Surviving an inflection point
There is little doubt that the automotive industry is in the midst of historic change. In fact, you could say it is going through what Andy Grove called an “inflection point” in his insightful book “Only the Paranoid Survive”. Electric and autonomous vehicles, on-demand transportation, government intervention and an ever-growing field of “start-up” competitors have the potential to disrupt the industry in a way we have not seen since the introduction of Henry's moving assembly line, and no one knows what competition will look like 10 years from now.
My crystal ball is a little cloudy at the moment. However, I had a similar experience, albeit on a more limited scale, while working at Ford during the Great Recession. Alan Mulally's Working Together management system allowed Ford to focus the company and successfully navigate that difficult and extremely uncertain period.
That experience was in the background of a recent discussion I had with my friend Paulo Couto, senior vice president of engineering and technology at TechnipFMC, about the incredible speech Akio Toyoda gave at Toyota's Financial Results Conference in May 2018. At the conference, Toyoda-san said the industry was “entering an era of profound transformation, one that comes only once every 100 years. Technology companies, our new rivals, with a speed many times greater than ours and backed by abundant resources, continue to invest aggressively in new technologies”. He also said he did not have all the answers. “A life-or-death battle has begun in a world of unknowns”. He went on to say that Toyota must “expand its investment in new technologies and new fields” in order to compete. Essentially saying that, since we do not have all the answers, we need to experiment in order to learn. But these experiments in new technologies will not be cheap.
Some of Toyota's competitors facing the same challenges have chosen to close plants, lay people off, exit market segments and cut back on new product introductions. But Toyoda seems to have a very different idea: “The Toyota Production System, or TPS, and our approach to cost reduction are Toyota's true values. In every workplace, there is a call to action”. In product development, “TNGA has now entered its second phase. While maintaining the best designs and the best performance achieved in the first round, we are now concentrating on activities to reduce costs. They (TNGA and TPS) are what give us a competitive advantage, because Toyota's true character is endless continuous improvement. “In other words, instead of laying people off, Toyota will leverage the capabilities of its people to innovate, solve problems and eliminate waste to generate the capital needed to move the organization forward”.
So when my friend Paulo recently visited Toyota's Kyushu plant, he saw it as a chance to test Toyota's management system and its much-vaunted strategy deployment capability. He wanted to see what the manufacturing people knew about this strategy, how they felt about it and, most importantly, how they were executing it. Everyone spoke enthusiastically about the strategy and was eager to show him the detailed plan of how their area, or how they personally, were contributing to the plan. For example, how the stamping area would use TPS and problem-solving capability to launch three new vehicles without adding people or increasing capital expenditures. Or how the assembly line would reduce takt time and shorten the line by 30 meters to accommodate the new models under the same constraints. And all this on top of their annual improvement targets. Paulo was completely impressed by the level of transparency, alignment and attitude of everyone, from the president to every corner of the company.
I know my sample size is limited. In fact, it is just one. However, the ability to connect strategy to execution through an effective management system has been a hallmark of Toyota. Toyota's long, learning-intensive approach to challenges and its unmatched ability to focus the company on a common set of objectives is why they will probably emerge even stronger after the disruption. Not because of any specific initiative or technology developed in response to the current environmental challenge, but because of a set of core values and a management system that links strategy to execution and that has been continuously improved over many years.
Every industry, and in turn every organization, will eventually face its own inflection point. How will your team deal with it? My advice is not to wait until it happens to answer that question.
