Swati Sharma

PGDM- Busines Design

Roll No.- 52

THE TOYOTA WAY

14 MANAGEMENT PRINCIPLES FROM THE WORLD’S GREATEST MANUFACTURER
AUTHOR- JEFFERY K. LIKER

The Toyota Way is the first book for a general audience that explains the management
principles and business philosophy behind Toyota's worldwide reputation for quality
and reliability. Complete with profiles of organizations that have successfully adopted
Toyota's principles, this book shows managers in every industry how to improve
business processes.

World Class Power of the Toyota Way first caught the worlds attention in the 1980s
when consumers started noticing that Toyota cars lasted longer and required fewer
repairs than American cars. Today, not only is Asia leading the way in car production
but the company has the biggest market value consistently producing high-quality cars
using fewer man hours and less on-hand inventories. To this day, Toyota continues to
raise the bar for manufacturing, production development and process excellence. The
Toyota Way explains the management principle and business philosophy behind
Toyotas success. It narrates Toyotas approach to Lean Production (known as the
Toyota Production System) and the 14 principles that drive Toyota towards quality and
excellence. The book also explains how you can adopt the same principles to improve
your current manufacturing process.

Professor Jeffrey 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 firm. He has been studying Toyota for twenty years, and was given
unprecedented access to Toyota executives, employees and factories, both in Japan and the United
States, for this landmark book. The Toyota Way reveals how Toyota creates an ideal environment for
implementing Lean techniques and tools by:

Ø Fostering an atmosphere of continuous improvement and learning

Ø Satisfying customers (and eliminating waste at the same time)
Ø Getting quality right the first time
Ø Grooming leaders from within rather than recruiting them from the outside
Ø Teaching all employees to become problem solvers
Ø Growing together with suppliers and partners for mutual benefit

Toyota developed the lean production after World War II. While Ford and GM used mass production
and economies of scale, Toyota faced very different business conditions. Toyota's market was very
small but it had to produce a variety of vehicles on the same assembly line to satisfy customers. The
solution:
making the operations flexible. This resulted in the birth of TPS- Toyota production system.TPS
borrowed some of its ideas from the United States. The core idea came from the concept of the “pull-
system”, which was inspired by the American supermarkets. In the pull system, individual items are
replenished as each item begins to run low on the shelf. Applied to Toyota, it means that the first step
in the process is not completed until the second step uses the materials or supplies from Step 1. At
Toyota, every step of the manufacturing process uses to signal to the previous step when its part
needs to be replenished.

The book is divided into three parts. Part one introduces us to the present
success and history of Toyota. It describes how TPS evolved as a new paradigm
of manufacturing, transforming businesses across industries. Part two covers the
14 principles of Toyota as identified by Liker. The 14 principles of The Toyota
Way are organized in four sections: I) Long-Term Philosophy, II) The Right
Process Will Produce the Right Results, III) Add Value to the Organization by
Developing Your People, and IV) Continuously Solving Root Problems Drives
Organizational Learning. Part three of the book discusses how organizations can
apply the Toyota way and what actions they can take to become a lean,learning
organization.

Toyota’s lean production system started a global revolution in manufacturing and service business
that many consider the next phase beyond mass production. The Toyota Way Explains how Toyota’s
production system evolved as a new paradigm of manufacturing excellence, and describes
companies in industries as diverse as healthcare, engineering, pharmaceuticals and construction, that
are using Toyota’s methods to dramatically improve their performance.

Not too many companies believe their competitive advantage is their process. But the title of the first
chapter says it all, “Using Operational Excellence as a Strategic Weapon”. Many people think the
Toyota Way is lean process development, but after reading The Toyota Way I understand that lean is
just a part of their “operational excellence”. Their real excellence can be summed up as “culture and
discipline”.
The Toyota Way isn’t a process, it’s the name for Toyota’s culture involving: problem solving (see for
yourself, consensus decision making, and ask why? five times), people and partners (grow leaders
and your business partners), process (eliminate waste, lean flow to view the problems, level the
workload, stop as soon as there is a quality problem, pull systems, visibility, and standardized tasks),
and philosophy (long term thinking). This culture influences every level of Toyota.
Many people confuse the Toyota Production System (TPS) with the Toyota Way. TPS is the
manufacturing process; the Toyota Way is the culture. Most companies try to implement lean (just in
time) production systems and fail because they don’t have the culture and discipline to do it. Simple
example: western plants try to minimize downtime; at Toyota downtime is considered good because
problems are getting fixed. Without the discipline to run so lean that problems pop up, western plants
have a hard time finding and fixing the problems.
"Minimize costs by maximizing quality at every level of the organization"
Toyota’s methods are surprisingly low-tech. Every employee is a problem solver and taught the
Toyota Way. Culture is ingrained. Reports are given on one sheet of paper. There is no Six Sigma,
only simple statistics. Processes are standardized and visible systems (andons) are created to show
deviation from the process. Pretend for a minute that every employee at your company had a traffic
light on their head and every day you could see if they were behind schedule, on time, or running
ahead. Again this isn’t just for manufacturing but for all parts of Toyota.

