Exploring Efficiency and Quality in the Toyota Production System

Is quality simply a matter of two categories: good and bad? But then how do you get to "better"? In this episode, Bill Bellows and Andrew Stotz discuss categories and continuum thinking.

TRANSCRIPT

0:00:02.4 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we dive deeper into the teachings of Dr. W Edwards Deming. Today I'm continuing my discussion with Bill Bellows who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. And today is episode six, Category Thinking and Continuum Thinking. Bill, take it away.

 

0:00:27.9 Bill Bellows: Welcome Andrew great to see you again. All right, so in podcast five, I went back and it was just posted by The Deming Institute. And I just wanna clarify again on the topic of acceptability and desirability. Where we're going tonight is looking at acceptability and desirability in a little bit more detail, a little bit differently, but those are still the prevailing themes. And again, I just wanna reinforce that none of this is to imply that desirability is better than acceptability. What's important is to be aware of when I'm using acceptability thinking. And when I'm using desirability thinking and use the one that makes the most sense in that situation. We were talking earlier about companies whose products we enjoy using and we're loyal to them. And I mentioned that my wife and I have developed a loyalty to Toyota products.

 

0:01:40.4 BB: Going back to 1989 was our first Toyota product. And I knew I wanted a pickup truck. 'Cause I was borrowing a pickup truck from a number of friends and I thought, I really like a pickup truck. There's a lot you can do with a pickup truck. So, I knew I wanted a pickup truck. And I knew from having worked in my father's gas station, I had reason to believe I wanted a Japanese pickup truck and not an American pickup truck. So, I then it was a question of is it a Mazda, Toyota.

 

0:02:11.1 AS: Nissan.

 

0:02:13.2 BB: Sorry Nissan. And I looked at all of them and yeah I just all I knew is I was gonna be one of those. And I think the major reason I went with... My wife and I went with a Toyota... I don't think the prices were that different. But it just had a, it was the styling was a little bit better. But I did not... That's why I bought it.

 

0:02:46.5 AS: The loyalty wasn't built yet.

 

0:02:49.0 BB: No I knew to stay away... I knew I had seen plenty of examples of... Well, I had traded in my first car that my father, my parents got me when I was in college was a 1975 Chevy Nova. Four door Chevy Nova. And the reason four doors is important is a... If it was a two door, the door would be longer. But it was a four door. By the time I gave that car to a friend, the engine was running beautifully but the body was falling apart. And, so, by the time I sold it to get the pickup truck, in order to get out of it, I'd have to throw my shoulder into the driver's door. Why? Because the door droop was so great that when you close the door, I mean the door drooped and this is not a four door, this is a two door. So, imagine if it was a two door the door would be even heavier. So, on a four door, the door drooped. And, so, when you closed it, you'd had to lift it and then close it in order to get out you had to... Oh, it's just my wife couldn't drive. It was just a nuisance.

 

0:04:17.6 AS: And, that in '75 was just about when the Japanese were really starting to go after the US car makers. And but I want to tell you just a quick one. I can't remember if I've told you, but I used to have a 1963 Lincoln Continental here in beautiful Bangkok. And I owned it for 10 years. And then eventually I sold it. But what a beautiful car. And people always ask me the same thing and they said, isn't it hard to take care of? And I said, you gotta remember back in those days, cars were simple.

 

0:04:49.1 BB: Yeah, yeah. So, the... So, with... So, the experience of 14 years or so, with the '75 Chevy Nova. And the door was like the straw that broke the camel's back. It just done with this, all right. So, we're gonna buy Japanese, bought a Toyota. That was the first one. And I think I've mentioned in the first podcast I mentioned that we had a 1998 Toyota Sienna, which is their first, it was their Toyota third attempt at a minivan. The first one I think was underpowered, the second one... And we knew we wanted a minivan. It was time, the kids were getting a little bit bigger. It was time for minivan. And just as we were ready to go buy it, they had a... I think a competitor came out with dual sliding doors. Dual sliding doors. And, so, instead of Toyota coming out with a one sliding door, they stepped back. I think Chrysler came out with two sliding doors. And they figured we can't come to market with one sliding door. They've got two sliding doors. So, then we waited another year and they finally came out and given all of our delight with the Toyota pickup truck, boom, that's what we wanted. And then the transmission failed, six months later with 10,000 miles in the car.

