Developing Lean Leaders - What is PDCA?

DEVELOPING LEAN LEADERS - WHAT IS PDCA?  webinar by Jeff Liker

Elizabeth Bordenave requested a copy of this old webinar (2013). She says that it was the best explanation of PDCA that she has ever heard. I’m not surprised considering that it comes from Jeff Liker himself. Enjoy the webinar.  Click the YouTube links to view.

This webinar was used as a reference to create the Shingo Prize Winning Book – Developing Lean Leaders at All Levels: A Practical Guide.

Jeffrey K. Liker (Author)and George Trachilis (Contributor), winners of the Shingo Research Award in Washington, D.C. - May, 2016

https://youtu.be/7QAY_6zSmiY

Okay welcome to the Lean Leadership Institute, I talk about the fundamental skill of leader and what the leader's supposed to teach is problem solving following plan, do, check, act. I talk about PDCA as the engine of continuous improvement. PDCA most people associate with Dr. Deming who went to Japan and as the story goes he taught the Japanese modern quality control including PDCA which he had learned from Dr. Walter Shewhart. Then companies ran away with PDCA and started using it and that was the reason for the Japanese miracle. That's a style I simplified reconstruction of history and I don't believe actually happened that way but in any case PDCA became the basis for total quality management and Six Sigma as we know it today and most companies that have Lean have some sort problem solving process. With those of us who understand PDCA as it's a lot about and as it's practiced within Toyota we see a very large gap between PDCA as we understand it and as we learn from Toyota and PDCA as we see it practiced more commonly in other companies. What I'd like to talk about then is what is real PDCA. My definition of real PDCA is again what we learn from Toyota and also what we teach and what we find to be extremely powerful. I will distinguish that from a lot of problem solving that is out there and some, most companies, most large companies particularly have some sort of high five step or seven step or eight step problem solving process they were thought in say one, two, three or five-day workshop.

I'll start with an example of a misconception and I'm not picking on this particular person back, then I know who it is, but someone sent me this from a presentation that was got around the internet. This person was distinguishing Dr. Deming who is said to have really talked about plan, do, study, act with Toyota who looks at plan, do, check, act, and one of the conceptions again is that PDCA is not as strong as PDSA because in PDCA we check but in PDSA we study. Also that this is Dr. Deming approach and this is how Toyota interpreted it. I won't go into a lot of details in history except to say that the original Shewhart model which was then modified a bit by Deming did not have PDC or A in it, it had things like you produce and you check the market, you sell. There were different set of things which eventually in Japan turned it into PDCA and I believed that was mostly the works of Japanese companies. Then there was a lot of back and forth of learning between Deming seeing this in Japan and then putting it in his terms and then teaching it so there was a lot of iteration of learning that led what we know as PDCA.

If we look at what this particular person is saying that Toyota does, they launch into determining goals and targets while Deming talked about objectives, he talked about questions and predictions, plans for carrying out the cycle. Everything they say in the Deming model is in the Toyota model, so again this is a misconception. Then in the do stage you engage in training and education and you implement work in Toyota which is not true. There's actually, maybe training, but in most PDCA you're just doing at this point. By the do stage you've got the plan, you've got countermeasures and now you're putting into practice to test your hypothesis. Which is a hypothesis that I found the root cause and this countermeasure will help address the root cause, that's the goal of the hypothesis which needs to be tested so you need to run the experiment. Then in the Deming model they talk about carrying out the plan, documenting problems and expected observations, begin data analysis again that all true in the Toyota model. Then the checking stage in the Deming model is study, complete data analysis, compare data prediction, summarize those variables a great description of the Toyota model. The description of the Toyota model is actually not very good and so the Deming model is a pretty good description of the Toyota model. But there's still a few things missing, so get this, just one example of somebody who writes a lot and is a thought learner who has a fundamental misconception both of what gets attributed to Deming and what actually happens within Toyota.

https://youtu.be/kbdxO9ytViY

So this is what apparently is the model within Toyota, it's called Toyota business practices. In 2001 Toyota Way was introduced with two pillars, respect for people and continuous improvement and they work hand in hand. As you can't expect people to put their minds into continuously improving processes in addition to doing the job, forming those processes unless they feel like a member of the team, trusted, respected and then that respect then allows you to give people very challenging goals that may even seem punitive but in a trusting environment there's an understanding that the goals are challenges. Purpose of the challenge is to help the company, as well as, to develop yourself to do something that apparently you don't think is possible with your current capabilities or capabilities of your team. But we see in the Toyota business practice model is two columns, this came out again after Toyota Way 2001 so 2002, 2003 this was introduced as the concrete method by what the Toyota Way principles would be put into action. There was a recognition that the principles by themselves weren't actionable. This is the way Toyota is going to practice its business. Just let me repeat that. All of Toyota globally hundreds of thousands of people over a million people if you include dealers, the way they will practice their business, any part of their business whether it's selling or building a new plant or designing a new car or making fundamental innovation and better technology, or moving a flow rank a few inches so that there's less walking time so from the very tiny, little problem to global breakthrough in the world of automotive.

