A front page story in today’s weekend edition of the Wall Street Journal, titled As Rivals Catch Up, Toyota CEO Spurs Big Efficiency Drive, does a good job of describing Toyota’s "culture of worry"… always worrying that they aren’t good enough even when they’re on top.
Although their sales, profits, and market share are increasing at the same time GM and the rest of the big three are in a tailspin, there is reason for them to be concerned. Over the past ten years they have reduced the average number of hours it takes to build a car from 21.6 to 21.3 while GM has reduced from well over 30 to about 23. Rapid global growth has led to design flaws leading to quality problems. An internal study a couple years ago found that Toyota paid more for almost half its parts than other car companies, a conclusion that Mr. Watanabe found "outright humiliating" and "unacceptably mediocre." The rise of inexpensive Chinese automakers and suppliers is creating an even more formidable threat.
They really know how to beat themselves up when they are succeeding like no other company can. But that’s one of the keys to their success. We’ve often talked about how that "presumption of imperfection" helps generate levels of improvement, often created directly from incredibly productive employee suggestion programs, orders of magnitude greater than what exists at most companies.
You can get a sense for how much they worry when they are willing to question – and change – even the most fundamental reasons for their success:
Within the company , he [CEO Katsuaki Watanabe] has even questioned a core tenet of Toyota’s corporate culture – kaizen, the relentless focus on incremental improvement.
Mr. Watanabe wants kakushin, or revolutionary change. He wants to cut the number of components in a car by half and create a new generation of fast and flexible factories to build these cars. Just think about that challenge for a moment… cutting the number of components by half. Think about your factory’s products, or even the computer you’re reading this on, and contemplate what that means. Basically a reinvention of the car itself. This new initiative is called "VI" or "Value Innovation."
This initiative builds on the CCC21 (Construction of Cost Competitiveness for the 21st Century) program that improved the way 173 components and systems were designed, which already reduced procurement costs by almost 30% over the five years ending in 2004. Also around 2002 Toyota began rethinking parts of its Toyota Production System, lean manufacturing, itself. "Simple and slim" teams looked at all processes to see where they could be simplified. Oversized monolithic equipments such as aluminum casters was redesigned into much smaller units. Paint lines, often the largest part of an auto factory, were reduced by two-thirds.
The VI program is radical. Cut the number of components by half. Create factories and processes that can pump out one of about a dozen different car models in any sequence… every 50 seconds.
Ford, GM, and the others also have lofty goals. The difference is that Toyota knows how to execute. That seemingly simple ability will keep them ahead of the pack for a long time to come.
UPDATE: See the follow up post here.