GREAT COMPANY CHARACTERISTICS

The following article comes directly from the online course, The Toyota Way to Lean Leadership, by Dr.Jeffrey K. Liker with George Trachilis. These materials are also part of the book, Developing Lean Leaders at All Levels.

The teaching objectives for this section are the following:

1.     Summarize the “Great Company” characteristics in Jim Collins’ book Good to Great.

2.     Use these characteristics as a backdrop for our discussion of the great company—Toyota.

The question we ask in this course is, “What is Lean Leadership and what does it take to develop it?” Over a series of sessions, I will explain what we (Gary Convis and I) learned and describe the model we came up with. As background, I'm going to give an overview of the Toyota Way, the four P models as I call it. That will provide a context for understanding Toyota Leadership. 

 At the end of The Toyota Way, you'll see a reference to Jim Collins' work. In that chapter, we discuss what Jim Collins calls level 5 leadership. In fact, when I was writing that last chapter, was about to put the book to bed, a PhD student called me, and asked if I had read Good to Great? I hadn't; I was busy writing my book, and he then said that I must read about level 5 leadership because it sounded exactly like Toyota leadership.

I read it; I added a little part in my last chapter and then later I had a chance to read the Collins book in more detail and I thought 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 how these great American companies outperformed their competitors dramatically over decades financially and in regard to the 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? 

 GREAT COMPANY CHARACTERISTICS

These are the characteristics that I synthesized from that book, and as I reviewed them, they perfectly described what I was trying to communicate in The Toyota Way starting with a focus on customers.

Toyota talks about customer first, and about having a passion for delivering value to customers. He says that the great companies start with the customer; they don't start by asking, “How much money did we make this quarter?” They don't start with “What's our next product; it's going to be a smash hit.” They start with who's our customer and what can we do to solve their problems; how can we add value in a way they don't expect, in a way that's superior to our competitors? Therefore, the customer is always the focus.

They also have an internal set of core values and that go beyond short-term profits. The values have to do with, Number 1: Satisfying customers; that is the reason we are 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 than when they came into this company?

Toyota leadership has a commitment that starts with the CEO who, in great companies, is often the founder. Take, for example, Walt Disney of Disney Corporation. The founder is always focused on building something with a legacy. How can I build something great, an enterprise that will live way beyond me and will be my legacy?

Hence, you can say that all of us live and die, but some part of us lives on and for these CEOs, 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, they are obsessive about building leaders who can succeed them, leaders who are just as passionate about the company, about the customers, about the kind of culture that they created.

It's very hard to develop that level of understanding, passion and commitment if you simply pluck a CEO from another company because they recently drove up the stock price. 

The senior leaders need to commit their life to the business, but that doesn't mean they can't have a life outside of work; 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 some compromise is needed. The senior leaders are obsessive about studying and adapting to the environment, and the word studying is very important.

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 Disney knows everything about them; what they're thinking, how they're thinking and probably what they're going to do next.

Disney doesn’t care about the auto industry and they don't care about semiconductors, and they don't care about hospitals. They care about their own business. A CEO is not a generic plug who can go any place and run anything; that CEO is an expert at a particular business.

Such CEOs also use the term “and thinking” as opposed to “or thinking,” and again, to me, this concept is The Toyota Way concept, a concept that's key to Kaizen or continuous improvement. What if a Toyota leader is coaching you to do a Kaizen and you say either we can have productivity or we can have quality. The leader's going to say, “Why not have both? What makes 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. 

The concept of innovation by experimenting and learning blew me away because the standard paradigm at that time regarding innovation was the lone inventor. The lone inventor would come up with ideas; they'd be brilliant ideas; then you’d prototype them and then you would bring them to market and there would be a promotion process, but the starting point was always the one brilliant idea that the one genius had.

Jim Collins was saying that great companies learn by doing, by trying, by experimenting. In Lean, we know about Gemba, which means the place where all the work is going on, where the customers are using our cars, where we are shipping materials; it’s the place where it’s happening, and that's really the place where you should be experimenting and innovating. 

 As far as having an unwavering belief in the value of capable, motivated people, Toyota will say that people are our only appreciating asset. In other words, people are the only part of this company that gains value instead of depreciating in value. Every other part of the business, the equipment, the energy we use--every part of the business over time--will depreciate and you must constantly renew it.

People get smarter; they develop high levels of skills, and a 10-year person is more valuable normally than an equivalent one-year person. What that suggests 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 will be a strong, coherent, cohesive culture. By strong we mean that the culture, the values, the belief are shared at all levels and across the company. 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, filters down to everybody (obviously not to the same level as the senior leadership).

Coherent means it's 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 they work for this great enterprise and they serve the same customers. 

One-Minute Review

A student asked Jeff if he read the book Good to Great because a section there on Level 5 leadership sounded like Toyota Leadership. In fact, the concept was about great American companies. 

In the book, Jim Collins described what made these companies great. As Jeff read the book, he determined that this was exactly what he was trying to communicate with his book The Toyota Way. 

These companies have passion for delivering value to customers. That is the starting point. They ask how they can add value in a way that their customers do not expect.

The other characteristics of these companies include:

·        Values that go beyond profit

·        Commitment for long-term

·        Committed senior leaders

·        Obsessive adapting to the environment

·        Using “and” thinking

·        Innovation by experimentation

·        A strong, coherent, cohesive culture

George Trachilis: I hope you enjoyed this audio book. As I mentioned in the introduction, it takes a ratio of 1 hour of learning to 20 hours of doing to build a skill. Another great statistic to remember is it takes people ten times longer to improve than for a process to improve. For sustainable results, focus on the people development.

Take a little bit of information from this audio book and apply it in your day-to-day life. Develop yourself and others as Leaders, and don’t forget to join our online community at www.LeanLeadership.guru/community/ .

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