Jeffrey Liker on the Toyota Way and Why Lean Enterprise Takes Years, Not Weeks

My guest for episode three of the Lean Blog Podcast is Dr. Jeffrey Liker, professor of Industrial and Operations Engineering at the University of Michigan and author of The Toyota Way. Liker has spent decades studying how Toyota actually works, not just the tools on the surface but the management practices and culture underneath them. In this conversation, recorded in August 2006, we talk about the gap between companies that talk lean and companies that do it, why claims of becoming lean in a matter of weeks don't hold up, and what it takes to build a genuine learning organization. This is part one of a two-part conversation. Part two covers lean and the Toyota Production System in healthcare.

For earlier episodes, visit the main Podcast page, which includes information on how to subscribe via RSS or via Apple Podcasts.

Part 2 of the interview (Podcast #4) can be found here.

LeanBlog Podcast #3 Show Notes and Approximate Timeline

• 1:45 What originally got Liker into studying Toyota — product development and supplier interaction.
• 3:58 Liker: “What do you see when you go on a tour? You see the factories. The see the factory's cleaner, it's better organized, the workers seem to be working hard a very engaged… so what Americans saw was really on the surface, so what they copied was on the surface.”
• 5:06 Are people working on less surfacy issues now? Liker talks about the move toward “lean enterprise.”
• 6:08 Back in 2000, Liker was quoted as saying “50% of auto suppliers are talking lean, 2% are actually doing it.” How do you think those numbers have changed today?
• 7:18 Liker: “What they've done is used individual tools.”
• 8:02 What about companies who claim to “implement” lean in 13 weeks?
• 8:33 Liker discusses how Toyota develops leaders in advance of opening a new plant. How long will it take the new San Antonio plant to become a true lean factory?
• 10:58 Can you pick and choose which of the Toyota Way 14 points that you use?
• 11:08 Liker discusses mixed feelings about “creating your own system,” good in theory, but the risk is you just pick and choose isolated practices. The goal really is to become a learning organization.
• 13:18 Liker: “We're not putting in the kanban system to eliminate inventory.” Liker discusses the balance between short-term gains and building a lean learning culture
• 16:03 Liker uses the phrase “Genchi Genbutsu” (or “go and see”)
• 16:08 Do you sometimes have to drag senior management out to the shopfloor?
• 17:22 Liker discusses how finance-driven companies drive metrics that interfere with lean. How has Toyota worked to set up an accounting system that supports the Toyota Production System?
• 20:28 Are there other Toyota Way Principles that companies struggle with?
• 22:33 Liker uses the phrase “hansei” (or “reflection”).
• 24:03 Why Toyota thinks you can't “implement a perfect lean system.”

If you have feedback on the podcast, or any questions for me or my guests, you can email me at leanpodcast@gmail.com or you can call and leave a voicemail by calling the “Lean Line” at (817) 372-5682 or contact me via Skype id “mgraban”. Please give your location and your first name. Any comments (email or voicemail) might be used in follow ups to the podcast.

Here is an amazon.com link to Dr. Liker's books and in particular:

• The Toyota Way
• The Toyota Way Fieldbook (with David Meier)
• The Toyota Product Development System (with James Morgan)

Dr. Liker's consulting firm, Optiprise, can be found here.

Lean Blog Podcast Episode 3: Dr. Jeffrey Liker, Part One

Recorded August 27, 2006

Mark Graban: Hi, this is Mark Graban of the Lean Blog. It's August 27, 2006, and this is episode number three of the Lean Blog Podcast. My guest today is Dr. Jeffrey Liker, professor of Industrial and Operations Engineering at the University of Michigan. He's the director of the Japan Technology Management Program and co-director of the Lean Manufacturing Program at the University of Michigan, which offers a ten-day lean manufacturing certificate and a five-day lean product development certificate.

Dr. Liker has authored or co-authored over 65 articles and book chapters and five books, including The Toyota Way and its follow-up, The Toyota Way Fieldbook, co-written with David Meier. He's active as a keynote speaker, a speaker for executive retreats, and a lean consultant, both independently and through a company he co-founded, Optiprise, Inc. Recent clients include GM, Ford, Intier, PPG Industries, and Johnson Controls, among others.