 

0:06:18.5 BB: And I have a photo of that. Not only did the transmission fail at 10,000 miles, but it failed on Christmas morning on our way to see friends about an hour away. And this guy, people were going to see, he knew I loved Toyota. And when he drove to pick us up, we transferred everything from that to his Ford F-150. He says to me... So, then we had to have the car towed on a flatbed to his house and the next day to the dealership, what a nuisance headache. But when he showed up, he looks at me knowing that I like Toyota. And he says, how's this data point change your theory about Toyota?

 

0:07:06.5 AS: I thought he was gonna say, if it was me, I would've said pop in the back.

 

0:07:12.6 BB: And I was like, yeah, that really hurts. Well when I shared that story with students at Northwestern's Business School, the Kellogg Business School, their advice and these are students that had worked in all different industries from Coke to banking, and a number of 'em have worked in the auto industry. And their advice was, I said, Professor Bellows never buy anyone's first model year, even Toyota. Now I have a friend who he and his wife bought the same model year Toyota Sienna. They did not have a problem.  Oe did. When I met at a Deming conference, a guy who worked in Georgetown, Kentucky which is where the Sienna was made. And, so, I met him at a conference and when he said he worked for Toyota, I said, oh, my wife and I buy nothing but Toyotas. He says, oh. And I said, we have a first model...

 

0:08:08.6 BB: Year Sienna. And everything was good. And then I'm thinking, I'm gonna ask the guy a question. And I looked straight in his eyes. We were pretty close together. And I'm about to ask him a question. I'm looking straight in his eyes and I said, we got a Toyota Sienna. He says, how do you like it? And I looked right at him and I said, the transmission failed at 10,000 miles. And he rolled his eyes. And I said, so, you know about this. It wasn't a look of shock. It was, yeah, all right. So, I said, all right, all right. Your expression just told me that you know something about this. I said, what's up? He says, we tried. This is so cool. He says, we tried to save a few pennies on a bearing.

 

0:09:00.8 BB: I said, you did but what you did cost me more than you saved. So, yeah you guys saved a few pennies on a bearing and cost my wife weeks of aggravation to have it towed from where it happened to the place we were going because it Christmas Day, it broke. Everything's shut down on Christmas days. You can't have it right? And, so, we had it towed, had to get a rental car. Then they're complaining about, we had... Who authorized this rental car? We only pay... It was just headache after headache. But we still buy Toyota Andrew. We still buy Toyota. Why? Because I'm afraid to buy from anybody else. Well, part of the reason I wanted to share that with our audience is I buy Toyota products based on value. And I believe that the best value we get in transportation, personal transportation is the money we spend buying a Toyota most often brand new. We've also bought some used, got great use out of them, never had a problem, anything like what I just shared with you. And that's having owned five or six different Toyotas. I mean, right now in our family we have three of them.

 

0:10:16.7 AS: I think I need to correct you.

 

0:10:19.1 BB: Go ahead.

 

0:10:19.9 AS: You buy Toyotas on value and values.

 

0:10:25.7 BB: Yes!

 

0:10:28.2 AS: You're aligned with their values and therefore you're willing to look beyond the mistakes and problems that it comes with every product, every service, every company, because you're aligned with their values.

