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In the ninth chapter of his book “How Toyota Became #1:  Leadership Lessons from the World’s Greatest Car Company,” David Magee talks about always aligning a company’s strategy with the business case, meaning the fulfillment of customers’ needs.    One of the ways to do this is not to presuppose that you know what the customer wants:   you have to actively listen to the customer.

1.  Avoid Hubris

The nineteenth-century self-help expert Samuel Smiles, who inspired the original founder of Toyota, Sakichi Toyoda, believed in “business through humility.”   Another inspiration for the Toyota family, W. Edwards Deming, believed in management principles that were focused on the customer.

If you look at Toyota’s vehicle lineup, it’s pretty stable with new models occurring infrequently, but improved upgrades of the existing models occurring frequently.   This is because products are developed with direct customer research and input.

One of the times Toyota departed from this strategy was Project Genesis, where it developed models intended to attract more youthful buyers, based on Toyota’s internal beliefs about where the market was going rather than on marketplace research.   All three products within Project Genesis were canceled within five years.   The company ended up retooling Project Genesis as an independent brand called Scion that was launched in 2003.    This time Toyota learned its lesson, and recognized that significantly more market research was needed to better understand young buyers, in the same way that it had done significant market research to understand its original mainstream customers and then its luxury customers with the Lexus brand.

2.  Take to the Streets and Observe

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In this seventh chapter of his book “How Toyota Became Number #1”, David Magee talks about a key element of Toyota’s success, that of favoring long-term strategies over short-term fixes.   The pursuit of short-term goals is hardwired into management when their bonuses are tied to increased stock prices and quarterly profits.

1.  A Tale of Two Strategies

Now, you can say “well, it’s easy for a company like Toyota to eschew short-term fixes when they’re sitting on a mountain of cash.”   My answer to that is, “well, how do you think Toyota got that mountain of cash.  By favoring long-term strategies, that’s why!”

GM pursued unprecedented dealer incentives to meet short-term sales goals; Ford flooded heavily discounted products into unprofitable fleet sales.   And Chrysler?   I can say from my experience at Mitsubishi Motors, where I worked from 1990-2004, that they decided to follow Chrysler rather than Toyota and Honda in going towards the profitable SUV market rather than the less profitable market of hybrid vehicles.    The result?    Mitsubishi launched its new version of the SUV at a historical turning point, right before the invasion of Iraq.   When oil prices soared as a result, the market shifted away from gas-guzzlers towards more economic cars, and Mitsubishi lost the bet it had made.    There were waves of layoffs, and I ended up losing my job in the 3rd wave.    Mitsubishi bet on the wrong horse, the SUV, but the larger mistake was following the Big 3 in their pursuit of short-term profits.

Toyota has favored long-term strategies, which is not just part of their company, but is a trait of Japanese business.  For Toyota, however, this is part of the company’s cultural foundation.   Their stability comes from a long-term approach.

2.  Make Daily Decisions That Benefit Long-Term Plans

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In the sixth chapter of his book “How Toyota Became #1”, David Magee explains another important ingredient in Toyota’s success story, that of kaizen, or continuous improvement.    Toyota had a established its reputation in the United States with its small, affordable efficient cars.    This chapter tells the story of how they made the quantum leap to establishing a luxury division called Lexus.

1.  The Quality Lexicon of Lexus

In the 1980s, Toyota engineers were working on a project to set an entirely new standard for luxury vehicles.  Code-named F1, the project was about giving Toyota’s customers a luxury car to “graduate” into.   At that time they were not planning a new brand, but rather on building the best luxury vehicle in the world.    Toyota engineers visited the United States in 1985 to look at the preferences of American luxury-car buyers.   They learned from the mistakes that other automakers made when entering the luxury-car market.   The result of their efforts was the LS400, which made its debut at the 1989 North American International Auto Show in Detroit.

2.  The Brand

It’s one thing to build a luxury car, but how do you sell it?    Here Toyota relied on the expertise of Robert McCurry, one of Toyota’s earliest and most respected American employees.    Among his successes were the creation of a highly loyal and interactive partnership with dealers, which led in 1986 to Toyota becoming the first non-domestic automaker to sell more than 100,000 units.   He pushed for Toyota to create its first full-size American truck in 1993.

