“Engineers at the Toyota Technical Center use hetakuso-sekke, which is the small booklet containing the failures experienced in the past.”
Kunihiko Masaki, former President of Toyota Technical Center, Ann Arbor
Despite colossal investments of both human and capital resources, most companies have continued to struggle to make organizational learning a true competitive advantage. Once reason is because their focus has typically been on tools that manage explicit or procedural knowledge, which is, although expensive, relatively easy to do, and easy for competitors to replicate. It is in leveraging “tacit” knowledge, or know-how that is the greatest source of competitive advantage. The focus must be on tools that help the organization change the way things actually get done. This type of knowledge is embedded in people and culture; it is around tacit knowledge that the best learning tools and technologies are built and designed.
“In business, excess information must be suppressed. Toyota supresess it by letting the products being produced carry the information.”
After all, product development is information flow among many specialists. Stop communication, stop information flow, and you stop product development. Now, instead of “throwing the design over the wall”, engineers are taught to communicate concurrently with a team of upstream and downstream specialists – across functions.
Given that everyone agrees that communication is crucial to good product development, what is left o say on this subject? Actually, quite a bit, including the fact that more communication is not necessarily better. And that sometimes face-to-face communication is not as good as written documents. And that large-scale collocation may not necessarily be all it’s cracked up to be.
A3 refers to standardized communication format, a disciplined process of expressing complex thoughts accurately on a single sheet of paper. A3 is a standardized technical writing methodology to create a report on one side of a standard size piece of paper to guide problem solving and achieve clear communication across functional specialties. There are four types of different A3 forms:
Hoshin management (a.k.a. policy deployment) is an effective tool for aligning an organization toward the achievement of broader goals or objectives and allowing that organization to react quickly to a changing environment. In a lean organization, hoshin kanri is generally an annual planning tool that aligns the organization’s long-term vision with its shorter-term activities while also aligning the efforts of people in the organization with the goals of the organization.
There are six primary components to hoshin. The first of these is company vision – the long-term vision of where the company wants to go, what it is, and what it wants to become. The annual hoshin complements company values. There are four phases to hoshin at Toyota:
- Strategic planning. Strategic planning has different levels in a broad sense, it can mean developing a ten-year strategic plan identifying the specific target market for the entire company. Hoshin is not used for this except as a vehicle for considering a set of short-term steps to achieve the long-term vision. Like other strategic planning approaches, hoshin identifies problems and opportunities based on company performance and other environmental data (including shortcomings from previous hoshin). This, in turn, can be used to develops a near-term, future-state vision based on these factors.
- Hoshin deployment. Deployment statements must be based on facts and data, be operationally viable, and be aligned with the six primary hoshin components. At each level of deployment, the participants go through a goal-negotiation process called catchball. This catchball process allows participants to develop a clear understanding of the hoshin and enables the hoshin recipient to “enroll” in the objectives.
- Controlling through metrics. Both results and means are measured and reviewed on a regular basis in a PDCA methodology.
- Check and act. During the year, managers measure actual progress against the goal and make necessary adjustments. In most cases, managers are required to develop a fallback plan that they can implement if the difference between the goal and reality is too great
A key to using hoshin effectively is to close the loop through rigorous reviews at each level. Each pair of levels must first agree on the critical few objectives for the year and how they will be measured. Although problems are addressed during this performance review, the meeting focuses on the hoshin – the specific objectives of the individual to meet the high-level strategic objectives.
The ringi system is a more formal decision-making process used for handling significant decisions. In the ringi process, a small team of people with the necessary expertise is assigned to analyze some specific issues or challenge and recommend a solution. At the conclusion of the analysis process, the team creates a decision document called a Ringi-sho, which outlines the challenges, the countermeasure, and the potential implications, both positive and negative, of adopting the proposal. The team then meets with all managers who will be affected by the proposal and requests their approval. Sign off on the proposal is traditionally done with a manager’s hanko, a personal stamp used only by managers at a certain level.
“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”
Bill Gates, president and CEO, Microsoft
Companies around the world are trying to find ways to accelerate product development, seeing this as a way to improve competitive advantage. In many cases, their efforts to speed up the PD process focus on advanced technology. Successful utilization of such tools and technology depends on the ability to customize them in a way that makes them exclusive and integrates them uniquely to the company using them. This successful implementation in Toyota is due to that it is important to recognize that this occurs only because Toyota has had the foresight and discipline to customize tools and technology to fit within a broader framework, one that includes people and processes.