 

0:10:42.2 BB: Well, what's funny is when we bought the Sienna and we're talking with 'em, doing the driving and signed agree to buy it, that's the color we want. We want these seats, blah, blah, blah. And then you go talk to the closer and the closer's a guy, the gal at the dealership that wants to add on the undercoating and the this and the this and the this and the this. And he wanted to sell us at a premium price, this extended warranty and I dunno what it costs, but I said, I've done a whole lot of research. And he says to me it's so funny. He says, when these things break down, a circuit board breaks and that'll cost you this and this and this, and, so, I'm gonna sign you up for the insurance policy, the extra coverage. And I said, no, and he is going on and on. And I said, look it, I've done a lot of research into how they're made and I said, and the values of that organization. So, I said, the reason we buy Toyota is that I have an understanding, a pretty damn good understanding of how they manage the product, the pieces and how it all comes together. And he's pushing back at me. Finally, I said, I teach university courses on how Toyota operates and their quality system.

 

0:12:14.8 BB: So, we didn't get the extra coverage. Now it was still covered under warranty, so, it was kind of laughable that. But anyways, the reason I bring that up is that...

 

0:12:27.3 AS: Before you do that, I want to just say for the listeners and viewers out there, what is the messaging from a corporate strategy perspective? And that is have values that you stand for. Communicate those to the market, stay loyal to them and the customers who align with those values will stick with you through the hard times that you're gonna definitely have. There's a quote by Alexander Hamilton says, "those who stand for nothing, fall for everything." If you do not stand for a clear set of values that the market can perceive, then people are gonna fall away from you as soon as times get tough.

 

0:13:07.2 BB: Oh yeah. And I...I, I. It's about that and that's why I've read lots about Toyota. How they operate written by people outside of Toyota trying to explain it, people inside of Toyota and their explanations. But part of the reason I bring this up is my fascination, my interest in Dr. Deming's philosophy, is a great deal to do with his system is based on an incredible appreciation of the difference between acceptability and desirability. All other quality management systems, whether it's the quality management within Lean is acceptability based, good parts and bad parts, Operational Excellence, Six Sigma Quality. In fact, there's a quote at the end of chapter 10 in "The New Economics". And chapter 10 was the original last chapter until the third edition came out. In which case there's chapter 11 written in large part by Kelly Allen, a good friend.

 

0:14:15.1 BB: And when chapter 10 was the end I thought it was pretty cool that at the very end of chapter 10. The last few pages of chapter 10 of “The New Economics” are about Dr. Taguchi's loss function. And this is what turned me on to Dr. Taguchi, was finding “The New Economics" in a brick and mortar bookstore. I knew from ASQ Quality Progress that this was coming out. So, I remember when it came out, this was before Amazon, going to the bookstore. Going through it and saying what does this guy think about Taguchi? Because Taguchi was my, the one I really idolized. And I opened it up and I turned to chapter 10 and it's all about the loss function, the problem and I thought this is way cool. So, the closing quote... The closing... The last sentence in chapter 10 which again was the original last chapter until third edition came out, is the following "Conformance to specifications," that's acceptability, "zero defects," that's acceptability. "Six Sigma quality," which is acceptability "and all other specification-based nostrums all miss the point, ,stated by Donald J. Wheeler."

 

0:15:42.6 BB: So, then I looked up, but what is a nostrum? And Dr. Deming not Dr. Deming a nostrum is defined as “quack medicine.”  So, "Conformance to specifications, zero defect, Six Sigma quality, and all other specification-based nostrums all miss the point." And, so, I wrote an article about this, gosh, 20 years ago. I said, what's the point? And my explanation, the point is, all of them are about managing parts in isolation. Looking at things in isolation. Again that's acceptability. And as I said earlier, I'm not saying acceptability is bad, I'm just saying acceptability is not desirability. And the other thing I wanna add is, why do I... My wife and I love Toyota products. I've got reason to believe through a lot of research and talking, sharing the ideas that we talk about in these podcasts with people within Toyota. And they have a desirability focus that nobody else... That I'm not aware of anybody else has.

