Books, papers, and essays have been written about the way Toyota handles its manufacturing processes. The practices have long been admired as a model for other companies to follow. Called the Toyota Production System, it is one of the success stories about the lean manufacturing process. Lean manufacturing simply aims to minimize waste as much as possible because in this industry, and other manufacturing-related industries, it is very easy to accumulate it. When mistakes are made, waste can build up unnecessarily. Here are three things a business looking to implement their own lean process can learn from Toyota.
Continuous Process Improvement
As successful as Toyota has been, one of its operating pillars is definitely continuous process improvement, also known as kaizen. This means that employees and staff members are executing their duties, and additionally, they are keeping an eye on possible ways in which current processes can be further improved. The operating process also requests all team members to be devoted to the company on 100%. When everyone is on the same page, it translates into a true team environment where the goal is the same, and the method to get there is the same, too. One of the reasons why Toyota is cited as a best practice so often is that the quality of their products does not deteriorate over time.
How to apply it to your business?
Most startups and small businesses operate in a fast moving environment and not enough emphasis is put on processes and their continuous improvement, Although, this may feel right if the product launch is approaching, the revenues are far from the forecasts presented to the investors and the team is close to burning out, in fact, it is having robust processes and analytics in place that can dramatically improve the situation.
Running a technology startup is always a challenge, especially in the early days when the brand is unknown and it is hard to attract top talent. Back in 2015 when Transformify was founded, it was decided that the company would be a 100% remote and would provide equal job opportunities to everyone regardless of gender, location, race or personal situation thus creating jobs for people in need or those living in high unemployment areas. The concept attracted lots of candidates and the first team of freelancers working remotely around the world was a fact in less than a week. It was not enough, though. More than a year was needed to have all process and project documentation optimized and organized so they were simple and intuitive for the team to follow. Selecting a good project management software is the first step followed by endless reviews and continuous improvement as the organization grows.
Where to start?
If your startup or small business is still short of written processes, it is time to have at least the basics in place. Will everyone be encouraged to log tasks and who will be reviewing, prioritizing and approving them? At first, it may look like an administrative burden but the numbers will surprise you. In some cases, dedicating resources and cash to low priority tasks or tolerating low quality may result in burning cash too fast and low return on investment. For a startup, this will probably mean more funding rounds, longer go to market time and potentially unhappy customers and investors.
It is rare that the processes will work from the first attempt. Reviewing them regularly and listening to the feedback of the team will help to continuously improve them over time.
Many industrial companies worldwide have incorporated Toyota's 5S system into their processes in an attempt to improve their organizational practices. The five Ss in 5S in Japanese are Seiri, Seiton, and Seiso as well as Seiketsu and Shitsuke. In English, they translate to sort, set in order and shine as well as standardize and sustain. The 5S System is thought of as a visual management system. The goal is to maximize efficiency because it leads to maximized profit. Through observation, analysis, and collaboration, successful implementation also leads to less waste. Indirectly, it also helps employees and staff members feel that they are making worthwhile contributions.
It is easier said than done, though. Integrating the 5S system in your startup or small business is likely to be a challenge. Still, you can do it by adapting the principles to your industry, size and stage of development.
The First ''S'' - Sort
In a startup world, ''sort'' can be translated to separating '' must have'' from ''nice to have''. Quite often, money, time and effort are invested in building product features that are not necessary at all. Pivoting from one idea to another too quickly prior to analyzing the root cause of the problem is widespread, too. Reality rarely matches the expectations, including those pitch decks that were presented to your investors. Even if the product launch was not as successful as planned, this doesn't necessarily mean that you need to pivot immediately. Gather data, analyze it and try to understand why the results are what they are. It may be the wrong marketing channel, inadequate optimization of digital marketing and social media campaigns that end up targeting irrelevant audience, a brand statement that actually results in annoying the users and losing their trust, product flaws, technology setbacks and much more. Pivoting shall be the last step to be undertaken only if after analyzing all data your management team and advisors are still convinced that there is no other course of action.
The Second ''S'' - ''Set in order''
Setting in order has many aspects. Initially, it will be your processes and product development road map that will require attention, to be followed by your product development roadmap and go to market strategy. Each of them will require endless reviews and continuous improvement. Having them off your ''To do'' list after the first iteration will simply not work. The hardest part will come after the product launch when the pilot users provide their feedback. Beware of a common trap - some user feedback can be actually misleading if the representative sample is not big enough.
