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Posts Tagged ‘Toyota

Prosperity without Growth

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Readers of this blog might recall the ‘secret sauce’ proposed in The Mindset for talking about Agile with executives:

Success, however, depends on a certain kind of mindset of the executive you are talking to.  This mindset is nicely described in H. Thomas Johnson‘s article Manage a Living System, Not a Ledger:

…a business organization cannot improve its long-run financial results by working to improve its financial results. But the only way to ensure satisfactory and stable long-term financial results is to work on improving the system from which those results emerge.

In a perceptive CQI  article on the recently reported problems at Toyota,  Johnson offers the following analysis:

Toyota avoided this fate until the last decade because it did not regard results as outcomes that a business achieves by requiring managers to drive people to meet financial targets. It saw that results emerge from a process in which people carefully nurture a web of relationships. These relationships, strikingly enough, emulate the behaviour in natural living systems.

The reversal of Toyota’s fortunes in the past decade suggests that many of its top managers lost the habit of thought that had previously shaped the company’s policies and actions. They lost the habit of thought that caused the company, perhaps unconsciously, to act like a living system. Toyota adopted the finance-oriented mechanistic thinking that had spawned the inferior management practices and the poor performance shown by most of its competitors after the 1970s. And because it abandoned living-system thinking for mechanistic thinking, Toyota began to embrace a virtual world of finance, not a concrete world of humans in cooperative relationships.

Johnson concludes his analysis with a broad warning:

Efforts of companies to reduce that waste by “going green” are not likely to be any more effective than efforts to improve performance by “going lean”. In neither case do these efforts change the thinking that produces excess growth. The efforts might reduce the rate of growth for a time, but they will never reverse it as long as companies adhere to the conventional wisdom from the virtual world of finance that says prosperity is not possible without growth. [Highlights by IG]

The hazards of the virtual world of finance have been conclusively demonstrated during the macro-economic crisis of 2008-2009. One must wonder what it would take to learn the applicable lessons at the micro level of individual companies.

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Connecting the Dots: Operational Excellence, Strategic Freedom and the Pursuit of Passion

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My recent post The Headlong Pursuit of Growth, and Its Aftermath applied insights from Toyota Motor Corporation to Agile methods. Among various lessons to be learned, the post highlighted the relationship between mechanism and policy: 

Just like the Toyota Production System, your software method is a “vehicle” which is subject to policy decisions from above. It cannot, however, compensate for policy failures.

In other words, operational excellence in Agile methods is not a substitute for strategy/policy. It does not confer strategic freedom.

In another recent post – I Found My Voice; I did not Find My Tribe – the vicious cycle that leads to loss of passionate Agile talent was described as follows:

This “1.5” phenomenon is at the root of a vicious cycle that dilutes companies, particularly these days:

  1. A round of layoffs is implemented.
  2. Just about everyone takes notice and tries to exhibit the “proper behavior/values.”
  3. Folks in the “private tribe” don’t dare come out of the closet.
  4. The passionate person who found his/her voice in Agile is like a fish out of the water. Sooner or later he/she looks for a tribe elsewhere.
  5. The company becomes more diluted on folks who are willing to try new things and have the drive to make them happen.
  6. The products and the supporting processes continue to be mediocre.
  7. Goto step 1.

Reading the article Getting Toyota Out of Reverse, published in the December 18 issue of BusinessWeek, I found a fascinating linkage between the two posts:

“They say that young people are moving away from cars,” Toyoda said. “But surely it is us—the automakers—who have abandoned our passion for cars.”

One had better take notice when the president of Toyota speaks of the effects of loss of passion using phrases like “irrelevance or death” and “grasping for salvation”.

You need go no further than John Hagel‘s recent post Pursuing Passion for a resounding second opinion on the subject.

The Headlong Pursuit of Growth, and Its Aftermath

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The December 12-18, 2009 issues of The Economist features a couple of fascinating articles on Toyota Motor Corporation. According to The Economist, Toyota’s President  reached the following dire conclusion on the situation Toyota is facing:

Mr Toyoda’s alarm call last month appears partly to have been prompted by reading “How the Mighty Fall”, a book by Jim Collins, an American management writer, which identifies five stages of corporate decline. Mr Toyoda reckons that Toyota may already be at the fourth stage. Companies at this point, says Mr Collins, frequently still have their destinies in their own hands, but often flit from one supposed “silver bullet” strategy to another, thus accelerating towards the fate they are trying to avoid.

In the litany of things that went wrong, an interesting point is made about the Toyota Production System:

… the recalls continued and Toyota started slipping in consumer-quality surveys. A year later Consumer Reports, an influential magazine, dropped three Toyota models from its recommended list. The magazine added that it would “no longer recommend any new or redesigned Toyota-built models without reliability data on a specific design”. People within the company believe these quality problems were caused by the strain put on the fabled Toyota Production System by the headlong pursuit of growth.

Whatever Agile method you practice – Scrum, Lean, Kanban, Crystal, etc. – you need to be cognizant of three touch points with the Toyota experience reported above:

  • Just like the Toyota Production System, your software method is a “vehicle” which is subject to policy decisions from above. It cannot, however, compensate for policy failures.
  • If your company relentlessly pursues growth, the quality/technical debt liability it is likely to incur coud easily outweigh the benefits of growth. Consider the upside potential of growth vis-a-vis the downside of the resultant technical debt. When appropriate, monetize technical debt using the technique described in Technical Debt on Your Balance Sheet.
  • In addition to monetizing the technical debt, evaluate the various kinds of risks indicated in The View From The Executive Suite. A sense of how devastating those might be is given by Toyota’s own experience:

Just as Cadillac used to be synonymous with luxury and BMW with sportiness, Toyota was a byword for quality and reliability… The danger in all of this for Toyota is that its loyal (and mostly satisfied) customers in America have long believed that the firm was different from others and thus hold it to a higher standard. The moment that Toyota is seen as just another big carmaker, a vital part of the mystique that has surrounded the brand will have been rubbed away.

Please remember – unless you work for Toyota Motor Corporation, chances are your company would not be able to take the kind of risk Toyota can.