 

0:16:54.9 BB: And, that's having presented around the world doing classes, at Kellogg Business School, at university. Yeah, the Kellogg Business School Northwestern University. I teach online classes at Cal State Northridge, Southern Utah University. I've lectured at many universities. And I never had anyone come to me working in industry saying, Bill, what you're talking about, we practice where I work. No. And, so, for those that are pursuing the Toyota Production System stuff. My response is, I don't buy Toyota products because they use the Toyota Production System. Now, that may help with getting the car to market faster. But I don't believe the Toyota Production System is why people buy Toyota products. I believe Toyota's quality management system... At least I buy Toyotas because I believe their quality management system, inspired by Dr. Taguchi, inspired by Dr. Deming, is providing something that nobody else has in many industries. All right. So, I wanted to get that out.

 

0:18:06.7 AS: So, are you saying Toyota Production System is more of a tool that is in their toolbox of quality management system?

 

0:18:18.4 BB: Um, the Toyota Production System is classic Industrial Engineering.

 

0:18:26.8 AS: Right.

 

0:18:27.0 BB: It's how to...

 

0:18:28.3 AS: It's a natural.

 

0:18:30.5 BB: How to improve flow, how to improve throughput by minimizing number of steps, by minimizing inventory. It's highly credited to Taiichi Ohno, who was mentored by the founder of the Toyota Motor Company. And it's all about, they don't have a lot of money. So, we need minimal inventory, minimum steps. So, it's like... So, the Toyota Production System is an efficiency based system based on, we don't have a lot of money, we're not gonna buy a lot of inventory. But the quality aspect of the Toyota Production System everywhere, everything I've written, everything I've read by people describing the Toyota Production System it's all explained by acceptability. So, that they may be moving things closer together so people don't walk so far.

 

0:19:27.8 BB: But what I'm looking at with Dr. Deming's work inspired by Dr. Taguchi is what is it about the quality system that causes those parts to come together so well and the products to perform so well? So, it's not just having the parts when I reach out, the part is there, but those parts integrate better. I've mentioned in the first podcast series that Toyota had 100% snap-fit pickup truck in 1969 at a time when Ford was banging things together using rubber mallets to get the parts together. They took apart and assembled a Toyota pickup truck twice 'cause they didn't believe the results the first time the parts went together without mallets. That's what I'm talking about, that within that system, the ability for the parts to come together to work together cannot be explained by an acceptability based system. And, so, having spoken with people and having the opportunity to share with people within Toyota the ideas we talk about inspired by Dr. Deming, I've learned that they do desirability in a way that nobody... I'm not aware of anyone else having done.

 

0:20:48.5 BB: All right, so, what I want to get into, add to the discussion tonight, relative to category thinking, is this idea of category thinking, continuum thinking. Category thinking quite simply is putting things in categories. So, in acceptability we have two categories, good or bad, or maybe three categories. It's good or it's scrap or it's rework. So, category thinking is generically putting things into categories. And so, we could look at category... Categories could be... There could be two categories, three categories.

 

0:21:27.1 BB: It's been a while since I've gone to see a movie, but I believe they still have a rating system of PG, PG-13, R, R-17, maybe X. Those are categories. Fruits and vegetables. Those are two high level categories. Within each of those categories, we have types of, we have apples and oranges, and within them we have types of apples. That's all category thinking. You go into a supermarket and every aisle... There's the cereal aisle. That's a category. There's the canned goods, those are categories. Religions - talk about categories. So, every religion you look at is its own category. And, then within those categories they have subcategories. How about music? How many categories in music are there Andrew?

 

0:22:18.9 AS: Well, it gets all messed up on my iTunes where I'm like, that's not heavy metal. That's rock.

 

0:22:28.6 BB: Yeah. And then there's types of rock. In the beginning it was rock and roll, and then there's types of rock and roll.

 

0:22:34.0 AS: Progressive rock.

