- SPECIAL REPORTS
Sakichi Toyoda was born in 1867 in the city of Kosai in Shizuoka Prefecture. Although Sakichi devoted his career to inventing looms, in his last years, he came to believe that automobiles were more vital and useful to humans, and he entrusted the family's foray into the automobile business to his eldest son, Kiichiro. Indeed, the fortune amassed by Sakichi through his loom inventions later provided the capital for Kiichiro Toyoda's entry into the automotive business. "Build cars!" Sakichi is said to have told Kiichiro. "Build cars and serve your country."
Sakichi Toyoda died in 1930 at the age of 63, but the principles, or precepts, he espoused were passed down to future generations.
The Toyoda Precepts
The Toyoda Precepts were articulated 5 years after Sakichi's death by his son-in-law, Risaburo, and his eldest son, Kiichiro. Sakichi's beliefs combined the lessons he had acquired as a lifelong inventor with the teachings of Japanese philosopher Sontoku Ninomiya and the doctrines of Nichiren Buddhism. The precepts are as follows:
1. Regardless of position, work together to fulfill your duties faithfully and contribute to the development and welfare of the country.
2. Always stay ahead of the times through research and creativity.
As company policies or management principles, the Toyoda Precepts continue to be used-either in their original form or modified according to the times, the environment, or particular company characteristics-in 11 companies of the Toyota Group, including Toyota Industries Corp., Denso and Toyota Auto Body. Common to all these companies is an emphasis on the key words: "research and creativity" and "cooperation and consistency." Sakichi's philosophy has become the traditional spirit of Toyota and the Toyota Group companies. It lives on as the ideology that binds the Toyota Group together.
"Open the window over there and take a look. It's a big world out there."
Sakichi is reported to have said this to doubters around him when Toyoda Boshoku was expanding into China. He recognized that although new behaviors always provoke opposition, those who are complacent will be left behind and ultimately defeated. Sakichi's words remind us that active engagement with the new is the principal business of managers.
Kiichiro Toyoda, the eldest son of Sakichi, was born in Kosai City in 1894. He entered his father's company, Toyoda Spinning and Weaving, in 1920, after graduating from Tokyo Imperial University.
In 1921, Kiichiro embarked on a tour of European and American industry in the company of his sister and his younger brother-in-law, Risaburo Toyoda. It was in America that he became convinced that the age of the automobile had arrived. This was the genesis of Kiichiro's dream of building automobiles. He established an automotive division within Toyoda Spinning and Weaving in 1933, and set about the serious study of how to build cars. Nineteen thirty-five saw the landmark unveiling of Toyoda's GI Truck.
After World War II, Japan's economy entered a period of extreme deflation. Even Toyota had trouble raising capital. Throughout this period, Kiichiro repeatedly insisted that "managers are duty-bound to avoid layoffs." His guiding moral principle was "to avoid layoffs whenever possible." He sent memos to labor unions flatly stating that he would not "engage in layoffs."
But, things got worse. By the end of 1949, with the company on the brink of bankruptcy, Kiichiro barely succeeded in obtaining a loan from a consortium of banks. The terms of the loan stipulated that "sales operations were to become independent" and that "excess manpower would be let go." Labor unions responded by launching a strike, and a major battle ensued. With troubles coming to a head, Kiichiro reasoned that he could not stay in his job if the only way to do so was to fire employees. In 1950, he stepped down as president.
Kiichiro was succeeded by Taizo Ishida, who got the company back on a firm footing by relying on the procurement boom prompted by the Korean War. In 1952, with the firm's fortunes on the rise, Ishida asked Kiichiro to return as president. But 2 months later, at the age of 57, Kiichiro suffered a cerebral hemorrhage, which ended his career.
Kiichiro and Just-In-Time
Productivity in the United States in 1935 was estimated to be nine times that of productivity in Japan. For Kiichiro, being able to compete on an equal footing with automotive manufacturers in the advanced countries of the West meant having to work out uniquely Japanese methods for high productivity and low cost. One of the elements of this approach was the "just-in-time" method (i.e., making what is needed, when it is needed and in the quantity needed). Just-in-time was born from the realization that each process in the automobile industry required massive storage capabilities and from Kiichiro's desire to find some breakthrough that would allow him to take on companies in Europe and the United States.
