S2E6 - True North Values: Continuous Improvement, Respect for People & Lean Leadership

In this episode, George and Tom explore the meaning of True North Values through the lens of Toyota’s philosophy and Lean leadership.

At the beginning of the episode, Dr. Jeff Liker shares insights from his in-depth study of Toyota, explaining how its philosophy is built on the two inseparable pillars of Continuous Improvement and Respect for People. He discusses Toyota’s five foundational values—Challenge, Kaizen, Genchi Genbutsu (go and see), Respect, and Teamwork—and clarifies that True North is not a quarterly metric or financial target, but a guiding ideal. Dr. Liker emphasizes that Lean is not about cost cutting or headcount reduction, but about long-term competitiveness, customer satisfaction, innovation, and developing people.

George and Tom expand on these ideas by challenging common misconceptions about Lean as just waste elimination. They discuss the importance of going to the gemba, developing people through meaningful challenge, and aligning leadership behavior with long-term operational excellence.

Additionally, George and Tom introduce the OW64 App, a practical tool for structured goal achievement and leadership development. The OW64 App can be downloaded on the App Store and Google Play Store, or you can learn more at OW64.com.

⏱️ Timestamps

00:00 – Dr. Jeff Liker on Toyota’s philosophy and leadership model
 01:02 – The two pillars: Continuous Improvement & Respect for People
 03:06 – The five core values: Challenge, Kaizen, Genchi Genbutsu, Respect, Teamwork
 04:43 – Go to the Gemba: Go and deeply observe
 07:42 – What Lean really is (and isn’t)
 12:01 – The danger of “war on waste” thinking
 14:03 – Everybody improving every day? The reality
 15:21 – True North is not a number
 16:18 – Pursuing impossible goals
 18:13 – Challenge, tension, and leadership growth
 20:19 – Process breakdowns and leadership responsibility
 22:14 – Lean is not cost cutting
 23:32 – Leaders as value-add or waste?
 24:15 – Introduction to the OW64 App
 25:04 – Reflection questions for leaders

#TrueNorthValues, #LeanLeadership, #ContinuousImprovement, #RespectForPeople, #ToyotaWay, #OperationalExcellence, #Gemba, #Kaizen, #LeadershipDevelopment, #OW64

