Principled Lean: Give Toyota Credit

The remarkable decisions coming out of Toyota this week – to stop selling most of its car models, to stop even producing most of its car models, until they solve the gas pedal problem – are thought-provoking. Even for someone like me, who interprets Lean Production within a particular industry vertical, and judges Lean as less of a religion and more a part of the toolset homebuilding companies need.

Toyota could have – and should have – responded more quickly to this problem. Clearly. But, give them credit for walking the walk when they did respond. They stopped the line to fix the problem. They matched the rate of production to the self-imposed limitation on demand; if you are not going to sell cars, then you might as well not make them. They took a longer view than the next couple of quarters’ earnings reports.

As I have said previously in this column, homebuilding is not automobile manufacturing.

Homebuilding production is project portfolio management, not continuous flow. Kaizen and PDCA pose limitations to solving anything but the simplest of problems. At best, Lean is only part of the solution for homebuilding companies. There are lots of areas where Toyota – and Lean Production – just get it wrong. In particular, Toyota produces to forecast, not direct demand, more the result of a flawed value stream than a flawed production system.

But, they understand how to solve problems with standards, they understand that inventory is an asset only on some balance sheet (and is a liability in every other sense), and they have the courage to make tough decisions and live their principles.

I wonder how many homebuilding companies would have done the same.

4 Comments

  1. Ping from Leslie Day:

    If more Homebuilding companies had done the same in 2006, the inventory numbers would not have been as high in 2009 and still today.

    Hopefully all businesses can learn from this lesson and know not only do you need to understand lean, you need to understand responsible actions in today’s business market place.

    Toyota responded — hopefully Builders will respond next time more quickly and slow production to demand. We were lucky, our System and disciplines saved us – the Builders Imperative has a powerful pull!

  2. Ping from JC Gatlin:

    Interesting post, Fletcher. I’ve been thinking about what you’ve said for the last couple of days.

    I was wondering: can you elaborate on what you mean by “Kaizen and PDCA pose limitations to solving anything but the simplest of problems?” Unless I’m misunderstanding, it’s hard to agree with point. Any problem — regardless of its simplicity or its complexity — will still boil down to a point of cause and root causes. And, regardless of the complexity of the problem, those affected will still implement counter measures and “check and adjust.”

    You said it very well in “give them credit for walking the walk.” I am curious to know how long they have been PDCA’ing the problem. How many times have they had to crank the wheel? It sounds like their PDCA process is working if they have in fact identified a single manufacturer as the Point of Cause.

    It seems like there are a lot of blog articles implying that PDCA doesn’t work or that the company shouldn’t experience problems if they were using a common problem solving methodology and following their production standards. But using lean tools such standardized work and PDCA doesn’t mean that a company will never experience problems; it means that the company is better equipped to handle them when they do occur.

    Thanks for thoughts on the subject Fletcher!
    JC
    http://leanhomebuilding.wordpress.com

  3. Ping from Fletcher L. Groves III:

    JC:

    My post had the following points:

    1. Toyota was slow to react to a known problem, but deserves credit for what it did, when it did it.
    2. TPS and Lean have shortcomings.
    3. To be relevant, Lean has to be matched to the parameters of the homebuilding vertical.

    I agree with your observation that using Lean tools, such as standardized work and PDCA, does not mean companies will never experience problems, but that they will be better equipped to handle problems when they do occur.

    The limitation I referenced regarding PDCA comes from the connection to standards. PDCA is standard-driven. How many times have you heard our buddy Pascal Dennis say — always with a smile — “What is the standard? No standard? No problem!”. PDCA is a problem-solving methodology. The definition of a problem, in the lexicon of Lean, is deviation from a standard.

    That is both the strength and the limitation of PDCA.

    There are problems for which standards simply do not apply, in terms of resolving the underlying conflict. Enterprises can face deep, systemic, complex problems, with many symptoms, often representing worthwhile-but-conflicting objectives. Although PDCA does a good job when the problem is the deviation from a standard, it does not provide the conflict resolution tools to solve more complex problems. To wit, PDCA does not provide a mechanism for rigorously surfacing legitimate reservations about the assumptions underlying the statement of the problem or the conflict. Within the Lean perspective, where are the categories of legitimate reservation? There are other problem-solving tools that do a better job on more complex problems and conflicts.

    The limitation of PDCA is one of the reasons I do not rely on Lean to address every aspect of production management, or every aspect of whatever scope you want to give it. More importantly, Lean is a set of tools, not a religion. The goal of a homebuilding business is to make money, for which there are a number of necessary conditions, the achievement of which often are advanced by applying Lean Principles.

    Having said that, the limitations of PDCA did not play into the accelerator pedal malfunction at Toyota.

    If we want to locate the problem within Lean Principles, we would likely be more correct saying it was a failure to apply Jidoka, a failure of containment and feedback. They did not stop the line. Moreover, this defect was designed-in, so it points to the product development process in the value stream.

    Which points to the real problem at Toyota: Leadership. Failing to contain the defect and provide a quick countermeasure was a symptom. The real problem was sacrificing quality for growth:

    “Our president, Akio Toyoda, has said that expansion may have occurred to the extent where it is difficult for us to keep an eye on the ball”, said Paul Nolasco, a Toyota spokesman in Tokyo (Washington Post).

    As far as relevance for the homebuilding industry, as I said, I interpret Lean within the homebuilding vertical. There are limitations. The accelerator pedal problem at Toyota was an opportunity to speak to one of those limitations.

    In my view, Lean is necessary, but it is not sufficient.

    Thanks for your comments, JC.

  4. Ping from Fletcher L. Groves III:

    Principled Lean: Give Toyota Credit. Or not. As more and more details come out, it is increasingly clear that more courage early on would have lessened the real problem, which is now credibility.

    This was not a failure of PDCA or Kaizen. This was a failure of leadership that stands on principle.

    I gave Toyota too much credit.

    The message to homebuilding companies that want to adopt Lean Principles: Do not worship icons. Understand the tools, but apply them in the context of your world. Make it relevant. Lean is necessary, but it is not sufficient.