In all those cases they're going to follow Toyota business practices. What it amounts to is PDCA and furthermore, it's defined as eight steps. So it taught in these three-days seminars as a kind of a nice tool to use that we hope you use when you go back to work, is the way we do business at Toyota in everything we do. Very fundamental difference in the place of this say methodology and the way of thinking and Toyota will think about it more as a way of thinking than as a methodology. You see there's two columns, this is from Toyota. One is these are the concrete action of processes, this is what you're going do. Then there's a drive and dedication column which is, these are the values, this is what you're going to learn. This is what you're going to develop as a leader, so you can look at the drive and dedication as a description of what leaders need to learn to be better leaders. They are going to learn it by, on a regular basis over and over again going through PDCA and performing concrete actions to improve processes.

In the eight steps, we see that you first have to clarify the problem. Toyota has a very simply definition of a problem, which is it's a gap. It's a gap between what should be happening and what is happening. It's as simple as that. Now it's not entirely that simply because for one thing you have to define what should be happening. That means, spending some time thinking about this workplace or this new vehicle or this new brand and with that brand what is the purpose and what should be happening. What should be happening at the starting point should be defined in terms of the ideal state. What would be the ideal state if we were 100% successful? Then you'll back off and create a target that's more realistic moving the gap between that target and the actual is then a problem. There are other types of definitions of problem like what should be happening is we should not be having defects and we have a defects, so there's a gap between zero defects and one defect, that's another problem. In that case that's a deviation from the current expectation so production in the case say we talk about the Scion brand development and of course with the Scion brand there's a gap between the desired age of the people who buy Toyota Lexus vehicles in North America and the actual age that was the problem they were trying to solve. So the current age was, what it was and the desired age became an aspiration. You could also look at zero defect as an aspiration. You could look at a certain mix of vehicles that will balance line to have a certain percentage of Camry's for every Avalon and that's the way we run production today and we deviate from that, that's a problem. We're not improving anything by keeping that balance but we're trying to maintain that level. In fact, it's challenging to maintain that level. So it's actually a target to maintain that say 80% Camry and 20% Avalon.

So the problem is going to be as tough as you make it and the toughest would be what is your target and it's often referred to as a standard. What is the standard you're trying to move to, to accomplish and when the gap is a problem but gap is often very large like a gap like we're at this age of buyers, we want to be at this age of buyers, so it's like this? That's extremely difficult to do and it's not clear what you should do so what you need to do is you need to break that problem down into smaller pieces. What are some of the actions we can take to reduce that gap? Meier options turned out to be create a new brand and then that had to be broken down further, what that brand would look like. Then when you have subdivided problem into smaller problems, into smaller, not hundreds but maybe half dozen or so smaller problems then for each of those problems you're going to then set a target that's concrete and specific. Then you're going to ask yourself why are we far away from that target and you'll ask why five times and drive to the root cause. Then you're going to develop a number of countermeasures that might possibly help you close the gap or reduce the gap and it may take combination of countermeasure to close the gap, it usually does. The term countermeasures are distinct from solutions because at this point none of these ideas is a solution, you don't know if it's going to work or not, it's just a hypothesis. Then we test the hypothesis, then we monitor what happens, we analyse as we're putting the countermeasure in place we're checking continually and finally we standardize successful processes and also we're going to think about the next step, what's the next problem we want to work on in the PDCA loop.