McCurry felt strongly that introducing the LS400 luxury car into the existing vehicle lineup would confuse buyers, and minimize the company’s profitability by shortchanging the phenomenal vehicle’s potential.   A luxury vehicle needed its very own brand with unique dealers and service.   Yukiyasu Togo, Toyota’s chief U.S. sales executive at the time, who spearheaded the luxury car project, agreed with McCurry.    The “Lexus” brand was launched in the United States in late 1989 with two models.   It is now the largest luxury brand in the United States, and receives more awards for quality and customer satisfaction from J.D. Power & Associates than any other automotive brand in the world.

Here’s how Lexus beat better-established competitors like BMW, Mercedes-Benz, and Jaguar:

• Unprecedented quiet ride while maintaining stability and control
• Elegant interior and exterior styling with highly functional controls
• Powerful, smooth-running engine yielding better gas mileage

Despite the successful launch of the Lexus brand, Toyota executives realized that the venture had been more costly than it needed to be, and that better planning, a more streamlined development process, and better cross-communication would all be needed in future product development.

2.  Redefine Classes with Standard-Setting Products (or Service)

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If you’ve been selected as an Area Governor, you finished the Area Governor training back in June, or you are taking the make-up training this month.    Among your duties, you are expected to do the following:

1. Club Success Plans–ask Clubs to provide Club Success Plans, which show what goals they plan to achieve in the Distinguished Club Program and how they plan to achieve them.
2. Provide Guidance to Clubs–contact Club Presidents monthly to discuss their progress in the Distinguished Club Program.  NOTE:  This can be done in the Area Council meetings–see item #4.
3. Area Success Plans–take Club Success Plans and create an Area Success Plan.
4. Area Council–hold at least two Area Council meetings each year, but optimally once a month,
5. Area Governor’s Club Visits–visit clubs at least twice a year, and fill out and submit an Area Governor’s Club Visit Report form for each visit.
6. Area Speech Contests–coordinate Area Speech Contest with the Division Governor and the various clubs in your Area.

This post discusses item #5, the Area Governor’s Club Visits.

BEFORE THE VISIT

1.   Get the Club Success Plan First

If you are not familiar with the clubs in your area, the easiest way to get to know the clubs is to look at the Distinguished Club Program dashboard on the Toastmasters International website for your club (all you need is the name and/or number of the club).    This will tell you how strong the club was last year.

Then you need to ask the clubs for the Club Success Plan.   In our District, we are asking the clubs for the Club Success Plan by 7/25, because the Area Success Plan is due to the Division Governor the following week, on 8/2.

2.  Arrange your Club Visit

Once you get the Club Success Plan from the Club, then make arrangements for your club visit.    It should be done by the middle of August, so you have about a three-week window to do the visit.   When you send an e-mail to the club officers asking for the best possible date for the visit, send them a copy of the Area Governor’s Club Visit Report form.   This will let them know what information you will need from them.    A lot of the information from the Club Success Plan, the goals and how they plan to achieve them, will be required for the Area Governor’s Club Visit Report anyway.

3.  Recommend the Moments of Truth Program

Recommend that the club officers get together before the club visit and do the Moments of Truth program from the Successful Club Series that they can download from Toastmasters International.   Why?   Because it tracks very closely what is asked for in the Area Governor’s Club Visit Report.   The program has the club come up with actions the club can take to improve its quality in six different areas, all of which are exactly the same six areas that are on the Area Governor’s Club Visit Report.   In other words, if the club has thought about the questions asked in the Moments of Truth program, the club will be able to answer most if not all the questions you have in your Report form.

DURING THE VISIT

4.   Area Governor Visit

Ask the club officers if there are any members receiving awards or getting any accolades for achievements on the day of your visit.   Ask if you can be the one to give the award; this will be a tremendous morale boost for the person getting the award(s).   It also shows that you are there not to “tell the clubs what to do”, but rather you are there to help the clubs and their members achieve their goals.   Ask if you get have a few minutes on the agenda to introduce yourself to the club.

AFTER THE VISIT

5.  Follow Up!

If there are any items which the club officers cannot answer at the time of the visit, then you need to follow up with them so that your report is complete.    You could go back for a second visit, but the second half of August is usually taken up by the Club Speech Contests.   So your follow up will have to be by telephone and/or e-mail.

Many Area Governors are so eager to do their visits that they try to bring the Report form with them and have everything answered at the meeting.   Trust me; it is almost impossible to do!

