is rare that one reads something written in 1978 that feels relevant to today's world in so many ways that is hard to explain all of its consequences.

This is what happened today and I wanted to share that. The following is a couple of paragraphs from the "Toyota Product System" (TPS) by Taiichi Ohno. Ohno was one of the key people in the development of what we know now as TPS.

Cost Reduction is the Goal

Frequently we use thew word "efficiency" when talking about production, management, and business. "Efficiency," in modern industry and business in general, means cost reduction.

At Toyota, as in all manufacturing industries, profit can be obtained only by reducing costs. When we apply the cost principle selling price = profit + actual cost, we make the consumer responsible for every cost. This principle has no place in today's competitive automobile industry.

Our products are scrutinized by cool-headed consumers in free, competitive markets where the manufacturing cost of a product is of no consequence. The question is whether or not the product is of value to the buyer. If a high price is set because of the manufacturer's cost, consumers will simply turn away.

Cost reduction must be the goal of consumer products manufacturers trying to survive in today's marketplace. During a period of high economic growth, any manufacturer can achieve lower costs with higher production. But in today's low-growth period, to achieve any form of cost reduction is difficult.
There is no magic method. Rather, a total management system is needed that develops human ability to its fullest capacity to best enhance creativity and fruitfulness, to utilize facilities and machines well, and to eliminate all waste.

The Toyota production system, with its two pillars advocating the absolute elimination of waste, was born in Japan out of necessity. Today, in an era of slow economic growth worldwide, this production system represents a concept in management that will work for any type of business.(1)

It is hard to believe when you read this (emphasis added) that it was written in 1978 (or before). But that is the case. All of this applies almost directly to the software industry today.


(1) Excerpt from Toyota Production System, By Taiichi Ohno, Productivity Press

Learn from the Sensei

It is seldom that we have the opportunity to learn from the masters, the Sensei. Here's a good post for those of us that are interested in TPS (Toyota Production System). I especially like this part:

In 1943 Taiichi Ohno was transferred to the automotive side of Toyota from the Loom Works. The architect of the Toyota Production System was not an automotive engineer. He had no prior background in automobile manufacture. This allowed him to look at the automotive manufacturing process with fresh eyes and also apply a perspective from an entirely different industry: spinning thread. When people say "we're not automotive, TPS doesn't work for us" they should remember that what we call lean manufacturing today owes more to thread spinning (jidoka), the Piggly Wiggly supermarket (kanban) and the efforts of Dr. Deming to teach PDCA and the scientific method than anything. These were the seeds, the automobile industry was merely the soil.

Which part did you like the most?

The reason why top managers should questioned and challenged by us, the Lego edition

For many people that have read about the Toyota Production System (TPS) the image of Toyota has been improved and their willingness to buy a Toyota car has been positively affected (heck, I _want_ to buy a Toyota, I just can't justify buying a car).

But how about reasons not to buy a product from a certain company? What if I told you that management is so incompetent that they outsourced the manufacturing of their core product to a company that had ZERO experience in building that product?

What if I added that this company planned to fire 900 of it's best employees just because they happen to leave near the company's headquarters which is a more expensive location for labor?

I'm guessing that by now you would be saying: "Maybe I should not buy any products from this company anymore..." And you would be on to something there...

But things get worse. The management of this company invested themselves in this outsourcing process with the help of the clueless McKinsey, only to back down and remove all ideas of continuing with the plan. Do you think that management's bonuses were affected? or even that management got fired? Naaah, that would be too logical...

As you guessed, the company is LEGO, and the devastating account of this blatant management incompetence is at Evolving Excellence blog.

The Toyota Way in the clothing industry, examples to pay attention

If you have been following this blog, it is no news for you that I'm a big fan of what is known as Toyota Production System and it's ideas as described by Jeffrey Liker in the famous "Toyota Way".

What you don't know is that I'm a big fan of many other companies that exhibit some of the same characteristics. How about this one: this is a clothing manufacturing and sales company that pays it's employees above minimum wage, is located in one of the most expensive states in the US (California), and has grown 40% last year, and still takes environmental sustainability pretty seriously!

The key here is that clothing manufacturing is an industry that has been heavily de-localized to India, Mexico, China, etc. And here is a company that competes with this cheap labor competitors and still manages to turn a handsome profit!

The company I'm writing about is American Apparel and Kevin Meyer from Evolving Excellence has an excellent description of a recent visit he made to American Apparel. Check it out!

Learn or else...

Through Elisabeth Hendrickson I got to Brett Pettichord's post about the role of feedback in Agile.

Read it if you haven't yet.

Here are the pearls that made me post this:

“If you don’t have meaningful feedback then you’re not agile. You’re just in a new form of chaos.”

and

“Agile practices build a technical and organizational infrastructure to facilitate getting and acting on feedback. If you aren’t going to adapt to feedback, then this infrastructure is waste that will only slow you down.”

This is very much in line (or even the same) with one of the tenants of the TPS (Toyota/Thinking Production System), the PDCA cycle. In order to improve you need to learn, feedback is the fuel for the process of learning. No feedback no learning.

If you are not learning, you are not Agile. No matter what you are doing!

Admitting mistakes is the first step to learning, not just for you, but also for your team and company

Here is an excellent piece from the blog Evolving excellence about how a worker at Toyota battled his fear of admitting a mistake and was rewarded by his pears and supervisor for not hiding, but rather disclosing the mistake he had done.

Admitting you committed a mistake is a very important part of continuous improvement. The andon cord (a sort of error alarm) should be pulled as soon as an mistake/error/defect is created or found.

Finding mistakes is not a blame game in Lean thinking, it is a key part of finding ways to avoid mistakes altogether through poka-yoke or mistake proofing our work methods!

Behind this willingness to show and learn from mistakes we make are some concepts in the Toyota Product System (TPS):

1. If the student has not learned the professor has not taught.
2. Most mistakes are caused by the situation or the system and not by people's incompetence or willingness to do their best.
3. Respect for people (one of the key pillars of the TPS)
   

These concepts together with other key concepts in TPS allow people to concentrate and focus on continuous improvement and not play the very ineficient and unproductive blame game that mostly impedes learning.


Updated: with a link to the Respect for people principle in Toyota's website.

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