Then you can see on the right that you're really learning the way of thinking, the behaviours, the skills required for Lean leadership which start with putting the customer first. Always confirming the purpose, understanding why you're doing what you're doing. Taking ownership and responsibility, being able to visualize the problem because we're visual creatures. We want to visualize whether we're in standard or out of standard. We want to make judgments based on facts not emotions or just opinions. We want to think and act very persistently because we have this target and we're not going to give up until we reach that target and we'll try endless things until we finally get to the target. When you know what you want to do, you've taken the time to plan it out you want to put in place really fast so you can run the experiment very fast. You're going to follow each process through with sincerity and commitment so that will lead to sustainment not putting in place like do kaizen bursts where we fall off a few weeks and disappear. We need to thoroughly communicate with our key stakeholders and involve them so they are all engaged through the process. So look that's a nice description of what a Lean leader should do and the way you do it is by doing step one through eight. I'll argue that step one through eight if you look at the details all include what this other person had said was the Deming model.

https://youtu.be/1B-tRvHXWpE

Another model that was used prior to Toyota Business Practices, a lot of the people you'll see out in the world of consulting for example who worked for Toyota, were really raised on the practical problem solving model which came before the Toyota business practices model. It's really not very different in the way practical problem solving is embedded within Toyota business practices doesn't have a specific step that says define the ideal state and break down the problem so a few important differences but by and large the ideas are similar. You're starting off by clarifying the problem when we initially see a problem it's usually large and vague. For example, we have a lot of turnover in this plant and we have to do something about turnover. Where is the turnover happening, is turnover really a problem, under what conditions is it a problem? None of those things are defined, we just know we have turnover or people are leaving, we have to stop them from leaving. So we start off by having just a vague perception that something hurts, there's some pain and then we have to clarify that problem and as I said break it down until we finally have an actionable problem. Then we will start with the most likely root cause and that might be root causes.

So you may use for example, the seven quality tools and collect some data and Pareto charts and you may do a cause effect diagram. You're getting a picture of some of the causes and then you're narrowing that down to the most likely causes. Part of that is finding where the initial problem was seen and then where the actually problem occurred so you might see the problem in inspection but then you have go back through the process to find where it originated.

Then you start to ask why, the first why is the direct cause. So if we customer complaint that their car stalled unexpectedly on a highway then we know that we have a customer complaint and that's the problem because we want zero complaints. Then the direct cause is because the car stalled and this point that's all I know is that the car stalled and that lead to a complaint. We don't know that we have to verify that in fact the car did stall and how it stalled. But then we have to ask why it stalled and that may lead to a specific technical problem that caused it to stalled. Then we have to ask why that technical problem occurred and that may lead to something at the plant like there was dust in the engine that shouldn't have been there. It may lead to a design issue in engineering and the why's will take you wherever they take you until you get to what you think is the root cause. Again, root cause is your best bet based on the data you have and your analysis and investigation you're not certain that that's the root cause. But based on that root cause you're going to identify some countermeasures, try something and then you're going to check, learn, further actions, share learning. So the point is that all of this is done with the mind-set of a good scientist. Not every scientist is really good but a good scientist who is sceptical, who wants facts and data, who doesn't believe that the actually problem is solved you might be looking at some sort of new kind of fusion and you may spend your whole life on this new kind of fusion and you're solving a lot of little problems along the way. But you go to your deathbed saying I never really solved the problem I wanted to solve, still more work to be done.

There's actually documents in Toyota that translated really documents from all those group that translate into discussing the scientific method. A Toyota leader should always be following the scientific method. The scientific method is you find why it happens not who did it. So it isn't a who done it game. It's a scientific game of formulating and testing hypothesis.

The process of getting to root cause is really a narrowing process. For example, we have a problem that the car stalled and there are many possible reasons why the car stalled or you know did it really stall, did the engine go off, did it hesitate, did it go off at a stoplight, did if go off while the car was moving? And you have to find that out and to find that more clearly and then you can think of all the different reasons why it might have stalled and that's why it cause and effect diagram is nice because it's a brainstorm of many different possibilities. Then you have to have some way of finding the most likely cause and that may involve some even experimentation in trying different things to cause that particular car and that particular engine to stall. Then you need to find a point of cause which is where did it actually originate. Did it originate in engineering? Did it originate in Manufacturing? Did it originate with something the dealer did to prepare the car? Did it originate in something that the driver did that they shouldn't have done? Was it some sort of oil that they put it that they added after the fact that wasn't the right kind of oil? Through the five why process you'll find the root cause. Then you are going to test that.

