There’s been some confusion over my recent post criticizing the Business Week article on Toyota’s “frugality.” I do not believe that Toyota is frugal (read: “cheap”). Rather, I believe that the company is simply focused on value.
The distinction I make is subtle, but I don’t think it’s trivial. Here’s the way I look at it: frugality (or cheapness) makes cost-cutting the goal, rather than the means to the end — which is to deliver the most value to the customer.
As I mentioned in my earlier post, if Toyota really wanted to cut indirect costs, they’d close down their dormitories instead of just turning off the lights. The dorms are not adding any value to you or me when we buy a car, except insofar as they help the company develop competent workers. And (in my mind, anyway) that’s the road you’d take if you were just interested in cutting costs/being frugal.
Kirk Paluska, an instructor at the Lean Enterprise Institute, once pointed out that lean isn’t a cost-savings strategy; it’s a cost-avoidance strategy. That’s a subtle distinction, too, but I think it gets to the heart of the difference between frugality and lean.
Avoiding costs is a strategy that places the customer and value front and center. Cutting costs puts the income statement front and center. And once you start doing that, you’re on the road to layoffs, outsourcing, and all the other productivity-improving chimeras that so many companies chase.
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