This will be the first of two podcasts with Dr. Liker. Today we discuss the transition from lean manufacturing to lean enterprise, some of the challenges companies face in becoming lean, and some of the methods Toyota uses to further the Toyota Production System.

Dr. Liker, thank you for joining me today on the Lean Blog Podcast.

Jeff Liker: Good to talk to you about my favorite subject.

How Jeff Liker Started Studying Toyota

Mark Graban: I think a lot of listeners are familiar with your background and your writing, but I was wondering if you could tell us what originally drew you into studying Toyota.

Jeff Liker: Originally I was studying the difference between the US and Japanese auto industries, and not so much Toyota. This was in 1982, and I was looking at the way Japanese companies worked with suppliers in product development compared to the way American companies worked with suppliers. Back then, the American companies were arm's length. They were clear silos. The product development people within GM and Ford and Chrysler did product development, and then they threw over the wall sometimes specifications, sometimes drawings, to suppliers, who then threw over the wall process drawings to manufacture the parts. Through that process of throwing things back and forth over the wall, they ended up with very inefficient manufacturing processes and quality problems at launch.

In the case of the Japanese automakers, the buyers and suppliers worked as partners and truly jointly did the technical work of designing an excellent product and an excellent manufacturing process to make it. The difference at that time, to me, was like night and day. It became clear that there was a level of effectiveness in the Japanese auto companies that I was not seeing in the American car companies.

Also, over time, as I did more and more interviews, it started to become clear that Toyota was the leader in Japan, looked up to by the other auto companies. In a lot of ways they were modeling and learning from Toyota. There was something different and special about Toyota.

Why Lean Looked Like a Factory Thing

Mark Graban: It sounds like you started out looking at supplier interactions and product development. As lean grew in the US, it seemed like people thought of it as strictly a factory issue. Do you have any thoughts on why that was?

Jeff Liker: That's true. I think a lot of the interest in Japan came, first of all, from the success of these companies. Then the American companies had to figure out what to do about it. Why is Toyota so successful? What can we learn from them? That led to a lot of study missions to Japan and tours. And what do you see when you go on a tour? You go and visit a factory.

Mark Graban: Yeah.

Jeff Liker: And you see certain things. You see the factory is cleaner than American factories, better organized. You see workers seem to be working hard and very engaged. You hear about the large number of suggestions employees give. And the kanban system, in Toyota's case, is very stunning when you see how many parts move around the factory just with these little cards. So what Americans saw was really on the surface, and what they tried to copy was really on the surface.

Talking About the Lean Enterprise Before Fixing the Plants

Mark Graban: Over time, it's been at least a good fifteen or twenty years that people have really been working on lean widely in the United States. Are people working more on the non-surface issues now?

Jeff Liker: Oh, yeah, there's definitely been movement. People talk about the lean enterprise, and I think it's pretty well understood that they really need the whole enterprise working together. Any sophisticated modern company will say, “We don't want to just have lean manufacturing. We want to have the lean enterprise.”

Unfortunately, they'll also typically say, “We've done lean manufacturing. We've done it in our plants. We did that for the last five years. We've had great success. Now it's time to move to the enterprise level.” Unfortunately, if you go into their plants, you see something different. They haven't done it in their plants. They just talk about it. They've done individual projects that have been successful, but their plants are far from what you see in the Toyota Production System. So they've superficially done it in their plants, and now they're ready to superficially do it throughout the rest of their enterprise.

Fifty Percent Talking Lean, Two Percent Doing It

Mark Graban: That leads to a question I've been dying to ask you for a long time. There was a quote I saw attributed to you, I think back in 2000 or so, where I believe you said that in regard to auto suppliers, fifty percent of them are talking lean and two percent are actually doing it. Do you have any sense of how those numbers would line up today, here in 2006?

Jeff Liker: Today I would say that well over ninety percent are talking about it and have talked about it. I would say that almost all of them that have talked about it have done something. They've done some individual projects. They've hired consultants. They've done projects in individual plants. They've done kaizen workshops. They've learned the words, and they've seen some results.