But many companies who think they are Lean – aren’t. The book explains how to get beyond a focus
on the surface tools and techniques of Lean by creating a Toyota-style culture of quality-a Lean,
learning enterprise. It tells how to improve the speed of a business processes, improve product and
service quality, and cut costs, no matter what is the industry. The Toyota Way is an inspiring guide to
taking the steps necessary to emulate Toyota’s remarkable success.

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. Liker’s thorough insight into the continual improvement
method known as "The Toyota Way" reflects 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 efficiency. Toyota’s success as the world’s most profitable automaker is no accident and now,
thanks to this book, it’s no mystery, either. Liker drills down to the underlying principles and
behaviours that will set your company on the Toyota Way. The book reflects years of studying
Toyota’s philosophy: it is well mapped out, straightforward and exceedingly although not daringly
innovative . this book is a must for anyone striving to improve their organization’s operational
efficiency.

INSPIRING STORY-
After World War 2 and Japan’s loss to America, inflation in Japan became very rampant ,which further
made money worthless and getting paid by customers very difficult. Cash flow became so horrendous
that at one point in 1948 Toyota’s debt was eight times in total capital value. To avoid bankruptcy,
Toyota adopted strict cost-cutting policies,including voluntary pay cuts by managers .Finally, even the
pay cuts were not enough. This forced Kiichiro Toyoda, CEO of Toyota, to ask 1600 workers to retire
voluntarily. This led to work stoppages and public demonstrations by workers, which at the time were
becoming commonplace across Japan.
Companies go out of business every day. For the CEO’s it is always some other person’s fault that
the company has failed. Kiichiro Toyoda took a different approach. He accepted responsibility for the
failing of the automobile company and resigned as president, even though in reality the problems
were well beyond his or anyone else’s control. His personal sacrifice helped to quell worker
dissatisfaction. More workers voluntarily left the company and labor peace was restored. However, his
tremendous personal sacrifice had a more profound impact on the history of Toyota. Everyone in
Toyota knew what he did and why. The philosophy of Toyota to this day is to think beyond individual
concerns to the long term good of the company, as well as to take responsibility for problems. Kiichiro
Toyoda was leading by example in a way that is unfathomable to most of us.
 THE MIND OF THE STRATEGIST
AUTHOR : KENICHI OHMAE

ABOUT THE AUTHOR-

Kenichi Ohmae is a highly successful business samurai,whose sword is his mind. Internationally
known as “Mr. Strategy,” Kenichi Ohmae is an MIT-trained Japanese management guru ,was a
partner at McKinsey & Company for 23 years, and today he is chairman of Ohmae & Associates. He
is the author of more than 100 books.
INTRODUCTION-
In this book Kenichi tries to reveal the mind of a strategist based on his experience in Tokyo using
large Japanese companies as examples ; these companies do not have large planning staffs or
complex planning processes. His message is that successful business strategies result not so much
from rigorous analysis but from a particular state of mind. This is not to reject analysis but to
subordinate it to the role of stimulating , testing and implementing a creative process , thus to create
strategic thinking.
The book is adapted from a Japanese original; it has the requisite recipe-for-success--"the
combination of analytical method and mental elasticity that I call strategic thinking""--but it rests,
intrinsically and more interestingly, on two precepts: gaining competitive superiority (lacking
competition, you need improvements not strategy) and putting customer interests first. (Corporate
freebooters who run myriad businesses "very much alike"--the prewar Japanese zaibatsu, current US
conglomerates--seldom "sustain a profitable leadership position.")

