How to Do a Lean Transformation – The Toyota Approach

Companies continuously need to improve to survive. Lean can help them with this continuous improvement, so many companies aspire to become lean. The question is, how do you do that? How do you do a lean transformation, or more generally a change management? In this post I would like to talk about what is needed for a company to start their journey to lean. Be warned, it is not easy, and it does require a lot of support from the very top.

What Is Lean?

Example of the American culture?

To become lean, you should know what lean actually is. There are many definitions of lean production around, although I find all of them flawed (except the one that says lean is a different name for the Toyota Production System, but this does not help you much here). Often, lean is reduced to a set of tools, from kanban to SMED. But this is far from what it actually is. In my view, lean is a culture!

This brings up a few problems. First, how do you define a culture? This is nearly impossible. How do you define the <your nationality> culture? Any attempt soon turns into cliches and subsequently turns offensive. America: Hamburgers, flag waving, and guns? Germany: Wurst, beer, and “Nein!“? I think I better stop here before I offend too many of my readers. In sum, it is really hard to define a culture, including the lean manufacturing culture.

Example of the German culture?

Second, how do you measure a culture? To improve, you would need to know where you are, and how much you have improved. Let’s use the example of your nationality again. On a scale from 0 to 100, how <your nationality> are you? What criteria did you use to measure this? Again, it is pretty much impossible to have a quantitative measurement of a culture, although there are a lot of qualitative opinions.

Finally, how do you change a culture? This is very tricky. However, with lean we have it a bit easier than if we would like to change the <your nationality> culture. A corporate culture is often less diverse than the culture of a nation. If you enter, for example, a car company, the mindset of the employees is more aligned than if you would randomly pick people from the streets. It is still quite diverse, however, and the task at hand is not easy.

How Does Toyota Do It?

Before we discuss how to change your corporate culture, let’s have a look at Toyota does it. Initially, the culture was homegrown. Hence, Toyota does not need to change its overall corporate culture. However, they often open new plants, many of them overseas, and they have to convey their culture, including the Toyota Production System, to the new location.

The Transformation of a Foreign Plant

They do this by shifting around a lot of workers. Large groups from the new location are brought to Japan to be immersed in the Toyota culture. Toyota sent hundreds of employees to Japan to learn lean. This includes not only bigwigs, but also a lot of frontline operators. The workers work in a Japanese Toyota plant to learn and understand how Toyota ticks. Such a stay is often four weeks, maybe more.

When these workers move back to their home country, even more Japanese workers come along. Most native managers in the new plant will have a Japanese “shadow” to coach and mentor them on how things are done. Toyota sends out hundreds of coaches from Japan to other locations. Many Japanese frontline workers will work alongside their foreign colleagues to also transfer the culture to the new location.

Even then, it does not always work out. Between 2000 and 2010, Toyota may have expanded too quickly, which may have lead to the frontline scandal with their gas pedals. CEO Akio Toyoda admitted that growth at Toyota “may have been too quick” (but he may have been more worried about the technical side). But overall, their approach works. Toyota plants overseas often have much better quality and efficiency than the plants of the native competitor.

GM–Toyota Joint Venture NUMMI

The famous example is NUMMI in Fremont, California, a GM-Toyota joint venture. It was originally a GM plant, and it was the worst of all GM plants. Even the unions said so. The culture was hostile, and everybody was miserable. Eventually the plant was closed. Two years later, it reopened as NUMMI together with Toyota. They even hired their workforce mostly from the previous GM employees. Many were worried about a repeat of the hostile culture. However, Toyota was able to turn it around, making NUMMI a place the employees were proud of. Quality and efficiency were on par with Japanese plants, and far, FAR better than any other GM plant. Absenteism went from 20% to 3%.

Why the Toyota Approach Does Not Work for You

Say Hello to your Lean Experts!
Say hello to your seasoned lean experts!

If you are reading this, trying to find out how to transform your own plant, it feels impossible. You would need a plant that already has this culture to learn from. You need hundreds of people of all ranks who have their lean culture deeply engrained. I don’t mean knowing how to SMED or kanban, or having a Six Sigma black belt. It means to live and breathe lean. From your point of view, it just looks like cheating, because Toyota has all of this but you don’t. Toyota sent six hundred employees from NUMMI to Japan for a month of training, and another four hundred coaches from Japan to NUMMI for months. Clearly, this is not a viable option for you.

