If you live in North America the automobile has influenced your life, the shape of the cities, the design, the movement, something about the autos has influenced you. When you look around the cars – there are many models and manufacturers and at one time the big three GM. Ford and Chrysler sold the most number of vehicles. Now there are a fewer manufacturers including Toyota. How it arrived and became the number one car seller and has remained in top is a interesting read and is the subject of How Toyota Became # 1 by David Magee, Penguin Portfolio Books, NY, 2007. The reason why books such as this one are important is as companies grow systems develop for very good reasons, but the systems develop tend to lessen the great innovation and energy which the founders saw as the problems with the competition. In other words the larger the company develops the more it looks like the old competition it thought was not doing the job of providing value to the customer.How does Toyota not become like its competitors?

The Toyota company was founded by the Toyoda family who first experience success in the textile industry and made the transition to automobiles. Many of the lessons, Mr. Toyoda learnt in textiles were transposed to automobiles. The biggest lesson is the strive for continuous improvement. The improvement is done through people suggesting a better way and being rewarded with cash, as well as studying and adjusting to see the most efficient and effective method. There is a story about how clean the shop floors of a Toyota factory are – it is because Toyota has and continues to work on it. Most of the parts come in recyclable, returnable packages or if suppliers want to supply Toyota they and Toyota come up with solutions to packaging. In addition, if there are empty containers they are stacked up to go back to receiving, where the package is sorted into bins which can be recycled. The net result is little waste, plant cleanliness is sustainable and Toyota saves money on garbage pickup. The other auto companies are no where near where Toyota is.

Continuous improvement applies to all parts of the business including the time it takes to do manufacturing. People think there is a better or easier way, this can include what it some steps were eliminated and it made sense to do the change. For example, the workers were taking 8 steps to do one part, a better way was to send the materials to do the same thing in 4 steps. One of the principles is thus if a process or an activity does not add value, get rid of it. This principle goes throughout the company from the cafeteria to the factory floor to corporate office.

Another principle is to speak up immediately when problems are recognized and ask why 5 times to get to the root cause. The process does not ensure there are no mistakes that get through, but it does ensure is people are trying to solve problems or do no harm.The reasons for the 5 whys it ensures the company is trying to solve the problem from not happening again, not a quick fix solution. Once the root cause is discovered the problem can be fixed.

Customers like pleasant surprises or getting more than expected from the advertisement. When the company is delivering the value, customers will tell everyone. A great example is the Lexus division. Those who drive or test drive the Lexus will like it as the car is built to be the best vehicle in its class. Within two years of launching the vehicle the Lexus was the largest luxury brand.

Linking to dividend paying stocks, the reason to examine good companies is to determine why are they consistently good. If it is their people, but people change; is it their culture, but culture can change. Toyota stresses the entire package not just one or two or three of their principles. It helps when the company has the backing of the family and other companies have Wall Street pressures on them, but that is a reality. In part 2  the column will look at more reasons.

There are more questions than answers, till the next time – to raising questions