https://youtu.be/1B-tRvHXWpE

I talked about defining the problem as being a very important in one of the problems with defining the problem is that you can come in at many different levels and you might come in at the wrong level and then end up focusing on the wrong problem. So for example in this case what the problem was seen as is reduced productivity, productivity went down. A good coach would ask you, (productivity went down) why is that a problem or how do you know that's a problem you should be spending your time with. There's so many problems that any organization has and you have limited problem solving resources. So why are you going to focus on productivity? In this case, they asked a question what happens when we have low productivity? The answer is that our cost go up and we don't have good customer service which are both important things but we still ask further right now with where the business is, what are we strategical focusing on? In this particular case they were strategical focusing on cost. So the real problem is when cost is too high. Lowered productivity is one source of high cost and it's also one lever for reducing cost. But then I would also ask what are other levers for reducing cost? Because it may be something that's much more important than productivity for example, material cost. So then if we discovered in fact that productivity is a key driver and one that we want to focus on then we can go backwards and start looking at some of the causes of cost and some may initially say it's because people aren't working as hard as they used to, we've lost our work ethic in America and they think no, I'm not about that. Then you would say that's one possible reason let's develop a cause and effect diagram – man, machine, and material and list all the possible causes and then let's go out and pick the one we think are most likely and collect some data. If you collect data and you find scrap and re-work is actually the biggest driver of reduced productivity because we spend a lot of time fixing things and really we should focus on quality not on making people work harder. The problem with a lot of what's done in the factories as problem solving is that number one; we assume that what we initially see is the problem actually is the problem and don't really question whether that should be the problem we're working on. Number two; we often jump to a conclusion about the cause that's incorrect without thoroughly looking at other possibilities and going and seeing ourselves, going to the Gemba.

https://youtu.be/gIm5fdRaW_g

The truth about PDCA is and this is from the Toyota Way Field Book we have several chapters that go through the problem solving process in quite a bit of detail. The plan always begins with problem definition and it should define the ideal state versus the actual current condition. This gap and that should be studied, the current condition should be studied the Gemba, so we should understand in a complete way as possible what's going on in fact. Toyota say you need to grasp the situation in a general sense before you even decide what problem to work on. So there has to be some general understanding of a lot of what's happening, the dynamics and the strengths of the people and the weaknesses of the process. Based a general understanding then you're going to then start to formulate ideas about what problems are important to work on and you can define the ideal state versus the actual state. The gap is, with the ideal state would be like a grand theory in science which is too big to actually test so you'll hear about theoretical physicist that come up with breakthrough theories in quantum physics and then there are experimental physicist who will then break that down into testable hypothesis that and then they'll use laboratories or equipment to run those tests. So you have to get from the grand theory to the smaller testable hypothesis. The small pieces then allow you to run small experiments with a great frequency and therefore you're learning very quickly. If it's going to take me my life time to run one grand experiment, I get one chance, one shot at it. If I'm running experiment every week then I'm learning something every week that then informs what I what I do the next week. There's hundreds of PCDA loops that are getting closer and closer to testing that grand theory.

For each of the pieces, for each of these small PDCA we want to go through the same PDCA process. What is the problem. What is the root cause? What is the countermeasure we're going to try now? What happened when we tried it? What is the next experiment we're going to run? As we're seeing countermeasures through which is the doing part there are in fact embedded PDCA loops. So in the case of that customer that had the stalling problem, we will try something like it maybe, we think a problem of the oil mix that was put in the car so we'll try a variety of oil mixes to see if we can either cross the car as stall or not stall and with each of those experiments we run we're doing PDCA. We're discovering which ones works and which ones don't work. So we're actually studying, analysing, learning as we're in the do stage. What that means is that if you keep on checking you'll see this is in work groups in Toyota that have an annual goal. George mentioned Hoshin Kanri which is an annual planning system and everybody has an annual goal and they have a big hairy tough goal to reduce all the defects by 30%. Every week they're working on one defect they discovered and they're doing a PDCA loop, and they're getting closer and closer to that tough goal. As they're eliminating those defects they're doing PDCA and they're learning and they're charting that they're getting closer and closer to that 30% reduction. By the time they get to the check stage at the end of the year they have checked many, many times and really the only thing they have to do is the last check, the last week say. So they pretty much now, they're now sliding into home plate and they know they're making the goal before they actually get to the check stage. The check stage actually becomes a broader reflection on what happened this year, what we learned and how it could prepare us for next year.