Once you get a draft of the report, share it with the President BEFORE you send it to the District.   If they have any additions, amendments, or dispute any of your findings, you can clear this up BEFORE it becomes “public knowledge.”

In this way, if you follow these steps, your visit will be spent more in making connections rather than your becoming a scribe as if you are auditor.    Try them and see your standing as an Area Governor rise in the eyes of both your clubs and your Division Governor!

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As a new Area Governor, I went to the first District Executive Committee (DEC) meeting of the new Toastmasters year, which goes from July 2014-June 2015.    The DEC meeting took place in the morning, and I carpooled with someone who had to stay for the afternoon in order to go to the make-up Area Governor training.    I had gone the previous month, but rather than just sit in the cafeteria while she went through her training, I decided to join in the training and my experience led me to the revelation that is the subject of this post.

The Area Governor training I went to in June was the tradition training that District has put on in the past.   We got a huge stack of documents, each of which was explained by a lecture given from a Powerpoint presentation.

The Area Governor training I went to today was a kind of experiment.   Since all the Division Governors had completed their training in June along with most of the Area Governors, the District leadership tasked them with taking over the training of the remaining Area Governors.    Their approach was more interactive, enjoyable, and left a deeper impression than the training in June.

1.  Interactive Training

Rather than present material from a presentation, there was a brief introduction to the material of each section followed by

• questions from the Division Governors to individual Area Governors
• breakout brainstorming sessions where each small group would come up with items that answered the question posed by the Division Governors to each group
• more dynamic presentation styles where the Division Governor would move throughout the meeting space, and reflect back what each person said in order to reinforce it

2.  Enjoyable

One of the reasons why it more enjoyable was because the Division Governors would break up the hour-long sessions by small, five-minute bathroom or networking breaks, or sometimes short sing-a-longs to get the group to interact in a fun way.    This increased the attention paid to the material, and started the Area Governors to interact with each other.

3.  Impressionable

The breakout sessions created a lot of input from the various Area Governors.   For example, in answer to the question “what can you do to further your club’s educational and leadership goals”, I had thought of about half-a-dozen items to answer the question, but by the time we all put our heads together, we had about two dozen items, divided into six categories.    Then one person from the group had to present their findings, or a small summary of them, to the group.

Of course the material reinforced what I had already learned in the June training.   But the June training consisted of one source of information (District leaders) dispersing to individual Area Governors, who were left to struggle with the material on their own.   Here, Division governors were dispersing information to Area Governors as individuals and as small groups.   This had the Area Governors interact with each other and reinforce the material, or answer each other’s questions.   This ultimately saved time, because in the June session, a lot of the time at the end of the session was taken up by a lot of questions from confused Area Governors.   In today’s session, we answered a lot of our own questions, and so the number of questions the Division Governors had to answer at the end of each session was a lot fewer than in June.

I just thought that today’s way of training Area Governors could be carried over into the training of Club Officers in the Toastmasters Leadership Institute.    I hope that I can get involved with the next TLI and try to use these methods to enliven and enrich the TLI that takes place in the winter of this year!

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In the fifth chapter of David Magee’s book, “How Toyota Became #1”, David Magee describes the next important component of the Toyota Production System, that of not just exposing defects, but identifying their root causes.    It is only by eliminating the root causes that you will eliminate the defects once and for all.

Toyota team members are taught three core steps to ensure quality:

1. Speak up immediately when problems are recognized, no matter what.
2. Ask why (at least five times), to reach the root cause.
3. Go to the source of the problem and see for yourself.

1.  Pull the Cord (or Pay the Price)

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I’m going through David Magee’s fascinating book called “How Toyota Became #1”, and I am summarizing parts of the chapter that I find most salient as I read through the book.    This post is a condensation of the fourth chapter, and it concerns the Toyota approach to muda or waste which can be summarized in the phrase “Rid All That Adds No Value.”

Progress comes not just from moving forward, but by removing any obstacles that you may encounter along the way.   Sakichi Toyoda, the founder of Toyota, taught his son Kiichiro Toyoda that waste was the great inhibitor of both man and machines.   The practice of elimination of waste started on the factory floor, but became to be practiced in all areas and at all levels of the company.   The bottom line at Toyota is:  if a process or an activity does not add value, get rid of it.

