Interviews

Develop a culture of continuous improvement and growth like Toyota

5 min read

19 October 2016

Toyota is, and has been for many years, an undisputed top-dog in the global automotive industry. Notwithstanding its well-documented recall-driven blip in the early part of this decade, the firm remains the world’s largest automobile manufacturer and is well-placed to deliver insight on how to achieve continuous improvement.

In our book “Powerhouse – Insider accounts into the world’s leading high-performance organisations”, we explore the high-performance model that underpins Toyota’s success. Key to this model is continuous improvement – or “kaizen” in Japanese. Developed initially as part of the legendary Toyota Production System as a means of eliminating waste from manufacturing operations, use of the kaizen approach and associated processes have long-since been extended to all areas of Toyota’s business.

It is fundamental to the company’s performance philosophy and integral to its operation in ways that are both intense and challenging. It’s no wonder details of the kaizen approach have been well-documented, however what is notable from our research is the effectiveness with which Toyota applies continuous improvement to its continuous improvement approach itself – in effect it applies kaizen to kaizen. This is because improving the rate at which Toyota improves is at the heart of its enduring performance advantage. It is the key means by which its leaders address competing tensions between short-term commitments and long-term growth.

Outside Toyota, in a world of constantly increasing workload, many competent leaders choose to deal with these tensions by prioritising one over the other. Some manage and measure success in the context of short-term commitments, adopting a “mañana” attitude to growth on the basis of being too busy to worry about it now. Others focus on chasing growth while betting staff can keep things going until a promised land appears. Such focus can seem both understandable and rational. But not only does it fall short of the standards for high performance; when kept up over time it increases the risk of failure.

By contrast, Toyota recognises the limitations of this approach, and instead looks to take on both tensions in parallel. They work explicitly and constantly on improving the capability and capacity of their organisations and, beyond this, on improving the rate at which it improves. To use an automotive analogy, this means increasing the rate of acceleration – rather than speed – of a car.

Organisational fitness

The rate at which Toyota’s organisation improves is a measure of its organisational fitness. In practice it sets both a ceiling and a floor on its ability to grow. It sets a ceiling in that Toyota’s leaders should not take on new initiatives if, in doing so, they put at risk their ability to meet existing commitments. It sets a floor in that if these leaders have the capacity and capability to hand, they have little trouble identifying and acting on exciting opportunities for long-term performance improvement and growth.

Continuous improvement and standardisation – It’s about managing change

Key to Toyota’s success is its approach to standards and standardisation. Standards for operating processes across the company are rigorously defined, followed and enforced, but can change often. Counter-intuitively, the key enabler of standardisation as a driver of high performance is the dynamism of Toyota’s approach to propagating and controlling change. It allows the firm to encourage and embrace innovation. The alternative scenario is one where the intransigence of a firm’s approach to change acts as a barrier to innovation. Here, its potential as an enabler of outperformance is lost. Rather than pushing and standardising to best practice, the firms resist innovation, demoralising thought-leaders and forcing standardisation to performance levels much closer to the average.

Driving continuous improvement – A design challenge

Improving the rate at which an organisation improves is a design challenge. It starts with taking on the idea of increasing organisational fitness as an explicit objective, deciding what this means in the context of the firm’s vision and strategy, and then designing and implementing a structured and aligned programme of change. It is best set-up as an ongoing area of focus for the leadership team. What it delivers, though, is the ultimate form of proprietary competitive performance advantage. Truly this view is worth the climb.

James Bowen and Brian MacNeice are co-founders and managing directors of Kotinos Partners, a niche advisory firm working to help CEOs and their teams achieve sustained high performance. 

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