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Transcript

SPEAKER_00 0:33

Unlike Jim Collins, who looked at a large sample of companies and compared the great to the good, I looked in depth at one company and from that I built up from observation and learning a model. What is it that makes to it a tick that makes them so great so great? And the starting point is their philosophy, and it has a lot of the same characteristics that Jim Collins talks about, passion for customers, wanting to build a great enterprise, deeply valuing and caring about your people, developing them for long-term. All of that requires as an underlying core value that you think long-term about the business. And the philosophy was first written down by Toyota before my book came out. In 2001, they came out with the Tit Away 2001, which is their model of their value system. It's their philosophy. And they say these two pillars are completely intertwined. You can't have one without the other. Continuous improvement literally means we are improving all the time in everything we do. So if you're packaging parts, you're improving how you do that. If you're developing the next Camry, you're improving the process by which you develop the next Camry, the process by which you get customer feedback, the process by which you turn that customer feedback into design characteristics, the way that you design so that manufacturing can easily build what you design. So everything that happens to the company, accounting, financing, every aspect of the company is continually asking, how can we get better? The philosophy, at least, is that we want to be continually reflecting, checking how we're doing and getting better. And who's going to do that? And so far we don't have a supercomputer that can do that, and we don't have a robot that can do that. Only humans can do that. So to get continuous improvement, you need a team of people who share the values, who identify with the company, and that takes respect. Now, in Toyota's view, respect means a little bit more than we will treat you nicely, we won't yell at you and hit you, and we'll uh have a nice work environment with uh uh good temperatures and lighting. It actually means we will challenge you to keep on improving yourself because that's how you're gonna be valuable to the company and that's how you're gonna be a better person. The foundation for that are five core values. The first is challenge, and every part of the company, from the senior leaders to the chef or worker, should be regularly challenged because they're not going to continuously improve anything for themselves or the process unless they feel some pressure. And that pressure comes from a desire to do better, it comes from specific targets and goals, it comes from very clearly understanding where you're trying to go compared to where you are on a minute-by-minute basis, ideally, or at least uh hour by hour or day-by-day basis. Uh, and it requires an attitude that whatever the challenge is, we will we will somehow find our way to meet the challenge. So when the earthquake in Japan happened and 500 parts were not available to Toyota, and a lot of the plants were in rubble, Toyota had to stand up to the challenge and go through the process of finding out what the problems were and finding ways to solve the problems and one by one bringing back these parts. The way they did that is through Kaizen. And there's a distinctive process for Kaizen, which I call problem solving. Uh so continuous improvement is what you want, Kaizen is the way that you get it. And then Genshi Genputsu is very closely related to Kaizen. Gensji Gen Butsu means the way that you understand the problems is by going to the actual place where the actual thing is happening. It could be where people are designing, it could be where the customer is using the car, it could be the test track where the car is being driven. Wherever the thing is happening, you go there and you obsessively study it and try to understand the strengths and weaknesses. And that's the starting point for problem solving. Uh now that's not enough. You need a vision of where you want to go, but the vision should be grounded in the reality so you can see the gaps between where you are and where you want to be. So the actual part, the actual place, which sometimes more generally is termed the gimba. Uh respect is really detailing what respect for people means. And teamwork is teamwork, the only thing that's a little bit unusual is that when Toy talks about teamwork, they do not separate individual development from teamwork. So they believe that the best team has individuals who are constantly being challenged, constantly growing, uh, and becoming better team members, and then they're working together toward a common goal as a team. So if you're putting together a uh winning team, you're gonna go through a selection process. You're gonna want your team members to go through a lot of training, drills, strengthening, and you want the best players, and then you want those best players to actually work together cooperatively. So both individual development and team development are completely intertwined. So, what does Toyota say about this? What is this thing, this house to Toyota? Is it a uh recipe to be implemented? Is there a set of tools associated with each of these and measurements to see how good you are on each? In fact, they do have sometimes measurement systems for these five foundational values, and they use that for for judging people. But really, what it what the important role is, is to provide what Toyota calls a true North Vision, they say in the Toyota Way 2001, an ideal, a standard, and a guiding beacon. So they are fully aware that continuous improvement is impossible. It's an impossible dream. There are always gonna be some time, whether it's seconds or minutes or days, where you're not improving in some part of the company. And they also realize respect for people is an impossible dream. There's always going to be somebody when you, especially when you have hundreds of thousands of people just in the company, and then multiply that in your dealers and your suppliers. There's gonna be somebody someplace at any point in time who's doing something disrespectful. Uh so it's not possible to eliminate variability to zero variability, but the goal is to reduce the variability and get closer and closer to this true North Vision. So what are uh when we talk about lean, what are we trying to accomplish with lean? And unfortunately, what's often uh thought of is some very narrow, very specific goal. Uh for some accountants, it might be we've got too many people and we need to lower our cost structure, which means reduce labor costs. For others, it might be we need to reduce our inventory costs so we can free up cash. So we need to measure inventory turns and speed up the flow of inventory through our system. Uh, for others, they'll talk about lead time. If you're in a hospital, you might look at the patient traveling through the hospital and ask how long does it take from the time the patient enters till the time the patient leaves. And if we reduce that, we have more satisfied patients and we have a more efficient system. So lead time is often associated with lean. And I put what lean can do into a broader context. Really, what it can do is it can completely satisfy customers in many different ways, and it can also lower costs in many different ways. And these are just some examples that are a little different than usual uh thinking. Uh so for example, if you can engineer products that solve your customers' usage problem, that's a lean project to me. It's not lead time, it's not cost reduction, it's really about innovation and creativity. If you can engineer and manufacture defect-free products, what we might call design for quality or built-in quality in manufacturing, to me that's a part of lean. On-time delivery is often associated with shortening lead time and being more reliable and predictable. Offering a full product range at market price and renewing the models frequently is another good lean goal. Now you can do that uh by being able to, for example, in a factory uh do mixed model production and become very flexible and therefore you're able to offer a broader range without large capital investments. And renewing models frequently means that you have a very agile, a very predictable and stable engineering process and launch process for new product products. And then lowering costs can in fact come from cutting heads, but if you cut heads, you're cutting your most valuable resource and you're also getting everybody else nervous and perhaps lowering their commitment. Uh, there's things like value engineering, which is looking at the product and asking how can we simplify it? How can we simplify it? How can we simplify it? So instead of taking two molds to make this plastic part, we could take one mold to make this plastic part. Uh eliminating waste in all your company activities, not just manufacturing, but every part of the enterprise. Assembling different products in the same production units. Again, mixed model assembly allows you to be very flexible to respond to changes in customer demand. And at the same time, allows you to level your schedule because you could make a similar volume over time. You know, one product sells more, another product sells less, and it tends to average out. And then finally, design products for manufacturing. So that means that this one organization of engineers who came out of uh engineering schools and they're clean and neat, and then you've got these dirty manufacturers who are getting their hands dirty on the shop floor, they actually become a team and work together. They don't see themselves as uh different parts of the company with different goals, or rather all part of the same company. So if you look at these, you can kind of see why perhaps I identified with uh the Jim Collins work, which is a much, much broader picture of lean than simply the idea that we shorten the lead time by eliminating waste, or we use people more productively and we can cut heads and lower our labor costs. Uh, it really touches every part of the company and what that part of the company can do to add value to the customer. Unfortunately, too often lean is reduced to a waste reduction toolkit. And we've learned and this was uh actually quoted a uh paraphrase of a quote from Tiono all we're trying to do is shorten the time from when the customer places the order to when we build and ship the product. And his his vision for Toyota was a build to order the company. We have no waste. When a customer wants a car, we build a car based on that customer specification. So this is accurate that this was the vision. Uh so what we're trying to do is eliminate waste when we're working for the uh Navy, uh, and then later the Air Force. They loved the phrase war on waste. Any guesses why they might like that. Uh so the metaphor fit, but what is the image that you get when you have a war on waste? You're there with your machine gun or your sniper and or your ballistic missile, and you've got a target, you hit the target, you wipe it out, and the target is gone. And you succeeded in the mission. So it's a vision of eliminating things, eliminate wasted steps, eliminate wasted activities, and it is blown up and it's gone, and now you now you can move to the next target. Is that really what leans was that what Sakichi Cheta was doing? Could Sakichi Cheta invented uh the best loom in the world by going through the shop and finding waste and eliminating it?

