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In the month of July, I wanted to turn my attention from leadership to the subjects of lean production and six sigma. These two movements have been spearheaded by Toyota and Motorola, respectively, but they both have common roots in the pioneering work on quality control done by Deming.

This week I am looking at the book How Toyota Became #1 by David Magee. In it, he tells the story of how principles of what we now call lean production transformed Toyota into the world’s largest auto company.

In the first chapter, he gives some of the company’s early history, which I describe in the following posts.

1.  Pursue Perfection Relentlessly

The secret to Toyota’s success is not quality; that is a manifestation of a deeper principle, which is “respect for people”.   This encourages every employee to be actively engaged in pursuing the company’s goals, including quality, and is, in a memorable phrase by the author, a “self-regenerating internally combustive enterprise.”    It allows the company to go beyond the more myopic pursuits of just profit margins and market share.

Where did this principle originate?    The concern for the welfare of employees started right from the beginning with Toyota’s origins as the company Toyoda, a textile manufacturer.  When Sakichi Toyoda, the founder of the eponymous company, watched his mother and other women work the looms, he wanted to make their lives easier by making their weaving jobs easier.   By observing the women and working hard at night trying to solve these problems, he developed better and continually improved machinery.

He received over 100 patents for his innovations, and his first loom patent in 1890 coincided with the date that an American engineer named Ransom Olds was building a steam-engine automobile.    Sakichi Toyoda applied the concept of steam-power to the previously hand-operated looms in 1896, and the Toyoda Looms Works became one of the most prosperous in Japan.

However innovative the steam-powered looms were in Japan, the looms in Europe and the United States were by this time considerably more advanced.    Sakichi Toyoda went to Europe and studied looms made by Platt Brothers & Co., Ltd., the leading manufacturer in the UK.    He purchased a copy of the book Self-Help by a 19th-century motivational management guru named Samuel Smiles, and he was heavily influenced by the work.    The key to Sakichi Toyoda’s success was not just his expertise at machinery and his desire to improve the capability and quality of his tools, but his ability to influence people to improve the quality of machine production at the source.

When he died in 1930, his son Kiichiro Toyoda took over the business after having learned his father’s philosophies about business that contributes to the betterment of its workers and to the society in which it operates.   In 1935, Kiichiro Toyoda established his father’s business philosophy in the following precepts.

1. Be contributive to the development and welfare of the country by working together, regardless of position, in faithfully fulfilling your duties.
2. Be ahead of the times through endless creativity, inquisitiveness, and pursuit of improvement.
3. Be practical and avoid frivolity.
4. Be kind and generous; strive to create a warm, homelike atmosphere.
5. Be reverent, and show gratitude for things great and small in thought and deed.

2.  Conquer New Territory

Kiichiro Toyoda traveled to Detroit in the United States, and wanted to emulate Henry Ford’s efficient production process which provided affordable automobiles to Americans.    By this time, rather than Toyoda following Platt Brothers’ designs, the Platt Brothers were now purchasing patents from Toyoda Automatic Loom Works.   This gave Toyoda the equivalent of $20 million in today’s currency to develop a Japanese automobile and pursue the Toyoda family ideal of “betterment of people through creative enterprise.”   The first prototype produced in 1935, and the “AA” went into mass production in 1936.    It became Japan’s most popular car.    In 1937, the company changed its name to “Toyota” because the name sounded more appealing and the Toyota Motor Company, Ltd., was established as a Japanese corporation.

The first vehicles that came out of Toyota had numerous quality issues, but were 10% less expensive than their American counterparts.   However, it was not in the passenger vehicle market where the company found its greatest success–Toyota only produced 1,500 cars in the first seven years in the auto business–but rather in the truck business.

There was steady growth until 1945, when the commencement of World War II required the company to focus its efforts on military production, just as its American counterparts in the auto industry did.    After World War II, the United States government allowed Toyota to begin peacetime vehicle production in occupied Japan, and Toyota began selling the Model SA (trade name “Toyopet”).    The vehicle was well received by the Japanese public–they produced 100,000 vehicles that first year!    However, an economic recession that started in 1950 caused Toyota to have to lay off employees amid financial losses.   After an historic restructured labor agreement, the company realized it needed to improve its operating procedures in order to survive in the long term.

In the late 1950s, Toyota tried to sell in the United States by setting up a dealership in Southern California to sell its “Toyopet Crown” flagship vehicle.    However, sales were dismal until they decided in the mid-60s to design cars specifically for the American market, like the Toyota Corona.

In the 1980s, Toyota started to build American manufacturing plants, like the one in Georgetown, Kentucky.   This would become key to the corporation’s future growth, until now when it leads operations in almost 30 countries, and sells products in more than 170 countries around the world.

3.  Commit to What Matters Most

The core founding principles of Toyota are those of a) respecting people and b) striving for continuous improvement.  The first part, that of respecting people, means that the people in the company strive to be more selfless, and this is exemplified by the first non-Japanese to lead Toyota Motor North America, Jim Press.    When he went from Ford to Toyota in the 1970s, he was impressed with the difference in corporate culture.   He felt at Ford that he was working for his immediate supervisor, but at Toyota, he felt he was working for the company’s president and chairman from day one.   He constantly seeks feedback from customers and dealers in the field, and it explicitly says on his business card, “If you or anyone you know has had trouble with a Toyota, call me.”   This willingness to listen and learn from others is combined with his penchant for discipline and self-improvement that carries over into his personal life.

4.  Be Willing to Improve

In order to be considered for employment at Toyota, you need to be able to fit into the corporate culture, which means subscribing to the belief that anything, from products to processes to people, can be improved.    It’s not how Toyota builds things, but how it approaches the process and mind-set of building things, that sets it apart from other automobile manufacturers.

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