The just-in-time concept can be traced back to Henry Ford's belt conveyor system. But, because of Ford's view that the market was production driven-that everyone would buy black cars as long as they were cheap enough-the original purpose of the belt conveyor system was lost. Ford's philosophy was transformed into a philosophy embracing mass production: Whatever could be produced, should be produced in large quantities. Ford's My Life and Work was Kiichiro's favorite book. Indeed, it was Kiichiro's study of Ford's management and production system that led him to discover the belt conveyor system's original purpose and eventually to the idea of just-in-time.
The phrase "just-in-time" was already in use when construction began on the Toyota plant in Koromo in 1935. Just-in-time thinking permeated the 10-centimeter-thick manuals that Kiichiro himself compiled for each process and distributed to key players. He drove the point home to Toyota employees in energetic lectures on the subject. Kiichiro's thick manuals are the roots of Toyota's production system. They led directly to the subsequent establishment by Taiichi Ohno of the kanban-system-based Toyota Production System that we know today.
Kiichiro never challenged the advanced nations of the West with any particular hope of success. Instead, he acted upon an unshakable desire to "always stay ahead of the times through research and creativity." Later, Eiji Toyoda would write admiringly of the extraordinary courage Kiichiro showed in founding an automotive company and establishing the Koromo plant. Kiichiro, armed only with his own convictions, had plunged into the automotive business when even the great industrial conglomerates had deemed such a move too risky. Kiichiro's resolve was shaped by the pioneering spirit he had inherited from his father, Sakichi, and the moral support he received from his stepmother, Asa, who once had declared that if her son was reduced to begging, she would willingly join him.
When Taizo Ishida was 38 years old, Sakichi Toyoda invited him to join Toyoda Automatic Loom, saying, "You've been a businessman. So make me some money!" Ishida, who had a natural gift for business, was later appointed president of Toyoda Automatic Loom. When Kiichiro withdrew from the presidency during the labor troubles in 1950, Ishida, while still chief executive of Toyoda Automatic Loom, was named president of Toyota as well. Accepting the promotion, he said, "In the event that I am able to conform to each of your expectations, I would like to ask for your approval in advance for Kiichiro Toyoda to return to the presidency."
In essence, Ishida saw himself as Toyota's caretaker. He had been trained directly by Sakichi and sometimes called himself a "medium for Sakichi's spirit." Ishida expressed himself with more than usual self-confidence and was endowed with verbal gifts rich in wit and polished humor. Indeed, the record he left of many of his sayings remains the best guide to the genes he bequeathed to Toyota.
"I'm a very greedy guy. That's what makes me work so hard. Always wanting money drives me to work harder. And even when I'm making money, I wonder what sort of manager I'd be if I didn't make any."
"Plow the money you make back into equipment. You're not going to raise efficiency with people. Do it with machines."
"Investing profits in equipment rather than people is the way to avoid layoffs."
Ishida's notion that money has value when it is being used fed his view of the pivotal role of equipment for continued production. He focused on investing in equipment rather than people, because he was determined never to repeat the humiliation of being forced to lay off 2,000 workers during the company's great labor crisis. One example of Ishida's adherence to this ideal was the Motomachi Plant. Built in 1959, it gave Toyota a decisive lead over Nissan at the dawning of the age of motorization.
Eiji Toyoda was born in 1913, the second son of Sakichi's younger brother, Heikichi. After Eiji's graduation from the Department of Engineering of Tokyo Imperial University in 1936, Kiichiro invited him to join Toyoda Automatic Loom, where Eiji was charged with working on Toyota's automotive business.
In contrast to Taizo Ishida, Eiji was a man of few words. Reticent and seldom one to play to the crowd, he nevertheless ran the business single handedly, and it was he who built the Toyota we know today. Taizo Ishida, with his first-rate merchant's instincts, provided management support for Eiji's suggestions. Rather then citing Eiji's words, we will take a look at the genes Eiji left behind by citing a few examples of his thinking.
Seeing Through to the Essence
Shigemitu Miyake, the former chairman of Tokai Bank, had this to say about Eiji: "He has an astonishing genius for being able to discern pointlessness and waste."
Eiji's ability to see waste and to see through to the essence of things is said to have been developed soon after he joined Toyoda's Automotive Division, when he was working in the company's Auditing and Improvement Center to resolve quality problems. Toyota had so many quality problems at the time that it seemed almost as though the company was using the marketplace as a testing ground. Eiji remembered that period well:
"When we'd build a car that turned out to have a defect, we'd ask why the affected part was bad and look for the process that caused the problem. My role was to improve the process, since we figured that if we fixed the process, then there wouldn't be any more defects. Basically, we were doing what would now be called QC."