1.  Reduce Clutter, Reduce Ills

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This posts summarizes the third chapter of David Magee’s book How Toyota Became #1.   The purpose of these notes is to clarify the material in my own mind, and also to whet the reader’s appetite so that they go and read the book for a fuller comprehension of the material.    There are many fascinating anecdotes and statistics in the book that illustrate the material which I am omitting for brevity’s sake.

1.   Humility, not Humiliation

Although Mr. Magee does not use the word, much of the corporate culture in the United States is involved with giving perks to executives which act as a way of separating the executives both physically and mentally from the workers they are in charge of leading.     By creating a culture of inequality, it lends itself to the executive gaining an attitude of entitlement and superiority, which can be perceived by the worker as a passive form of put down or humiliation of their own status.

As opposed to the American corporate culture, the Japanese corporate culture has the principle of humility, not of humiliation.   Their corporate culture is designed not to increase the physical and mental gap between executives and workers, but to decrease it.

The Toyota Executive Vice President Gary Convis is an example of this.  He flies commercial airlines rather than a company jet, walks the manufacturing facility floor daily in order to remain accessible to team members, and drives around in a $15,000 compact.    His lifestyle is designed not to distance himself from his workers.

2.  Don’t Give Others Reason to Doubt

One of the more contentious aspects in manufacturing in the United States is the issue of executive perks such as corporate jets at a time when restructuring implies the elimination of thousands of jobs for ordinary workers.    In the Toyota company culture, this would be seen as muda or waste.    There are executive perks in Toyota, such as chauffeur-driven cars in Tokyo, or larger, private offices rather than the open, obeya-style offices where lower-level executives work at the head of a table where all of their staff are seated.    However, the Toyota culture of humility is so strong that these modest perks do not engender executive arrogance.

This culture of humility grows out of a national character which encourages modesty and mutual respect, and is nurtured by the small-town attitude that Toyota has maintained over the year given that its largest concentration of manufacturing plants is in the suburban countryside community of Toyota City outside of Nagoya.    The Toyoda family maintains a significant influence on the culture and ongoing operations of the company, in a way that is similar to the Ford family’s involvement with Ford Motor Company in the United States.

3.  Maintain Proper Perspective

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This post covers the second chapter of David Magee’s book on Toyota’s philosophy of lean production called “How Toyota Became #1.”    In this chapter, he introduces the Toyota Production System, or TPS. 1.  Toyota Pr0duction System or TPS TPS is a commitment to continuous improvement or kaizen through the elimination of waste or muda.    The continuous improvement is not dictated by management, but is rather cultivated through creative employee contributions.   It is definitely a bottom-up, rather than top-down, flow of ideas.   The TPS is not just a lean production tool, but rather a guiding principle by which to live and work. TPS is a collection of manufacturing methods that incorporate three key philosophies:

• Customer first
• Employee satisfaction
• Company stability

2.  Bigger is Not Necessarily Better

GM tried to learn about TPS from the joint venture between Toyota and General Motors called NUMMI (New United Motor Manufacturing, Inc.).   However, General Motors saw TPS as a tool for making products at lower costs.   However, at Toyota, TPS is an extension of the Toyota’s basic founding principles of respect, thrift, and perseverance.  TPS is not just its approach to manufacturing, but its approach to business as a whole.   Kaizen, the principle of continuous improvement, is applied in offices as well as in factories.

One enthusiastic adherent of TPS was Gary Convis, who left Ford after being an employee for 18 years to take a job with Toyota in 1984 as plant manager at NUMMI.    Toyota was making inroads in the US market by selling value-priced compact cars, while the US carmakers continued to focus instead on more upscale, luxury sedans.   When Convis went to Japan to tour Toyota’s Takaoka plant to see TPS in action, he was an immediate convert.    Convis learned from some of the world’s best implementers of TPS and use them to transform NUMMI into a thriving automotive assembly site.

The best way to describe the culture change that TPS made at NUMMI was the fact that Japanese bosses were not were referred to as bosses but as sensei (teachers). The surface level of lean production is when it is used a tool to create products at lower costs.   However, TPS goes deeper; there lean production began as an extension of the company’s basic founding principles of respect, thrift, and perseverance.   TPS is not just Toyota’s “unique approach to manufacturing”, but rather it is its unique approach to business as a whole.

The three objectives of TPS are

• Highest quality
• Lowest cost
• Shortest lead time

3.  Understand the Evolving System

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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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