"From Good to Great" by Jeff Liker

The Toyota Way to Lean Leadership

The following materials are located in Jeff Liker's online course, and the book Developing Lean Leaders at All Levels: A Practical Guide.

The question we really ask in this course is what is Lean Leadership and what does it take to develop it? So what I'll be doing is over series of sessions explaining what we learned and the model we came up with. As background (to be provided in later sections) I'm going to be giving an overview of the Toyota Way, the four P models as I call it. That will provide a context then for understanding Toyota Leadership. 

Don't like reading, watch this video instead - https://youtu.be/j7jXAqcVC2A

At the very end of the Toyota Way you'll see a reference to Jim Collins' work, in fact, what we talk about in that chapter what he calls Level 5 Leadership. When I was writing that last chapter and about to put the book to bed, a PhD student called me and said, “Have you read Good to Great”? I hadn't, I was busy writing my book and he then said you got to read about level 5 leadership because it sounds exactly like Toyota leadership. So I read it, I added a little part in the last chapter and then later I had a chance to read the book in more detail and it was like oh my gosh this is Toyota, this is Toyota, this is Toyota. Now what he's describing was not Toyota. He was describing great American companies and these great American companies outperformed their competitors dramatically over decades financially, in stock price. He asked the question what makes them great?

What is the difference between these good companies that do okay, and the great companies? 

These are the list of characteristics that I synthesized from that book and again as I went through these they perfectly described what I was trying to communicate with the Toyota Way starting with a focus on customers. Toyota talks about customer first, he talks about a passion for delivering value to the customers. What he says is that the great companies start there, they don't start with how much money did we make this quarter? They don't start with what's our next products; it's going to be a smash hit. They start with who's our customer and what can we do to solve their problems, to add value to them in a way that they don't expect, in a way that's superior to our competitors. So the customer is always the focus.

They also have internally a set of core values and the core values go beyond short term profits. The values have to do with, number 1, satisfying customers why we're in business. Number 2, what kind of environment do we want to have for our team members, so that they can grow, so that they can have a good quality of life, so we can make our team members better when they leave here than when they came into this company.

Then they have a commitment and the commitment starts with the CEO who in the great companies were often the founder, for example, Walt Disney in the case of Disney Corporation. The founder always is focused on building something with a legacy. How can I build something great that will live way beyond me and will be my legacy and that's the enterprise? So you can say that all of us live and die but some part of us lives on and for these CEO's their legacy, what they want to live on, is that great company. They want that great company to continue to be great and to do that their absolutely obsessive about building leaders who can succeed them, who are just as passionate as they are about the company, about the customers, about the kind of culture that they created. So it's very hard to develop that level of understanding, passion and commitment if you simply pluck a CEO from the other company who drove up their stock price recently. 

The senior leaders need to commit their life to the business doesn't mean they can't have a life outside of work but you probably have noticed that as you grow up in the company people spend more time at the office, more time in the business and somewhat less time with their families so there is some compromise there. They're obsessive about studying and adapting to the environment, the word studying is very important.

So if you're a Walt Disney for example, you have competitors in your industry who are for example theme parks, parks where they're making films and you know everything about them, you know what they're thinking, how they're thinking and probably what they're going to do next. You don't care about the auto industry and you don't care about semiconductors, you don't care about hospitals, you care about your business. You're not a generic plug and play CEO who can go any place and run anything, you're an expert at your particular business.

They also use the term 'and thinking' as opposed to 'or thinking' and again to me a very Toyota Way concept, a concept that's key to Kaizen. Which is that if you ask Toyota leader who’s say coaching you to do a Kaizen and you say we can either have productivity or we can have quality. The leader's going to say why not both? What make you think that you need to trade off quality for productivity? Please achieve both. That leader believes that it's possible to achieve both and they believe that because they've done it so many times in their own lives. 

 Innovation by experimenting and learning kind of blew me away because the standard paradigm at that time of innovation was the lone inventor. The lone inventor would come up with ideas, they'd be brilliant ideas, then you prototype them and then you bring them to market and there's a commercialization process but the starting point is always the one brilliant idea that the one genius has. What Jim Collins was saying is that in the great companies the way they learn is by doing, by trying, by experimenting. In Lean, we know about Gemba, and Gemba means the place where all the work is going on, where the customers are using our cars, where we are shipping materials, it's a place where it's happening and that's really the place where you should be experimenting and innovating. 

An unwavering belief in the value of capable, motivated people, what Toyota will say is that people are our only appreciating asset.

In other words, people, the only part of this company that gains value instead of depreciates in values. Every other part of the business, the equipment, the energy we use, every part of the business over time will depreciate and you have to constantly renew it. Whereas people actually get smarter, they develop high levels of skills and a 10-year person's more valuable normally than an equivalent one-year person. What that suggest is that you need to invest in people for the long term because you don't get the 10-year person unless number 1 you can keep them around and number 2 you invest in developing them. They don't naturally develop wonderful skills by themselves. 

Finally, the result of all that is a strong coherent, cohesive culture. By strong what we mean is that the culture, of the values, the belief is widely shared at all levels and across the company and to some degree a piece of what that founder or that CEO has, that passion for the customer, that passion for the company to some degree that filters down to everybody, obviously not to the same level as the senior leadership. Coherent means it's really clear and understandable and if you talk to different people you get a similar story. Cohesive means that people feel bound together like a team even if they don't know each other because we all work for this great enterprise and we all have the same customers we're serving. 

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