Toyota strongly believes that the capacity to learn is the main source of competitive advantage and that continuous improvement is about learning. Toyota has two major cultural biases with regard to learning:
- Learning is tacit. This is the most important one. By definition, you can only transfer tacit knowledge when there are dense ties under the guidance of a skilled mentor. At Toyota, every leader is a teacher – personally training anc coaching junior people in the Toyota Way.
- Learn by doing which means trying. You cannot learn by theoretically determining the best way and then executing only the best way. There are many possible solutions, and you can only learn by trying them, enjoying your success, and reflecting on your failures. If you are always trying to figure out the best theoretical solution, you will be in a constant state of waiting, missing many opportunities to learn.
Toyota leaders often refer to this learning-by-doing way of thinking as part of the Toyota DNA. Leaders are guides, encouraging and watching for the right opportunities to impart significant lessons.
“TPDS is rooted much deeper in the culture in things like genchi genbutsu, the chief engineer system, kaizen, TPS, etc. it is the totality of it working together in the culture established across many years that makes it all work. What is actually happening in your workplace? A good understanding of that is critical. To have a clear understanding of what your work is and how you are doing, that is what is important.”
Takeshi Uchiyamada, Chief Engineer of the original Prius
An organization’s culture defines what goes on in its workplace, and no company can develop a lean PD system without a strong and vibrant culture.
How Culture Can Stand Between You and Lean
The assumption is that if lean has eliminated or reduced waste in manufacturing, it can do the same for product development. Invariably, their organizations expect them to bring back effective waste-bursting tools that will cut lead-time and cost. Of course, it’s not that simple. Comments from companies whose engineers have taken suck courses or have attempted to apply Toyota’s lean PD tools illustrate the problem:
- We invested millions in a “book of knowledge”. It is web-based system and several people were assigned full time to load it up with standards and best practices. But we are getting almost no hits – engineers are not using it!
- We created a new role of chief engineer. A bunch of engineers in different project manager roles were given this new title. But they still acted just like the old project managers and still did not have any power to get anything done.
- We value stream mapped and came up with great ideas. We created A3’s and developed action plans. Then we got three new programs dumped on us, the crisis mode kicked in, and the action plans went out the window.
As these examples show, companies cannot simply have their engineers learn and apply these powerful tools and then sit back and watch the waste evaporate. What is missing is a lean culture to sustain the tools. Loosely defined, culture is the soft, imprecise, fuzzy stuff of everyday life. Definition of culture:
“… the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems.”
“The ability to learn faster than your competitors may be the only truly sustainable competitive advantage.”
De Geus (1988)
At Toyota, learning and continuous improvement are fundamental to how each person does his or her job every day and are inseparable from Toyota’s culture. Toyota sets challenging performance goals for every project and holds both real-time and postmortem learning events (called Hansei or reflection) that encourage functional specialists to verify and update their own knowledge database. Learning and continuous improvement are also embodied in a problem-solving process that develops root-cause countermeasures: multiple potential solutions that prevent recurrence. In fact, Toyota’s awesome ability to learn quickly and improve at a regular cadence may well be the characteristic of Toyota its competitors should fear most.
“Achievement of business performance by the partent company through bullying suppliers is totally alien to the spirit of the Toyota Production System.”
A Part is Not a Part, and A Supplier is Not a Supplier
When customers buy cars, they do not care who makes the engine, radio, seat, carpet, etc. they want and expect reliable quality and hold the automaker totally accountable for anything that is not up to their expectations. Toyota recognizes this and makes sure that every car part reflects Toyota quality. To achieve this and makes sure that every car part reflects Toyota’s PD process and lean logistics chain.
Other companies largely failed in emulating the Toyota model because they have not grasped the concept of true partnering. When the market gets though and there are serious earnings pressures, they have been less than forthright with suppliers, vacillating between public statements of commitment to partnership and trust and then unilaterally cutting supplier prices after signing contracts. They have even cut off suppliers in the middle of contract, resourcing it to a lower bidder. Toyota (as the supplier’s most demanding customer) to the contrary works on improving the supplier’s efficiency. For example when Toyota noticing that they were paying suppliers for many key parts above the lowest prices competitors paid globally, it issued a new target for all key suppliers as part of a program. The new program asked suppliers to reduce prices by 30 percent for the next model line; typically this would over a period of about three years.