It's All About Efficiency
It has finally happened: Toyota this year has surpassed General Motors as the world’s top-selling automotive retailer. And it boils down to one core competency, one that is an integral result of many other core competencies. Can you guess the answer to the riddle? It’s EFFICIENCY. The comparison of Toyota’s efficiency achievements to a puzzling question is fitting. Efficiency IS a puzzle. You have to have the pieces of several other outstanding operations in order to achieve it. Yet, it’s the golden ring everyone wants to achieve by approaching its improvement at as if it were a sole entity.
Businesses are using various methods to improve efficiency, with a recent study indicating these numbers (source, Violino, 2007):
• Business management frameworks like Total Quality Management: 44%
• Business activity monitoring: 42%
• Balanced scorecard: 36%
• Six Sigma: 33%
• QPR: 17%
• Malcolm Baldridge: 16%
All of those methods have validity, but the answer to the riddle of efficiency is better found in the daily practical approaches companies like Toyota use in their daily operations.
- Relentless focus on improvement. Toyota, as a Japanese company, calls it Kaizen: “Continuous, incremental improvement.” The company is known to have a much shorter product redesign cycle than its competitors. This is largely due to the front-line commitment to innovation. For example, an M.I.T. study shows that the average Japanese auto worker submits 64 ideas per year, compared to the U.S. average per worker of .4 (and no, the decimal was not a mistake before the four).
- Customer satisfaction is King. Toyota has not gone about business the past few years with the mantra, “Surpass GM, Surpass GM.” In fact, as one writer noted, Toyota has been very humble about the prospect (and now the reality) of doing so. “Toyota doesn’t care if it surpasses GM. Toyota cares about quality. Toyota wants to be number One with the customer”(Belew 2007).
- Cutting Edge Technology: “Our businesses today rely on technology: that’s a fact,” says Greg Rich, Microsoft Certified System Engineer (www.netricks.com). “How much production have you lost out of your employees due to technical failures?” A major health care agency discovered how important technology can be to their efficiency. What used to take hours by several employees, home health care worker scheduling, was efficiently managed with specialized software to take only minutes per day.
- Inventory Control. Dell Computer has been the market leader of efficient inventories, with an average turnover of ever 3.8 days due to their customization. “In today’s tough business climate, many companies succeed by running financially efficient operations. That means they keep costs down and reduce the need to borrow by timing their inventories and speeding up collections of what is owed them”(Scherreik, 2002)
- “A Cumulative Process…” Efficient companies do not focus on efficiency; they focus on the pieces of the puzzle that complete efficiency. “A company’s success is the result of a cumulative process, made u p of right decisions and rigorous work. By no means can it be achieved by a stroke of luck by the sole effect of a revitalizing program, or through the incorporation of innovative technologies. It is required to operate with disciplined people, disciplined thinking, and disciplined actions. This means efficiency (http://www.market-ing.com.mx/en/empresas-e.htm).”
As Peter Drucker is famous for, he summarized this topic, well, efficiently: “Being effective is doing the right things, while being efficient is doing things right.”
Belew, Bill, 14 Reasons why Toyota will surpass GM next year, Rising Sun of Nihon, April 2007
Scherreik, Susan, How efficient is that company? Business Week Investor, Dec. 23, 2002
Violino, Bob, Frameworks boost business efficiency, www.optimizemag.com, 2007