Takao Sakai, a Lean management expert and author of The Secret Behind the Success of Toyota, visited Riyadh in December 2018 to attend the inaugural Four Principles Kaizen Awards.  In an exclusive interview with Opening Doors, Mr. Sakai explained his family links to the Toyota Way; how Kaizen principles can help to deliver success for businesses across Saudi Arabia; and the key moves any organization can make to secure enduring profitability as the fourth industrial revolution approaches.

Q: Your great grand-uncle, Dr Kotaro Honda, worked with the founder of Toyota, Kiichiro Toyoda, from its earliest days to the 1950s.  How proud are you to be delivering the message of the Toyota Way all these decades later?

About 80 years ago, when Toyota Motor Company was a tiny start-up in rural Mikawa province, in Japan, Kiichiro Toyoda had every reason to give up.  He faced difficulties with finance, technology and available talent.  Technology was the major bottle-neck. Japan had been trying to catch up with the West since the late 19th Century, but it still lacked the knowledge for industrial-scale production.  Kiichiro went to see Professor Honda, my great grand-uncle, in Tohoku University, to ask whether it was possible for the Japanese automobile industry to catch up with Ford and GM, who dominated at the time.  Dr. Honda, who was from the same province as Toyoda, replied: “Of course we can,” reflecting the ‘can-do’, entrepreneurial spirit of Mikawa culture.  Honda went on to help Kiichiro personally in his efforts to achieve his business ambitions, and he also sent many of his colleagues and students to work with Toyota.  Today, more than 80 years later, Toyota has global revenues of US$ 260 billion and profits of US$ 20 billion.

Toyota still has that Mikawa spirit of creating something from nothing.  We believe in and nurture the power of people’s creativity and intelligence to create and deliver value for society.

The Kaizen principles behind what became known as ‘The Toyota Way’ have not changed for centuries.  It is a very practical and universal philosophy.  It can be applied to any business, in any industry, delivering real value while simultaneously creating profit and steady growth.  Our way works in any country or society, adopting a scientific approach that sees facts first and regards people as assets to help create value and profit.  I am proud to have the chance to spread this idea around the world.

Q:  Do you think Dr. Honda would be surprised at just how far the Toyota Way has spread around the world?

Yes, of course.  But I also think he understood the universal application of his ideas right from the outset.  Dr. Honda helped a variety of industries in the 1930s and 1940s, not only to provide knowledge and innovation, but also to nurture and enable talented individuals to tackle problems and drive innovations for their respective industries.  He nurtured leaders who can think and use knowledge purposefully.

In the Kaizen philosophy, this is called Hito-zukuri – the process of creating people who can think by themselves to keep delivering better products and process.  In the end, it is people’s knowledge and creativity that create value for us, and that concept is universal in today’s knowledge-based era.

Dr. Honda also said that “everything needs to be purposeful” and Kiichiro Toyoda’s idea was always purposeful.  He wanted to “fill every road in the world with cars made by Toyota.”  His mission was clear.  Eighty years later, if you see the current state of the world’s roads, Kiichiro’s vision was realized to some extent.  But Dr. Honda and Toyoda would still say “it is not yet enough – we need more.”

Q: Has the way Lean management is implemented changed or advanced over the years you’ve been involved?

Yes, it has.  Lean management in the West tends to focus on the Toyota Production System (TPS) and the Gemba concept of continuous improvement.  But The Toyota Way includes other aspects of business, such as market research, product planning, design, product development, and research planning.

In Japan, I teach the entirety of the management system.  Some companies then quickly understand that Gemba will not always bring them to the ideal state – the real Toyota Way includes value creation by design and development (TPD) alongside value-mapping techniques (TPS).  Product- and service-level design and development are critical to make a whole company’s lean system.

Q:  What are the biggest differences you’ve seen between the start of your career and now?

I began my career in Nippon Telephone and Telegraph Corporation (NTT) just as the internet was starting to emerge.  Back then, NTT had the largest market value of any company in the world.

I suggested to the head of the lab that NTT should establish a new organization to create tech products to sell in the internet era, using Toyota’s engineering system to create and deliver the value and profit.  But at the time, nobody could understand why we would do that.

Today, for many start-ups around the world, the de-facto standard organization structure is the Heavy Weight Product Management (HWPM) system – a term coined by Kim B. Clark at the Harvard Business School to describe Toyota’s Chief Engineering system.  And today I’m still explaining to old-fashioned Japanese companies the same things that I said to NTT all those decades ago.

Finally, though, some companies are now starting to implement the full Toyota Motor Corporation management system, not just Gemba, to try to make their organization better.

Q:  What, in your opinion, elevates Lean management above other business improvement methodologies?

Great question – and one that’s very important, because I’ve seen so many cases of Western-style business improvement methodologies that are harming Japanese companies.  That’s why I wrote my book about Toyota’s real management system.

Lean management is still very important.  Everybody in every organization needs to learn Lean thinking and techniques.  But Western-style business improvement methodologies, which are still widely taught in business schools, need alternatives.  The Toyota total management system, including TPD, is the strongest candidate.

The Toyota management system is based on focusing on the process to create value for the customer – and that involves both people and machines.  For example, in a factory setting the production machinery is designed by production technology engineers who have the knowledge to create the product duplication process with minimum cost and capital.  The machine operator will also do kaizen of his assigned process to make it better.  Someone’s job is not just do what they are told to do, but instead to contribute to create the ideal process for the best possible outcome.  The same principles are then applied across every aspect of the business and over time the organization accumulates new knowledge and capability to grow.

This accumulated organizational knowledge is the real asset of your company – but it is not represented in its financial statements.

In Toyota management thinking, intangible assets such as people and processes are regarded as real asset.  The focus is to accumulate organizational knowledge about product, process and people’s capability – the three key intangible assets of every business.  Toyota is successful because it creates intangibles through purposeful organizational effort.

Q:  What makes Lean management such an appropriate fit for the Middle East?

Toyota management is versatile, scientific and objective.  It also encourages people’s creativity, and organizational knowledge accumulation, to keep delivering value for the customer.  This system can be applied to any organization, in any culture, in any country.

By investing its wealth from the oil industry into the people that produce products, services and experiences that will sell in the world market today and for decades to come, the Middle East can further strengthen its position.  Knowledge-based industries can be built anywhere: Toyota started from nothing in the most rural area in the center of Japan.

Q:  Do Lean principles need to be adapted to the Saudi Arabian context, or can the same principles be applied everywhere?

I am quite new to the Saudi Arabian context, so I need to learn about the people and culture, but I can say that the Toyota Way is very versatile.  American, Chinese, Korean, European and Latin American business have all used it successfully.  I’d highly recommend every organization in every country to learn this sort of value-creation science.

Q:  As technology and things like artificial intelligence advance, do you think Lean management will remain as relevant to businesses over the next 20 or 30 years as it has over the last 50 years?

No matter what technology becomes available, it is people who create the value and buy the value.  Technology is a tool, a means to create the value.  The Toyota Way is very versatile for the information/knowledge value era.

Q:  Have you been aware of the work Four Principles have been doing across the Middle East, and how encouraged were you by the quality of winners at the Four Principles Kaizen Awards?

I’ve been very impressed by Four Principles and the work it is conducting, and I’m pleased that the Four Principles Kaizen Awards were a major success.  The winners all understood the underlying concepts of Lean management.  Hopefully, together we can help them to reach the next level in their Lean management journey over the next few years.