I would say the number that have deeply implemented the Toyota Production System as a system in their plants is probably below two percent. What they've done is use individual tools in individual places. Occasionally there's a plant manager who really has a good feel for this, drives it through the whole plant, does a great job. They leave the company, and the plant reverts back to what it was. But if you were to try to find a model supplier that really has TPS broadly across their plants, it's hard to find.

Mark Graban: So we've made progress as far as talking lean.

Jeff Liker: Well, I think we've learned some of the tools. We've talked about it. We've seen results. We're certainly farther than we were in our understanding, but still well short of truly implementing it as a system.

Becoming Lean in Thirteen Weeks

Mark Graban: I can understand how it would take time to ingrain a lot of that in a culture. Toyota didn't develop TPS overnight. Their culture developed gradually over time. So at some point, is it not fair to expect an American company… There's a company I used to work for, and I'll leave them unnamed right now, that was very fond of saying a plant, quote unquote, “became lean in thirteen weeks.” They would brag about this internally and undoubtedly brag about it to Wall Street. It's not fair to expect somebody to turn around immediately, is it?

Jeff Liker: No. In fact, when Toyota starts a new plant, like they'll open a new plant in Canada, and they're working on one in San Antonio, Texas now for their Tundra truck, they'll have put about two years into starting to develop and prepare the leaders to understand TPS. They'll send them to Japan. They'll work in Toyota plants in Japan. They'll be immersed in it. They'll hire people. They'll train them for months. They'll set them up in a completely lean environment with all the tools of lean.

If you ask a good leader like Don Jackson, who's leading the San Antonio effort, how long it will take the San Antonio plant to really understand lean and live it and follow the Toyota Way principles, he'll say about three to five years. Those are under ideal conditions, where you've hired people from scratch and, day one, you've indoctrinated them into the Toyota Way. They've been to Japan. They have models. They're part of a network of other plants around the US. They'll have a mother plant, which is the Princeton, Indiana plant that's been at this for years. And he would still say it'll take them at least three to five years to really start to get it and understand it.

So if under ideal conditions, with everything in place and all the right leadership and all the right tools, it takes Toyota three to five years, I don't know how a company that has never done it before and never seen it before can do it in fourteen weeks.

Mark Graban: With the fourteen weeks, what we saw was some very surfacey application of tools. Things may have looked different and may have run differently. Okay, they had a kanban system in place instead of relying on an MRP. But I think the one thing your Toyota Way book does so well is lay out the cultural differences and the management practices.

Jeff Liker: Right.

Picking and Choosing From the Fourteen Principles

Mark Graban: I don't see how that could change in fourteen weeks. And it seems like management a lot of times doesn't want to admit that there's a problem in their non-Toyota approaches. If you look at the fourteen principles of the Toyota Way, it seems like people might be tempted to pick and choose and say, “Well, points three, four, and five are some good ideas, but number one, no. We've got to stay focused on the short-term financial goals. We're not going to choose to do that one.”

Jeff Liker: I think that the picking and choosing is a problem. I've heard companies say, “We're going to develop our own system, and we want to find best practices, and we want the best of what we can find in the world from many different companies.” And they piece together a system.

I have mixed feelings, because on the one hand they should be doing that. They should be creating their own system. They should have ownership. They should identify with it. On the other hand, what they often pick and choose are things designed to reinforce their current management system and their current philosophy, which is short-term focused, project-focused, program-focused. So all the best practices they put in place will be a bunch of individual programs that really won't change things very much.

If you take all the principles of the Toyota Way together, what you're trying to drive toward is to become a learning organization. And very few companies are learning organizations. Mostly they're looking at their company as a technical system where we're just shoving in inputs and tools and people, and we want to get products out, and we want to make money. But they don't understand that to be successful long term, they have to actually create a learning community where people are willing to share problems and solve problems and get better every day. That's really the goal of the Toyota Way.

So they can't simply pick and choose and say, “Well, we'll pick kanban, we'll pick this tool, we'll pick this SAP system because BMW used that well,” and shove these in and expect to become a learning organization. It's not going to happen. If they're basically managing through fear and intimidation and replacing anybody who doesn't meet targets, then in that environment they don't have a chance of achieving the Toyota Way.