SPEAKER_02 14:15

Okay, welcome back, everybody. Um, we're gonna talk a little bit about True North Values, which is the center topic with uh our developing leadership skills class that we're in right now. Now, one of the things that everybody says around continuous improvement is everybody the the idea is that everybody everywhere improves every day. Now, one of the things I found out when when I went to Japan is nobody was gonna be improving every day, except for the team leaders, because everybody's working to standard work. It's pretty amazing that 80% of everybody on the shop floor is way too busy doing their standardized work job to think about improvement. That's a that's an amazing aha for me. It's really the team leaders that improve every day. So that was one of the things that you know I just wanted to share. When you think about everybody improving everywhere, every day, it is not going to happen. The idea is that there's a vision for that, and that's wonderful, and there's there's a benefit to having a vision out there, a beacon, something you can strive to that's impossible. So go ahead, Tom, you can uh take it over.

SPEAKER_01 15:37

Well, that's that's true. I mean, you're never gonna you're never gonna make it, right? You're never gonna be at that point. I mean, I've I had a uh leader once who mentioned that uh, hey, we're already there. We've we've uh we're in a good place. And I told him, Hey, you're already lost then. Because the moment you think you've arrived, you've stopped pursuing true north.

unknown 16:00

Yeah.

SPEAKER_01 16:01

True north isn't something you reach, it's something you chase.

SPEAKER_02 16:04

You got it. It's not a goal. True north is not a quarterly target, it's not Ibida, it's not margin, not revenue, it's an ideal. So Toyota pursues two things that are technically impossible to perfect. One, continuous improvement. And two, perfect respect for people. Perfect respect for people. So they know they will never reach 100%, they pursue it anyways. That's the point. An impossible vision. They call it a seemingly impossible goal when they're trying to make big strides towards their vision, and that removes the short-term panic. That's what you want to do, and it replaces it with long-term alignment. So the question is not, did we hit the number? The question is, did we move closer to the ideal? So, you know, a listener would would would do well to say, what is my true north in my company?

SPEAKER_01 17:06

And you're right, and the thing that you're that you mentioned there is true north is not a number. And too many people think that it is. Um I just don't think that's a good true north.

SPEAKER_02 17:34

Yeah.

SPEAKER_01 17:35

Maybe I'm wrong.

SPEAKER_02 17:37

No, I I I don't think you're wrong, but I do think uh somebody else might think you're wrong, Tom.

SPEAKER_01 17:44

And I'm comfortable with that.

SPEAKER_02 17:46

Exactly. So the the the Yeah, go ahead.

SPEAKER_01 17:51

Oh, I was just gonna say, and you know, with with uh uh continuous improvement and respect for people. Uh nobody Toyota knows they're not gonna be perfect with tens of thousands of employees out there that um everybody is being treated right. But it's continuous improvement. It's that the it's that the person they they learn, leaders learn.

SPEAKER_02 18:17

Yeah.

SPEAKER_01 18:18

Uh how to respect people, how to listen.

SPEAKER_02 18:22

Yeah, you got it. So it's interesting because um uh the five values that they synthesize for their company, it's it's pretty amazing. That and it's it's the two pillars. When when uh at Toyota, they showed both pillars kind of cut and you know, cross like across the pillars, and then turned up, and the one called respect for people had two values, which was respect and teamwork. The other one called continuous improvement had Genshi Gambutsu. You can't continuously improve unless you go to the Gemba, which is really almost synonymous, Kaizen and Challenge. So that was like very evident that this is where we want our employees to have their values based. And I I thought that was pretty good. It's they're not tools, it's a system. And uh, to break it up even further, challenge creates tension, and that's what they want to get a little bit of tension so you get the creative juices going. Genshi Gembutsu demands first hand understanding, and there's a lot of consultants out there that say Genshi Gembutsu, it's hard to remember for like Japanese words. Let's just use get your boots on. Get your boots on, and let's go to the Gemba. Right?