https://youtu.be/gIm5fdRaW_g
So, you have during the implementation phase, you should know whether you're effective or not. It's only necessary to collect actual process data and chart it, just as you charted the original problem. So we said we had a problem because say there's been an increase in quality problems and we need to reduce the gap that's between where we are in defects and where we want to be in defect, 30% less and then we're going chart defects and see if we're getting closer to the 30% reduction. So it's pretty straight forward statically to chart how you're doing. Then you're going to get two levels of results if you aren't successful first of all, may in fact, for example, theorize that one cause of quality problems is weak standardized work. You develop better standardized work and you build in quality key points and that's going great and you're getting great standardized work and you're training people and they're following the key points and you're monitoring how they're following the key points and they're adhering to the standardized work. That's all going well, but it's possible that your defects aren't going down. That would suggest that your belief that the root cause was in standardized work and training process was just a bad theory, bad hypothesis. So you might reject the hypothesis that the root cause we thought was the root cause was correct. Or we might reject the hypothesis that developing the standardized work in a certain way is a good way to develop the standardized works so it could be the process or it could be in the link between what we think is that process, the driver of the root cause and what actually is the root cause. So it's very important to reflect on the process and that should happen at regular intervals, the shorter the better. You've have daily huddles, weekly meetings, you shouldn't wait until the end. Second of all, you should be paying as much attention at least to how people are being developed as you're paying to what results technically we're achieving.

The purpose of Hoshin Kanri is actually both business results for Toyota and also people development. Stretching people, the targets and you're teaching them and guiding them and coaching them to follow PDCA in the smaller cycles. If people aren't really following PDCA but somehow you get the results mainly because the leader is very clever or you have a clever engineer who comes up with the one great solution, then you've achieved the results but nobody's been really developed except that one engineering or that one Manager. So you failed on people development and then you succeeded on getting results.

So the picture that we developed in the Toyota Way to Continuous Improvement and that ties this together. It starts with the purpose and the purpose should be both what we want to accomplish for the business and what do we want to accomplish in developing our people. Then to achieve that purpose we need to find the ideal state, we need to break down the ideal state into more small manageable piece and for those pieces we're going to set a target. The target could be results like for example cost reduction or say a productivity improvement that's measurable. Also it could be a condition, for example, if scrap and re-work is a driver we may want condition to be that the scrap bin is empty 98% of the time. That's something people could see and give a sort of visceral picture of how we're doing in the process that we think is leading to the outcome we want.

When we define the target and it's very, very clear and easy to understand by all the people doing work, by all the people imagine process then we are at the current stay and we're going to try our first step on implementing the countermeasure, that maybe, say one workstation and we're going to do a PDCA loop and we're going to find out what happened to that one workstation. That will inform our next step which may modify what we did in the first workstation based on what we learned. So each of their smaller iteration maybe they're daily, maybe they're weekly is again running a small experiment and we're learning something that's getting close to the target like Thomas Edison talked about the thousands of light bulb that failed and he said that every light bulb was success, that fail was successful because it taught us one more thing that doesn't work. So you're learning as much from failure as success as long as you always have your eye on the target. As long as your work is very directed and you know why we're doing what you're doing. When you have the failures you decide what you learned so that you try the next PDCA loop informed by that failure. Then step by step you're getting closer and closer to the target. Creative tension between a big target like a 30% reduction and a where you're at is what drives the challenge. The gap makes it challenging, difficult but you need to have confidence. Some of that confidence comes from having a good coach who actually could solve the problem and you know they can solve the problem but they're going to guide you through solving the problem. That helps you get confidence and then the more times you go through this process of achieving challenging targets, the more confident you become. So the next problem at some point seem impossible but you're not concerned about it because you know you had a great process and through PDCA you'll get there. Even though you don't know now how you'll get there.

Then we talk often in the act stage and the final stage about spreading best practices. I was at a company yesterday, Dover Energies and in one of the divisions they're very interested in how to define spreading best practices. In this particular business unit, they don't want to mindless copy what one group happens to do that works, they want everybody in the other groups to be thinking about what's best for them. They're asking that question if somebody does something good and they write a A3 report should that become the new standard that everybody should follow? My answer was no, absolutely not. Because even in one plant that makes the same product there's are many different processes and there's different kinds of equipment even though it's same, perhaps equipment on the surface, it was made at different times, designed in different way and what you do in one instances may fix that context very well not a different situation. So a best practice is kind of misnomer, it's the best practice that a particular group came up with today in order to act as a countermeasure to the root cause of the problem they have discovered. That's the best practice for them right now until they come up with a better best practice. The term best suggests that there's nothing better so that would end Kaizen.

So what Toyota uses instead as the term, Japanese term, yokoten which does mean spread everywhere, but in Japan they often use nature analogies. The nature analogy in this case is translating a bonsai tree and if the environment isn't perfect for that particular bonsai tree then the bonsai tree will die or it will grow in weird ways and won't look so beautiful. You have to maintain it and keep on working at it to improve it and adapt to the problems that the tree experiences at it grows. So it's an adaptive, learning survival process not just sticking in the ground process. So if you went to Japan and bought one of these trees and they look beautiful and you took it home and plant it in your backyard, there's a reasonable chance that it will die because there's very particular conditions of soil and the environment that are necessary and you haven't prepared the soil properly and you have to adapt your environment so that the bonsai tree will flourish and as well.