The Third ''S'' - ''Shine''
It is your product, marketing and PR strategies that need to shine for your startup to be successful. People relate to people and the story of your brand and what it stands for can be your ''unfair advantage''. Think about your brand identity, how to differentiate your product from the competitors and how to reach out to your target audience. A/B test different marketing channels and polish your brand to perfection until they truly ''shine''.
The Fourth ''S'' - ''Standardize''
Standardize and automate your processes as much as you can. From automated QA tests to seamless checkout process to standardized customer support, it will save time, cost and effort and keep your customers happy. Have you ever wondered why most enterprises, if not all, have standard operating procedures ( SOP)? The reason is simple - for a business to scale and grow, everyone needs to know what is to be done and how.
The Fifth ''S'' - ''Sustain''
Depending on the source, the startup mortality rate is as high as 97 %. We have all heard endless stories of startups that raised hundreds of millions of dollars only to close shop when least expected. A notorious example, Theranos, was valued at USD 9 billion at the peak of its glory and no one believed that it would cease to exist shortly after.
Why so many startups and small businesses fail to build a sustainable business?
A single reason would make startup founders' and business owners' lives much easier but unfortunately there are too many of them. Let's start with what is sometimes called the ''VC business model''. Such companies are pushed to grow fast and raise many funding rounds one after the other which allows early investors to exit and achieve their target ROI ( return on investment). Quite often, such startups end up having no clear business model, let alone a sustainable business model. As they are cash flow negative, failing to raise the next funding round timely, may mean that they cease to exist.
The next popular reason is being too slow to adopt new technologies and falling behind the competition. No one expected Kodak to file for chapter 11 bankruptcy protection in 2012. After all, the company was a market leader for decades and had almost 20 years to respond to the adoption of digital cameras by its previously loyal customers. Even more surprising is the fact that Kodak had access to top experts and financial resources only a few competitors could afford to invest. Kodak's management was blinded by the considerably thinner profit margins on digital cameras early on and decided to back further investments in film and photofinishing services.
As a senior vice president and director at Kodak said, "We’re moving into an information-based company, but it’s very hard to find anything [with profit margins] like color photography that is legal". Souce: betanews
Well, he was wrong.
Technology moves faster than ever and many startups find out that someone is about to launch soon the product that requires 2 more years to build on their side. In such situations, there are 3 possible strategies:
(i) to learn from the mistakes of the competitor and launch an enhanced product;
(ii) to pivot, which may require to raise more funding;
(iii) to completely abandon the project if investing more cash and effort is too risky and the potential return on investment is questionable.
Being dependant on a partner, a single big vendor or customer is also a common reason. After all, even big multinational enterprises like Huawei are not immune to this thread. Shortly after posting a record USD 107 billion in revenue for 2018, Huawei faced an unprecedented thread as the company was no longer allowed to rely on Android which was already an incremental part of its mobile devices.
How to protect your business from such dependencies?
It is easier said than done. In the early days, it makes sense to use a high-quality product or service that has already gained the trust of the potential buyers. This strategy shortens the go to market time, increases the chances of a successful launch and in most cases, requires less funding versus building in house. It is a classic ''buy versus build'' decision. By the way, this was the decision of Huwai that launched their mobile devices relying on Android. Back in time, it was a very reasonable decision that resulted in revenue growth and increasing market share worldwide. However, Huawei was not standing still. The company was preparing for the worse and started developing their own operating system early enough to be able to respond to a potential threat.
As a startup or a small business is highly unlikely to have access to the same resources as Huawei, it is advisable to regularly perform a WCGR ( what could go wrong analysis) and be prepared for the worst case scenario.
Within Toyota's two pillars of continuous improvement and the 5S System is respect. Process, theories, and employees are highly respected. People and teamwork are seen as incremental and their efforts are recognized. Ultimately, it can be argued that human capital is Toyota's hidden advantage. 5S System and continues process improvement rely on employees observing the processes and suggesting potential ways to improve them.
Companies aiming at organizational excellence and efficiency often turn to Toyota's practices. After all, when a successful and efficient model for running a business has been created, it is worth studying and potentially applying to your small business or startup..
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