SPEAKER_01 19:50

So go ahead, Tom. Oh no, I was just gonna say uh improvement does if if your improvement doesn't develop people, it's not improvement. They have to learn from it, you have to learn from it.

SPEAKER_02 20:03

Yeah, I want to uh dig a little deeper on Genshi Gembutsu, which is uh termed go and see. And remember our coach Ritzel Shenko, he says, no, don't use go and see. Go and see implies you're going somewhere and you're seeing. He says, I want you to go and watch. Like watch deeply, you know, and use your five senses basically. Watch, listen, um, you know, touch, you know, everything. He just says, no, go and watch, stay in one spot for, I don't know, you know, he didn't give a time. Stay in one spot until you understand what's going on. So that's pretty amazing. Go to the real place, the place things are happening. Um, and reports are not understanding. If you're sitting at your desk, uh you get reports, that's not understanding. First hand observation creates this clarity. Okay. Yeah.

SPEAKER_01 21:02

And I heard I heard something today from somebody that uh he was talking about okay, process breaks, and a young engineer or young young leader runs down to the floor and he starts getting on the the the uh person doing the work. And uh this guy goes, uh, all right, so if somebody does something wrong, then as leaders, we've let them down. We haven't helped them develop, we haven't trained them, we the process isn't being followed, the process isn't right. There's something we are doing that is not correct.

SPEAKER_02 21:42

Yeah, that's a good thing.

SPEAKER_01 21:43

So we have to look within ourselves. And you know, and and but we say this all the time, and and it's it's sad that you know uh companies don't listen. Everybody thinks they're too smart for a process. They they think they're they think they're better than than than uh than what we're what we talk about. And what we talk about is simple, right? It's making our lives easier. But they don't like it because they they just can't see that something so easy is gonna make them so much money.

SPEAKER_02 22:21

Yeah, you know that's the connection, I think, Tom. The companies out there that fall in that category that you were describing, they can't make they can't make the connection that doing this is good for business they're not doing they're not making that connection and the more you tell them to do it the more it reinforces what they're doing which is incorrect is right that's the that's the brain at in work at work right so anyways lean is not cost cutting lean is not headcount reduction uh it's it's not a war on waste which was mentioned so its purpose is to get full customer satisfaction through quality innovation flexibility engineering alignment that's what we talked about these projects are lean uh it's almost like it's all encompassing one one time I said look lean what about sales well you can have lean in sales as well right yeah wait waste reduction is just a byproduct of doing it right so if your lean initiative feels like austerity like structured and you know that then you you miss the philosophy lean is long-term competitiveness that's where you want to go with it so what would you what would you do look at your system building and is it is it efficient is it building towards excellence really is the question okay and how often do you go to the gimba yeah should be daily I mean to some degree and if you don't it's just a field trip it's not it's not going to your true north it's not you're not accomplishing anything you're just doing a field trip and checking checking a box off that hey I did my gimbal walk this week or whatever.

SPEAKER_01 24:13

No go there whenever you get an opportunity because guess what that's where the value add is those are the only people that your customers are willing to pay for. Yeah you got it as a leader.

SPEAKER_02 24:26

You're waste uh yeah really you're waste I mean you might argue you're non-value added but necessary but in general you're waste if we could do the job without you the product would get built and shipped and sent to the customer and they wouldn't care that you got all these supervisors uh you know looking around to make improvements they wouldn't care so get out there as soon as you can and see what you can do to make their life easier and better. Yeah ask questions in the app in the app called OW64 Tom we talked about look there's 75 lessons there we're on lesson four and we got some questions that you can type right into the app as a leader and I'll just give you the questions here what is one area in your life where you can focus on continuous improvement this week so the listener should think about that type that one area get to work how can showing respect for someone help them improve it's a good question I'm not gonna answer it for you but how can doing that help them improve we're gonna ask our coaches that question and what is one way you can combine teamwork and individual growth in your daily activities every time you and I get together it's teamwork Tom and I'm growing because first of all we're accountability buddies right you're you're holding me accountable to doing my work and I'm doing the same for you.

SPEAKER_01 26:02

Anything else to add Tom no uh you know I I think this was a great topic on true north uh there's so much we could go on forever on I mean honestly we could go on for hours on this but the podcast is short so we'll keep it to this