SUMMARY-
The book reiterates many well publicised but less commonly practised guidelines, starting with the
need to formulate questions in ways that facilitate finding a solution, the use of systematic analysis to
find critical issues, differentiating oneself from competition and in particular finding and using the key
factors for success in business domain.
In the first part of his book, Dr. Ohmae introduces some techniques of strategic analysis and thinking.
The need to challenge assumptions, to be inquisitive are well illustrated. The stress on defining users’
or consumers’ objectives and exploring routes to securing competitive advantage are occasionally
obscured by jargon such as ‘strategic degree of freedom’ .
Ohmae explains how to identify the key factors for success in each industry--by dissecting the market,
by discovering what distinguishes winners from losers; and how to build on relative superority (quality,
service), or challenge prevailing assumptions (an electric blanket to sleep on, a camera with a built-in
flash), or exploit strategic degrees of freedom.
The second part builds up a framework for strategy based on a strategic triangle- customers,
competitors and corporation. Strategies based on identifying and developing a crucial differentiation in
one or more of these sectors are reviewed . customer based strategies including segmentation by
customer objective or by market coverage, example geography or channel of distribution,are rightly
put first. Corporation strategies are limited to examining types of functional advantage, but strategies
based on understanding competitor’s weaknesses and specifically the possibility of using the
differences in cost and profit structures is neatly brought out.
Part three is concerned mainly with environmental factors bearing on strategic thinking and strategy
formulation,an overall perspective on the nature of strategic foresight and a summary of kenichi’s
ideas on the formulation of successful strategy.[[[[[[[[[[[
We also find Ohmae comparing the Japanese and American models of thinking. For example, if a
Japanese company wants to add a new product, the evaluation looks heavily at how well
the customer will be able to use the product and how effectively the company will be
able to provide it in the context of probable competitive offerings. An American analysis
will feature financial analysis of a forecast that is often based on little more than
spreadsheet doodling.

APPRECIATION-

The Mind of the Strategist stands apart from other books in terms of its profound
discussion on what the strategy really means. Author talks about four ways of thinking
to deal with a given situation in a business world. He may not give you off-the-rack
answers of what to do. Rather than spoon feeding you, he gives you the right logic, not
just techniques, to come up with your own solutions to maximize your competitiveness.
It is your job to use your thoughts and imaginations to win the game of business.

The author must have intentionally taken this approach to discuss on strategy in order to
sincerely tell us that there is no correct strategy for every situation. The author has done
his job by giving us the way of thinking. Now it is our own job to think strategically after
having read this book once.
The book contains many vivid examples from the Japanese business scene which
makes the book interesting to read.

SHORTCOMINGS-

Dr. Ohmae has been successful in giving readers an insight into what makes the
Japanese tick from a cultural, economic and industrial perspective. The major shortfall
however, is that book seems to suggest that the Japanese model is the benchmark for
many western businesses to emulate. Maybe a more balanced approach would have
given us the right perspective. My feeling is that the book could have contributed more
by hypothesising a model that embeds the strengths of both Japanese and Western
models to achieve optimum outcomes. After all, continous improvement strategies that
many Japanese businesses embrace are hardly drivers for major technological break-
throughs. Conversely, many US-based companies are excellent at large-scale investment
in major R & D programs (and subsequent patenting) that secure long-term competitive
advantage.

There are a lot of business and technical jargons used by the author which makes it a
little difficult to comprehend at times.

CONCLUSION-

The author presents a crisp, clear and almost surgical approach to designing strategy.
Though , the book theorizes a lot on key success factors and other such ideas, I guess the
best it brings out is in the examples it presents. Ohmae's knowledge and depth in business
is truely getting reflected in this book.
Although this book has its limitations,it is a valuable perspective on strategy thinking
that will be helpful to most business people if they think about the concepts in a more
thorough way.

NO STORIES, BUT CASE STUDIES EXPLAINING A STRATEGIC CONCEPT.

CASE STUDY EXPLAINING THE CONCEPT OF RELATIVE SUPERIORITY

INDUSTRY : COLOR FILM INDUSTRY, JAPAN.

CASE - Japan’s amateur color film market is currently dominated by three companies,
two of them Japanese: Fuji, which leads the market, and Sakura. For the past fifteen
years, Fuji had been gaining market share, while Sakura-the market leader in the early
1950s with over half the market- had been losing share to both its competitors. The
problem was not product quality. Rather Sakura was handicapped by an unfortunate
word association; its name in Japanese means “cherry blossom”, suggesting a soft ,
blurry, pinkish image. The name Fuji , on the other hand, was naturally associated with
the brilliant blue skies and white snows on Japan’s sacred mountain. Sakurs was gravely
handicapped by its unfortunate image, but all its efforts to overcome the handicap
through advertising were of no avail.

SOLUTION – Sakura turned to analyzing the market from structural, economic and
customer points of view to see whether it could uncover any competitive advantage.
What Sakura discovered was a growing cost-consciousness among film customers.
Processors exposed that 36-exposure roll led to wastage of shots and with 20-exposure
rolls , a person always wanted to squeeze in extra shots.

Here was Sakura’s opportunity. It decided to introduce a 24-exposure

film at the same price as the competitors’ 20-exposure film. Its marginal costs would be
trivial, but its big competitors would face significant penalties in following suit. Its aim
was twofold. First, it would exploit the growing cost mindedness of users. Second and
more importantly, it would be drawing attention to the economic issue, where it had a
relative advantage, and away from the image issue , where it could not win.