Is Toyota the best-performing knowledge organization in the world? Some analysts would argue that it is. By the end of last year Toyota was on the verge of replacing DaimlerChrysler as the third-largest North American car company in terms of production, not just sales. In terms of global market share, it has recently overtaken Ford to become the second-largest carmaker. Its net income and market capitalization by the end of 2003 exceeded those of all its competitors. 

Given Toyota's performance in terms of quality, reliability, productivity, cost reduction, sales and market share growth, and market capitalization, other companies have studied and attempted to duplicate the company’s processes. Several decades ago, General Motors famously spent some $45 billion trying to duplicate its automation processes with little success. The fact that few companies have come close to rivaling its performance suggests that the secret of Toyota does not lie in stories about its processes. 

An article in the May 2004 Harvard Business Review, Steven Spear argues that a major part of the reason is that imitators focus on specific tools and practices while failing to recognize the underlying principles of the Toyota approach. 

According to Spear's earlier HBR article, Toyota’s much-noted commitment to standardization is not for the purpose of control or even for capturing a best practice, per se. Rather, standardization—or more precisely, the explicit specification of how work is going to be done before it is performed—is coupled with testing work as it is being done. The end result is that gaps between what is expected and what actually occurs become immediately evident. Not only are problems contained, prevented from propagating and compromising someone else’s work, but the gaps between expectations and reality are investigated; a deeper understanding of the product, process, and people is gained; and that understanding is incorporated into a new specification, which becomes a temporary “best practice” until a new problem is discovered. 

Spears describes the training of an "American hotshot", who arrived at the company thinking that he already knew the basics of TPS -- having borrowed ideas from Toyota to improve operations in his previous job -- and would simply be fine-tuning his knowledge to improve operations at his new assignment. He came out of his training realizing that improving actual operations was not his job -- it was the job of the workers themselves. His role was to help them understand that responsibility and enable them to carry it out. His training taught him how to construct work as experiments, which would yield continuous learning and improvements, and to teach others to do the same. 

Toyota inculcates managers with the Toyota approach in the way it readies recruits for a higher-level position at one of Toyota's U.S. plants. According to Spear's story, the trainee learned four main elements: 

• Element #1: “Direct observation”. Toyota employees are encouraged to observe failures as they occur. That includes managers who are required to watch employees work and machines operate. Spears points out how different this is from the usual forms of indirect observation such as reports, interviews, surveys, narratives, aggregate data, and statistics. 

• Element #2 “Change is experiment" Toyota expects employees to embed explicit and testable assumptions in the analysis of their work -- all of which managers have to report in detail and with considerable precision. That approach helps reveal gaps between predicted and actual results. 

• Element #3: "Frequent experiment" Employees at all levels strive for continuous improvement through quick, simple experiments instead of lengthy, complex ones. The manager’s training is structured so that the complexity of the experiments increase gradually, allowing mistakes without severe consequences, thereby increasing his willingness to take risks and learn by doing. 

• Element #4 “Managers coach rather than fix.” Toyota managers enable and direct employees, but refrain from telling them where to find opportunities for improvements. Spears argues that this unusual manager–worker relationship produces a high degree of sophisticated problem solving at all levels of the organization. 

What is more convincing than the various lessons that the trainee learned in the article is the fact that the article is the story of the training of a single individual - a hotshot in the US environment - encountering the very different approach of Toyota. The learning lies less in the lessons than in the story.

Read Steven Spear in the Harvard Business Review

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