Why You Probably Can’t Afford Toyota’s Approach Either

Piggy BankBefore I go into the options you actually have, and before even an example on how NOT to do it, I would like to talk about the effort Toyota takes to bring its culture across. You have multiple larger groups visiting Toyota in Japan. Six hundred people from the USA all spend four weeks in Japan. While they do work and generate value, it is probably less than they would working normally at home. They also need coaching, mentoring, and training by Japanese employees. This includes frontline workers who train their foreign colleagues. You surely know that when you hire a new person, the first few months it will cost you more than what you get. Often, after six months or so, the performance is good enough to be comparable to a seasoned worker. It is somewhat similar when Toyota trains foreign workers in Japan.

I estimate that including the additional work for the Japanese hosts, it is similar to having six hundred workers for a month getting paid but bringing no benefit … all of this while on a business trip to Japan. Later, when additional Japanese workers and managers are sent to the foreign country to help the natives, they are also not quite as efficient as at home. Having a shadow for most managers is particularly expensive. Four hundred Japanese coaches stayed in the USA for months, or even longer than a year.

Just do the numbers in your head. The salary of six hundred people for one month, half of another four hundred people for a year, including many expensive managers, plus travel or expat expenses for all of them … it is a lot of money! Even if you had access to four hundred lean experts, you probably could not afford it. I do this calculation to show you how much it is worth to Toyota to transfer its culture to a new plant. And, yes, it does cost Toyota a lot too!

Sneaky Consultant $ to CentHence, you need cheaper options. This is possible, although it will take longer. However, it will still be quite an investment in time and money. If done right, it should pay off through better quality and efficiency. See it as a large development project. Of course, if the price is your main issue, you will be able to find consultants that promise you lean for cheap. “Just take two lean experts, preferably freshly graduated from university since they are cheaper, and give them the task to transform your one-hundred-fifty-location-worldwide corporation with 50 percent of their time.” If you believe that, then I can’t really help you.

But I will show you better in my subsequent posts. Since I am a fan of learning from mistakes – preferably the mistakes of others – I will first show you how it will NOT work. Until then, go out, do lean where you can, and organize your industry!

Series Overview

6 thoughts on “How to Do a Lean Transformation – The Toyota Approach”

  1. NMUK was established in 1985. I was No.72 joining, as one of a group of 24 Supervisors who followed the hiring of a few Directors, Managers and Engineers. Supervisors were 50:50 ex Automotive or elsewhere. Engineers were all ex UK automotive. Early learning experiences in Japan included the high respect for standards in all aspects of the business. Back in the UK I found that in just about every aspect of my zone – tools, material, environment – engineers wanted to stick with the inferior stuff used in the UK …except for the IE who supported the given Standard Times! Engineers regarded it as clever to source as cheaply as possible – perhaps paying half the price for a tool that lasted 20% as long. In the Paint Shop we started with a few experienced sprayers, but within a couple of years found that those who came to us with no experience, but the right state of mind, were the best performers. It was the same with graduate trainees who spent time actually making motorcars before becoming engineers, purchase controllers etc.

    Once we were up and running there came the time for the first annual budget submissions. Calculations were made and submitted ‘up the hierarchy’. Experienced ex-Automotive managers inflated the amounts by what, in their experience, would get deducted before approval. The MD at the time was Japanese and the budgets were signed off without demur. At the end of the financial year – having spent broadly what had originally been expected – there were surplusses, and the Managers expected praise. They didn’t get it, as a resource had been secured which hadn’t been needed – and was incurring interest. The following year budgets were not inflated …but were cut anyway!

    As a business though, we learned, and it became Europe’s most efficient – and effective – automotive plant, while most of the UK’s ‘traditional’ car companies sadly withered.

    We are all guided by our paradigms, so effecting a transformation will always be more difficult than starting afresh with a ‘clean sheet’. Its even worse when a business has had a history of failed initiatives – probably because results were expected too soon. It takes years to change the culture. Birth is commonplace, resurrection is not.

    When I left NMUKAs a consultant I always sought to work on a broad front – not promising ‘jam tomorrow’ but working on hearts and minds whilst putting money in the till.

  2. Great post Christoph. Your description of lean is the best one I have seen yet. As a senior supply chain major, I’m very excited to be getting into this field now because of how vastly lean culture is growing. When phrased as “changing a culture,” it seems nearly impossible, but learning about Toyota and how they essentially import their culture into new plants puts it in an entirely different perspective.

    Thanks for the great insight!

  3. Great Post. Whenever I learn about Toyota in my supply chain classes their work in lean manufacturing is held in high regard. Their method of changing corporate culture sounds like such a great idea it is unfortunate to hear that it is extremely costly. I can see why many companies decide to outsource through a third party. Although company culture cannot be transferred efficiently it is not as costly.

Leave a Comment