The long-term part comes because there are a lot of investments you have to make to become a learning organization that take time and don't have an immediate payback. Very often the projects we do with clients on a consulting basis are really intended to teach them. So when we set up a kanban system, we want to teach them what a kanban system is, the power of it, how it can be used for continuous improvement. We're not putting in a kanban system to eliminate inventory. If their only goal is to count how many pieces of inventory are eliminated and the value of that inventory, they're going to miss the whole point of the exercise.

At the same time, anybody who's well trained in the Toyota Production System knows how to get dollar savings. They know how to get labor reductions. They know how to get inventory reductions, and they can do that. And a smart leader who understands he's under pressure to deliver short-term financial results, and who wants to build a long-term learning organization, can find a balance between doing projects that will get the money and then using those projects as ways to teach and develop the kind of culture you want for the long term. So it's not necessarily contradictory. It's when the tools are only used for short-term financial results, and there's no real interest in developing a sustainable culture, that I think there's a problem.

Providing Cover, and the Practice of Genchi Genbutsu

Mark Graban: So if you have a plant manager who's got the right long-term interest in building a lean organization and developing people, what you're saying is they have to provide cover for themselves. They have to keep their job to be able to do that, which might mean focusing on the short-term improvements so they can keep their boss happy.

Jeff Liker: Yeah. The only way the boss can address that, and this is probably one of the most difficult things I see for American companies, is through the practice of genchi genbutsu. We talk about it in The Toyota Way as genchi genbutsu, which is going and seeing and understanding. So if the boss can go and see in the plant and understand that the plant manager is just pulling the wool over his eyes and maybe getting the numbers, but at the expense of building the right kind of culture, then the boss can coach that plant manager.

If all the boss does is look at the numbers, and he goes to the plant but doesn't really see what's going on and doesn't understand what we're saying, then he's not in a position to coach the plant manager. And then the plant manager delivers the numbers and becomes the hero, even if he's doing all the wrong things.

No Clean Metric for a Learning Organization

Mark Graban: We tend to be so metrics-driven. There's not really a good clean metric to say how much of a learning organization you are at this point. Some of these things aren't easily measurable.

Jeff Liker: No, I think you have to go and see. You get a feel for it by being on the floor and understanding what's really going on. And again, that's been the biggest problem we face in working with companies. Sometimes we literally have to drag the senior management out to the plant, if we can. We schedule it ten times and they never come, and then they make decisions without ever really seeing and understanding. But if we can get them to the floor, we can walk them through and point out what they should be looking for when they tour the plant. It's usually very enlightening for them to see the plant through our eyes. Any Toyota vice president can walk through one of the Toyota plants and immediately tell how they're doing in following the Toyota Way.

When Finance Metrics Reach the Shop Floor

Mark Graban: How much of a hindrance is resistance to going out on the shop floor? It seems like American companies tend to be driven more by finance people, quote unquote, and you read a lot about how Toyota has manufacturing people, and how the manufacturing people really have the real leadership positions. Is that something that hampers US companies from moving forward with lean, that at some point you reach a level in the organization where there's just not a good fundamental manufacturing understanding?

Jeff Liker: Well, the problem with the finance part of it is that it gets translated into metrics that go all the way down to the shop floor. If I'm in a department and I'm being judged by pieces produced per worker, or in some plants they'll have a measure that says how many dollars of value am I producing in my department per worker, if that's how I'm being judged, then you can come and talk to me about lean all you want and tell me all the good things I should do and tell me, “Don't overproduce, produce just in time, produce what the next operation needs.” If I know that in doing that I'm going to get beat up for not making the measures, I'm probably going to make the measures, even if it means producing the wrong stuff. I'll produce the high dollar volume stuff. Overproduce, put it in inventory. That's somebody else's problem.

So telling me to do the right thing from a lean point of view, and teaching me these great concepts in the classroom, and then beating me up because I'm not making the numbers, I'm going to make the numbers. I'll say, “The hell with you, I'll do what you're measuring me on,” even though I know it's not the right thing.

Now, the reason that happens is because we have established measurement systems in accounting and finance that are based on the old paradigm of mass production. And those haven't changed, and they're very difficult to change, and it's disruptive to change them. And the people who are in charge don't understand why they need to be changed.

