Toyoda’s legacy goes well beyond the lean: The innovator who led Toyota insisted that people were as important as the production system

September 30, 2013 5:17 pm

Toyoda’s legacy goes well beyond the lean

By Andrew Hill

The innovator who led Toyota insisted that people were as important as the production system

Eiji Toyoda was the man who taught the world’s production workers Japanese. If you know kaizen means continuous improvement, and use kanban inventory tags to eliminate muda, or waste, then Toyoda, who died recently, was your sensei. The Toyota Production System he championed as head of the carmaker in the 1970s and 1980s, traces its roots to a fail-safe device devised by Toyoda’s uncle to cope with thread breaks on mechanical looms. Multinationals have since turned its efficiency methods – “lean” production, just-in-time supply chains and outsourcing – into a habit that is woven through the fabric of global production. However, in future, Toyoda’s insights into the power of human initiative will be more relevant.Modern manufacturing is moving, using 3D printing and other methods, through mass customisation of small batches to affordable personalisation of individual items. Crowd and cloud are unpicking the production lines Toyoda revolutionised, while manufacturers look to make more money from services than products.

TPS is still “the dominant design in high volume manufacturing”, according to Willy Shih of Harvard Business School, who puts Toyoda in the management pantheon alongside Henry Ford. His system is already capable of producing millions of product variants. InThe New Industrial Revolution, my former Financial Times colleague Peter Marsh estimates that across the Toyota range “in the course of a year’s output . . . a maximum of only about five [vehicles] share the same product features”.

But companies will increasingly have to recognise, learn and apply more of TPS’s core people management principles, some of which have been obscured by an obsession with “leanness”.

Lean production has given TPS a bad name, by associating it with cost reduction and job cuts. Yet people were always at its centre. Taiichi Ohno, Toyoda’s chief production engineer, called it “autonomation” – or “automation with a human touch”. Ohno gave the lie to the idea that people management was a “soft skill”; he was like an “authoritarian schoolmaster”, according to one account. However, he insisted teams should work out how to solve problems on the line themselves. That philosophy of respect was passed on. When Toyota sought to teach its practices to US suppliers in the early 1990s, it was a precondition that they should redeploy displaced production line workers.

Manufacturing expert Lord Bhattacharyya of the University of Warwick says Toyota’s experts saw inventory reduction as simple common sense – born of necessity in resource- and space-constrained Japan after the second world war. He says consultants hyped “leanness” to their clients, peddling production-line efficiency to the exclusion of all else, to the irritation of keepers of Toyoda’s flame.

One of those guardians – Jeff Liker, professor of industrial and operations engineering at the University of Michigan and author of The Toyota Way – says all but a few organisations that use the Toyota system are “scratching the surface” of its deeper benefits.

As computerised production becomes more sophisticated, companies will have to place greater faith in an ever more skilled workforce. To flourish, they will need, in Prof Liker’s words, to become “learning organisations, constantly adapting to [their] environment”. As such, they will be direct heirs to Toyoda and Ohno, whose hard-nosed perfectionism was built on an appetite for learning, whetted on visits to sprawling US car plants and abundantly stocked supermarkets in the 1950s.

Toyoda’s production practices will not disappear. A system for simplifying complex manufacturing and supply chain challenges remains useful. You will continue to findkanban and kaizen from Shenzhen to Sheffield. But the change he inspired in the culture of manufacturing was far more profound. It will also prove to be far more enduring and relevant for modern businesses, whether their staff work in a single factory, are dispersed up and down the global value chain, or form a collaborative open network of freelancers.

So set aside the paraphernalia of lean production for a moment. It is only the most visible of Eiji Toyoda’s legacies. He insisted, above all, that managers should listen to the people who design, build and make things, and reward them for improvements they suggested. That is a language everyone should learn.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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