So similarly again with the best practice what Tanner will do is they will share what people try as countermeasures that work and they'll share them with others that may have similar problems and they'll share the problem the reason they choose that countermeasure. What the root cause was and then what happened. That now is an input to your group and you can filter it out and say it's not really relevant to my problems right now. Or you can hey that's an interesting idea we have a problem like that and you still have to go through the PDCA process and then in that process you may use that solution, you may not use it, you may use a piece of that solution, modify it ideally you'll improve on it. So in Toyota they say if we enforce best practices sharing we will kill Kaizen

https://youtu.be/kUBcJHcBICQ

When you talk about culture you naturally end talking about language, the way people talk which reflects the way they think. This came out of the Toyota Culture Book, we talked about the language of Lean Six Sigma compared to language of the Toyota Way. We hear thing in Six Sigma like we need to deploy the methodology which we don't hear of in Toyota. They are more likely to say we're trying to grow people's capability. We talk in Lean Six Sigma about the master black belt, in fact we're using that terminology in the courses we offer because it's recognized in the world and it's a credential that recognize a certain level of achievement in Toyota they're less interested in marking specific level of learning as they are in following your capability to teach and be a sensei. A sensei has to earn the respect of the student because of their demonstrated knowledge and their demonstrated ability to teach and coach. It's an ongoing process you're always learning how to be a better sensei.

In the Lean Six Sigma we collect data, in the Toyota Way we go to the Gemba. Or in Toyota's case we go to the Genchi Genbutsu which is the actually place and we look at the actually part. Or you go to the general area where we think the problem occurred and then find the specific point at which the problem occurred and we observed it first-hand.

Kaizen Events or Rapid Improvement Events have become very popular as a deployment method in Lean Six Sigma and there not really a PDCA method to achieve your annual goals in Toyota. What they are, are activities that you specifically organize in order to teach a group of people something. So therefore it's called Jishuken or voluntary self-study.

You don't deploy the standard method in Toyota as I mentioned teams own the standardized work and they adjust and adapt the standard work as condition change and line speeds change. The particular work layout changes some of them have a kaizen idea, we discover a new specific cause of defect all those will result in change in the standardized work so the standardized work become a living breathing, evolving document. In Toyota best practices as I mentioned the Yokoten instead of deploying metrics we develop a daily management system where a group own the metrics and they're trying to achieve specific goals for the year, they'll change year by year and then they're measuring the driver what they think are the drivers that will address the countermeasures that will get them closer to the goal. Those drivers can for example because the productivity it might be scrap and re-work. So measuring scrap and re-work but they're really interested in productivity because we're trying to reduce cost.
They you'll see this chain of measures where something at the working level is very different like scrap and re-work. At the top level that the company is looking for which is cost reduction.

What Toyota does that we believe allows them to accomplish more and be more adapted to the environment, I believe the adaptation of Toyota Today to great recession, to the political recall crisis in America due to the greatest earthquake and tsunami in Japan to the greatest flooding in Thailand and then coming out and again being number one. Rated in tops and quality and sales are growing very well. Profits are going through the roof compared to where they had been in the last few years, all of that is adaptation, it's happening everywhere in the company. The reason why they are able to do that is because they have created a system that surfaces problems and the problems are then visible, transparent and open. Then they concentrate their efforts, they develop a focus on the most important issue for their survival and prospering in the long term not just the short term. They teach this set of principles the Toyota Way and the method for achieving Toyota Business Practice and there’s a third element which is on the job development which is how you teach Toyota Business Practices. That allows them to leverage the abilities of all the employees as problem solvers not just a few individuals who get belts or special training who are engineers.

If you wanted to summarize what Toyota has been able to do it's to define as one company, one culture that centres around problem solving, centres around a way of thinking that is very rigorous and very deep and also very humble, we don't know, we think, we guess, we try, we learn. They have been able to develop their leaders at all levels and across all functions with a similar way of thinking. Some are stronger than others but they all have a somewhat similar way of thinking about the company, what they believe in, respect for people, continuous improvement and how we do continuous improvement through Toyota business practices and how we develop people. You think deeply about problems. Okay, I'll take questions now.

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