In the case of Toyota, one of the things I talk about in The Toyota Way is a guy, Glenn Uminger, who was hired as an accountant for the Toyota Georgetown plant. Before they let him set up the accounting system, and this guy was a hundred percent accountant, they sent him to Japan, and he worked in a factory and put together cars. Then he did kaizen projects to eliminate waste from the line. He did that for close to a year before they would let him set up the accounting system. By the time he set up the accounting system, he had a really good understanding of the Toyota Production System, so he set up an accounting system that fits the Toyota Production System. Then after he did that, they made him the head of the Toyota Production System office. Here's an accountant who's driving manufacturing improvement. Now he's the head of logistics for North America.

So it's not so much whether you're an accountant or whether your training is in finance. It's whether you have a really good understanding of what's really going on on the floor, how your measures are impacting what's going on on the floor, and whether you understand this paradigm of lean or you're steeped in the old paradigm of get every part you can out of every machine.

Andon Was the Hardest Thing to Teach

Mark Graban: Looking at the fourteen Toyota Way principles, we talked about some struggles with focusing on the long term. Are there any of the other principles that you've found companies tend to struggle with, or principles that are more important than people would tend to recognize at first glance?

Jeff Liker: Well, first of all, I would say all of them are tough. None of them come easy. But a couple stand out. One of them is the principle of stopping when you have a production problem, the andon principle. And I say this in The Toyota Way, that I had interviewed Fujio Cho, who at the time was the president of Toyota, and he had been the president of Toyota in Georgetown, Kentucky. He taught the Americans about TPS in their first Toyota assembly plant in the US.

And I asked him, “What was the hardest thing to teach the Americans?” And he said, “The hardest thing was andon, was to teach them that it's okay to stop when there's a problem and pull the andon cord.” And I asked him, “Well, how did you teach them?” And he said, “I had to go to the floor every single day and say, ‘Please pull the cord if you have a problem.'”

So that again reflects this culture that we've developed that says problems are to be hidden. And they're not to be admitted. If you admit a problem, you're the problem, because you must have caused it. If you're a good worker, if you're a good man, you ought to be able to solve the problem yourself. Whereas in the Toyota system, the whole system is based on people surfacing problems so that teams can solve the problems. And the first assumption is always that the problem is with the system, it's not the individual. It may be with the individual, but the first assumption is with the system.

So stopping the line, losing production, is counter to every instinct we have about producing every part you can every minute of the day.

Reflection, Hansei, and a System You Know Is Flawed

Jeff Liker: And that leads to the other principle, which is the principle of reflection, hansei, and continuous improvement. At Toyota, they believe that reflection is necessary for kaizen. And reflection does come down to a personal issue, which is that each person has to believe that they want to do the best they can. And whenever they do something, they now have an opportunity to learn from what they've done and improve. And that's true at the individual level, for the group, for the plant, for a product development organization. And that's very, very cultural. In Japan, it's actually quite natural. In the US, it's quite unnatural. We're used to charging ahead and solving the next problem, fighting the next fire.

And the idea of stopping and saying, “We just launched this plant. What have we learned from launching this plant so that the next time we launch a plant, things will go better? And what can we do to systematically ensure that the next launch is better than this launch?” We don't do that well at all.

And it's similar to stopping when there's a problem, which then takes you to reflecting, which then takes you to really truly trying to put in a countermeasure that will improve the system. And what you see in Toyota is that they don't believe that you can implement the perfect lean system. They believe the essence of lean is that you implement a flawed system, you know it's flawed, and then over time, through continuous improvement, you make the system better and better and better. And the lean tools are designed to surface problems so that you can make the system better. We think that you should be implementing the perfect lean system, and if there's a problem, it's because somebody didn't do their job right.

Coming Up in Part Two

Mark Graban: I want to thank Dr. Liker for being here with us today on the Lean Blog Podcast. Again, this is just part one of our discussion. The second part will be released as a podcast episode sometime in September. In our next podcast, Dr. Liker and I will discuss applications of lean and Toyota Production System methods in healthcare, as well as approaches to problem solving that can be used in any industry.