"Many companies have accounting departments and general affairs departments, but both the name and the function of our Auditing and Improvement Department were unique. It's the same now as it was then. We search out problems that need to be taken care of, and we focus knowledge and wisdom on them until they're solved."
Continuing this sort of work for years results in the ability merely to look at a problem to reveal its origins and true causes. The work formed the background of Eiji's belief in the primary importance of the shopfloor and physical phenomena-a way of thinking that, through Eiji, went on to permeate Toyota.
"Fabrication is the foundation on which civilization is created."
"Fabrication is the motive force of technological progress."
"Fabrication moves people's hearts and enriches their minds in the same way that art does."
These are profound words, spoken by a man who spent more than half a century striving to build things.
Taiichi Ohno went to work at Toyoda Boshoku in 1932. Sakichi had passed away 2 years earlier, but for Ohno, the great genius of the inventor remained in the company, and this "presence" would teach him what it meant to work in a world-class company.
Ohno transferred to Toyota Motor in 1943 and set about reforming its manufacturing division. After the war, Kiichiro instructed Ohno to "catch up to America" in 3 years. As Ohno came to grips with the task of revolutionizing production, he began crafting the unique Toyota Production System that some have referred to as the "Ohno Production System."
Ohno's own words reveal his thoughts and allow us to survey the genes that he passed on to the Toyota Production System and to Toyota.
Going Beyond Common Knowledge
"Break free of conventional thinking. Think of each downstream process as pulling from the one upstream."
Conventional wisdom had always been that upstream processes send parts to downstream processes in a "push" arrangement. Ohno turned this idea on its head and devised a "pull" system, in which each process goes to the previous one to draw only what it needs. This was the genesis of the kanban system.
"Look at the production floor as a blank sheet of paper. Focus on the issue at hand and ask 'Why?' five times."
Kiichiro Toyoda had often told inexperienced managers to stand on the shop floor. His expectation was that direct observation of the shop floor would reveal essential truths about manufacturing. Ohno's "Go watch the production shop floor!" harks back directly to Kiichiro's admonishment. However, standing absentmindedly on the production floor serves no purpose, and Ohno's insistence on asking "Why?" five times precisely expresses the method of observation he had in mind. This technique revealed the essential causes of problems by forcing the observer to look beyond what was visible.
"As soon as processes are stable, reduce inventories between process steps. This will bring new problems to the surface."
"The purpose of reducing stocks between processes is to make latent problems visible."
Kiichiro had been interested in more than just inventories between process steps. He had directed that all stocks be reduced because he saw inventories as idle money. Ohno went one step further, declaring that revealing latent problems was the real purpose of inventory reduction. He believed that once processes were stable, reducing inventories between process steps was a matter of constant repetition. It is likely that Ohno was aware that this idea would not be universally popular; on one occasion, he was nearly struck by a hammer wielded by a violent operator. Ohno dared the man, "If you're going to hit me, then hit me." From that day forward he refused to wear a helmet.
At the same time, Ohno was aware that you don't solve anything by burdening operators. "Always use equipment to solve problems," he said. "And don't frustrate people who are basically willing. Even when things don't turn out well, you have to give them a reason to do their best because you appreciate their efforts. You don't cut down on inventory between process steps to torment operators. Your sole purpose should be to reveal latent problems."
A Human Element in Automation
"Overproduction is the worst waste of all. Equip all your high-speed machines with automatic shutoff functions."
"Automation should always include the human element."
Ohno's "automation with a human element" was a reference to mechanisms that prevent high-speed machines from making defects because they have the sense to automatically stop when defects occur. Later, this notion was linked to the idea of a "stop cord" for operators along the production line. Such devices make it obvious to everyone which process steps generate defects and thereby make it possible to carry out rapid investigation of root causes and take preventive action.
Visitors from Europe and the United States are often astonished at these stop cords. In their plants at home, only a plant manager or higher manager has the authority to stop the production line; any operator who stops the line would be fired on the spot. Even in Japan, many managers think it is more advantageous to keep a line running when defects occur and to rework bad parts later. Certainly, in the short term, it often seems less problematic to rework parts. But, reworking parts makes it more difficult to investigate the root causes of problems and to prevent their recurrence. And, in a vicious circle, latent problems will again rear their heads and cause new defects.
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