A recent series of interviews with Toyota’s president provides great insight into not only the fabled Toyota Production System, but also the automaker’s long-term strategy, which involves a combination of kaizen (“continuous improvement) and kakushin (“innovation,” or radical renewal).

Despite some setbacks in recent years, Toyota Motor Co. is considered by many as the best automaker out there. For almost 15 years, J.D. Power and other research firms have consistently rated Toyota and its luxury line, Lexus, among the top automotive brands in terms of reliability, initial quality and long-term durability. Toyota is also the most profitable car manufacturer.

Harvard Business Review recently provided some revelations from Toyota leadership in the publication’s Lessons From Toyota’s Long Drive. Culled from a series of interviews with Toyota President Katsuaki Watanabe and several executive vice presidents, the 12-page feature provides great insight into the Toyota Way.

The automaker’s long-term strategy involves developing both global and regional car models in order to compete worldwide with a full line of products. Watanabe aims to achieve his goals through a combination of kaizen (“continuous improvement”) and kakushin (“innovation,” or radical renewal).

Understanding Continuous Improvement
Watanabe, who is using the Toyota Way to remake the company, explained to HBR editor Thomas A. Stewart and senior editor Anand P. Raman that “the root of the Toyota way is to be dissatisfied with the status quo; you have to constantly ask, ‘Why are we doing this?’ The question is how long it takes to train people to develop the Toyota mindset.”

While Toyota carefully describes its fabled Toyota Production System (TPS) as an operating philosophy for guiding the management of an entire enterprise, would-be followers often use it piecemeal as a toolbox.

Indeed, there is an implied cautioning in Watanabe’s message to all those purchasers of lean expertise from those who have not spent years honing their lean craft. Moreover, purveyors who have not been trained under Toyota’s tutelage (by Toyota or a close supplier) but nonetheless believe they truly understand TPS “are simply kidding themselves,” says Matthew May, the author of The Elegant Solution: Toyota’s Formula for Mastering Innovation, at his Elegant Solutions blog.

Recounting a recent visit with 30 of the company’s executives, Watanabe noted how a number of them said they were able to understand the Toyota Way fully.

“That’s totally wrong,” according to Watanabe. “Two or three months isn’t a long enough period for anyone to understand the Toyota Way. The managers may have understood what’s on the surface, but what lies beneath is far greater.

“I don’t think I have a complete understanding even today, and I have worked for the company for 43 years.”

(For more on this, see today’s Is Your Lean LAME?)

Implementing Radical Innovation, or The Factory of the Future
As for kakushin, Toyota envisions its high-volume Takaoka, Japan, plant as the factory of the future:

Right now our processes are complicated, so when a problem occurs, it is difficult to identify the cause. We’ve tried to make the processes at Takaoka simple, keep the facility slim, and have people close by observe the process.

Toyota says it is aiming to set new standards at Takaoka for quality, productivity and flexibility (not to mention environmental performance).

When the first line in Takaoka opens this summer, it will be “Toyota’s fastest production line, and it will cut lead times, logistics and the assembly time in half.” When the plant’s makeover is completed in 2009, the automaker expects to build more models, faster, and on shorter assembly lines than any other Toyota factory. And as Toyota cuts the length of Takaoka’s assembly lines, it will ditch the plant’s huge, expensive machinery in favor of smaller, more nimble equipment.

It will use innovative approaches in virtually every step of the manufacturing process, from stamping and welding to painting and final assembly.

For instance, Watanabe told HBR:

Instead of a transfer bar, we will use robots. That will allow the line to move 1.7 times faster than it used to. We have cut the length of the line by half. A new painting process allows us to apply three coats at the same time, without having to wait for each coat to dry. This will shorten painting times by 40 percent. To build in quality, we will go beyond visual inspection and use high-precision instruments to measure several parameters.

“The new manufacturing process at Takaoka will completely change the way Toyota makes cars,” Watanabe said. “We call them the ‘simple, slim and speedy’ production system.”

But “simple” doesn’t mean “simplistic.” Indeed, the Takaoka plant will become one of Toyota’s most flexible plants.

Watanabe said:

We will have more flexibility than ever before: Each line at Takaoka will be able to produce eight different models, so the plant will produce 16 models on two lines compared with the four or five it used to produce on three lines.

Takaoka previously built 660,000 cars a year on three lines. After the revamp, it will have the capacity to build 500,000 on two, shorter lines. While production volume will be lower, the plant will be much more efficient.

For Watanabe, being No. 1 means “being the best in the world in terms of quality.” If Toyota’s quality continues to improve, he says, volume and revenues will follow. If problems arise from over-stretching, he wants them made visible, because then his people will “rack their brains” to solve them — and if that means postponing growth, so be it.

As such, there are three keys to building a stronger foundation for Toyota’s future, Watanabe said: “We must improve product quality, keep reducing costs, and, in order to attain those two objectives, develop human resources.”

Indeed, the lean enterprise embraces a common language and culture based on customers and people. It’s no longer enough to reduce costs and improve efficiency — companies must tap the only resources that make them unique: people and their ideas and abilities.

See also: Is Your Lean LAME?

Resources

Lessons From Toyota’s Long Drive: A Conversation with Katsuaki Watanabe
by Thomas A. Stewart, Anand P. Raman and Katsuaki Watanabe
Harvard Business Review, July 1, 2007

The Toyota Way
by Jeffrey K. Liker, McGraw-Hill
Excerpts via IndustryWeek, Feb. 1, 2006

Toyota Production System (TPS)

AMAZING HBR Interview with Toyota President Watanabe
by Matthew May
Elegant Solutions, June 29, 2007

Toyota Number One in the World… in Recalls?
by Jon Miller
Gemba Panta Rei, May 22, 2007

Toyota 2006 Environment Report

Toyota’s Success Pleases Proponents of ‘Lean’
by Del Jones
USA Today, May 2, 2007

Toyota’s Real Secret: Hint, It’s Not TPS
by John Teresko
IndustryWeek, Feb. 1, 2007