Don’t Get Lean Wrong

April 1, 2010
What Toyota teaches us about lean gone wrong

According to a Feb. 24 Los Angeles Times opinion column written by McKinsey & Co. Management Consulting former director Kenichi Ohmae, “Toyota has built a strong presence in the United States by serving its consumers well and doing what the U.S. government has wanted. Now it has stumbled badly largely because its greatest strength—the Toyota way of ‘accumulation of small improvements,’ or kaizen philosophy—has turned out to be a weakness in the age of complex electronic engines.”

He goes on to say, “In an average Toyota, there are about 24,000 inputs and outputs, with as many as 70 computer chips processing information and sending it on to other chips to operate the engine control units. It is a very complex system. Such complex systems are a problem these days for all auto manufacturers—Germans and Americans as well as Japanese—because about 60 percent of a modern automobile is electronics.”

Ohmae, author of The Mind of the Strategist (McGraw Hill, 1982), concludes: “What we see with Toyota in particular is that this new electronic complexity has overwhelmed [the] concept of kaizen … that has made Toyota such a high-quality brand worldwide. This company has so perfected the practice of kaizen from the assembly line on up that it has lost the big picture of how the whole electronic engine—and thus overall safety—works.”

In 1982, when Ohmae wrote his book on management strategy, the Japanese were perceived as masters of the art of efficiency. In a chapter on Japanese management, Ohmae said, “In effect most large U.S. corporations are run like the Soviet economy. Many are planned for three to five years, with their managers’ actions spelled out in impressive detail for both normal and contingency conditions.” He contrasts this with Japanese corporations of that era, which he described as “organic and entrepreneurial as opposed to mechanistic and bureaucratic.” Now, faced with Toyota’s current mishaps, Ohmae might observe that to some degree the situation has reversed. Certainly most body shops are highly entrepreneurial and only the largest consolidators might be called “bureaucratic.”

While lean certainly delivers fantastic results for companies that do it well, it might be time to stop following Toyota’s example—
at least, the more recent expression of it.

Ohmae’s perspective has been influential for more than 30 years. The management book In Search of Excellence (Harper & Row, 1982) had a major impact on U.S. business, and its co-author Tom Peters became a major voice in business management. Peters—who went on to write Thriving on Chaos (Knopf, 1987), Liberation Management (Knopf, 1992) and The Pursuit of WOW! (Macmillan, 1994)—was employed by McKinsey & Co. and was mentored by then-director Ohmae. Even in 1982, lean was identified as common practice among America’s best-run businesses, as evidenced by Peters’ eleventh Excellence chapter, “Simple Form, Lean Staff.” Not surprising, given that under Ohmae’s direction, McKinsey & Co. incorporated this dictum in its consulting activities.

Today, many American body shops are enamored with Toyota’s lean production philosophy, based on the concept of continuous improvements. Lean has been on the lips of nearly everyone in this industry for some time now, and some shops are starting to figure out how to sustain the lean practices they’ve adopted. While lean certainly delivers fantastic results for companies that do it well, it might be time to stop following Toyota’s example—at least, the more recent expression of it: Beginning around 2002, according to recent news reports on Toyota’s recalls, the auto manufacturer shifted its emphasis from quality as a top priority, to profit as the predominant consideration.

Continuous improvement became continuous cost-cutting at Toyota. The same inexpensive accelerator pedal on a Corolla could be found on the pricier—and presumably higher-quality—Lexus. This may sound fine to shop owners who imagine that “lean” equals “cheaper.” But Toyota dealers are now fixing drivers’ pedals with an expensive stainless steel reinforcement bar. As of Feb. 13, about three million bars had been shipped. So much for cheaper.

The best shops I’ve visited through the years have always kept quality as their top priority. It goes without saying that quality in collision repair means ensuring safety for the vehicle owner. Imagine what it could cost your shop if your repair resulted in run-away acceleration, or a fatal failure of any kind. Imagine what Ohmae, with his strategist’s perspective, might tell you: Don’t abandon your continuous improvements as you strive for lean production. But don’t lose sight of the big picture, either.

Tom Franklin, author of Strategies for Greater Body Shop Growth, has been a sales and marketing consultant for more than 40 years.

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