 

0:22:34.0 BB: Progressive rock. And then we have people... So, what category would we put... I think somebody asked Lucinda Williams, we're going to see her in a few weeks. So, what category? Well, she doesn't fit a category. So, that's category thinking. Category thinking is putting things in categories. We could say, where did you go to college? That's a category. These are USC grads, those are Cal State grads. And, part of the point I want to make is that we use category thinking all the time. Putting people in categories is what we do. Such as you and our daughter are Cal State graduates.

 

0:23:17.6 BB: And, so, what degrees do they have? Those are categories. So, I don't know what we would do if we couldn't put things in the categories. So, I don't think category, putting people in category is not a bad thing. Now, when you start to associate values with the categories, now we're getting into racism or sexism and then, okay. But this idea that putting people in categories is a bad thing, I'd say category thinking is our simple way of organizing everything around us and these little file cabinets. Now added to that is when you put four or five things into a category, then what you're implying is that they're all the same. And that gets into acceptability.

 

0:24:12.8 BB: So, if this is a good part, that's a good part. That's a bad part. That's a good part. So, all the good parts go into the good part category. Then we say, oh, these are all good. Then we get into the sense of, and they're interchangeable. Well, maybe not. And that has to do with what I call continuum thinking. All right, so before we get to continuum thinking, Andrew, remember the question. What do you call the person who graduates last in their class of medical school?

 

0:24:43.3 AS: I don't remember that.

 

0:24:45.2 BB: Okay, so take a wild guess, Andrew, putting the pressure on, what do you call the person that graduates last in his or her class in medical school?

 

0:24:55.7 AS: Surgeon general.

 

0:24:56.9 BB: What's cool is that's a question I've been able to ask all around the world. Now, depending on where I go, I can't talk about baseball because they don't understand baseball. Or depending on where I go, I can't say soccer or I have to say football. Then if I say football, I have to say, well, I mean your football, not American football. But what's neat about this question, what do you call the person that graduates last in their class in medical school, that's "doctor." That's also acceptability thinking. From the first in class to the last in class, they all met requirements. Andrew, you know what that is? Acceptability. So, category thinking is a form... Acceptability is a form of category thinking. All right. Now I'm gonna give you three numbers and I'm going to ask you which two of the three are closest to being the same. You ready?

 

0:25:58.0 AS: Yep.

 

0:26:01.7 BB: 5.001, 5.999 and 6.001.

 

0:26:11.1 AS: 5.999 and 6.001.

 

0:26:17.6 BB: Are close to being the same?

 

0:26:18.8 AS: Yeah.

 

0:26:20.2 S3: That's what most people think. Okay. But...

 

0:26:25.7 AS: One's a six and one's a five. That's a problem.

 

0:26:29.5 BB: All right. And, so, again, the numbers were 5.001, 5.999 and 6.001. And the question is, which two of the three are close to being the same? And, what most people will say is 5.999 and 6.001, which infers that what does same mean?

 

0:26:48.5 AS: The integers?

 

0:26:49.1 BB: If you answered.

 

0:26:49.9 AS: I looked at the integers at the end rather than the whole number at the beginning.

 

0:26:56.7 BB: But is it safe to say you chose those numbers by saying they were closest together?

 

0:27:01.6 AS: Correct. Yes.

 

0:27:03.2 BB: So, in your case you're saying, if I plot those numbers from zero to infinity. Then those two are really close together. That's one definition of same is proximity. But, same could also be, they begin with five, in which case the first two are close to being the same. 'cause they both begin with five or they're both less than six. Or, I could say 5.001 and 6.001, because they both end in .001. So, it turns out there's three answers to the question. But the answer of the last two and proximity is what category is what continuum thinking is about. On a continuum these two are closest together. All right.

 

0:27:51.2 AS: And I have to tell you, we're gonna be running out of time, so we gotta wrap this up.

 

0:27:55.4 BB: All right. So, when I asked you the question, what do you call the person who graduates last in their class of medical school? And you said doctor, that's category thinking. If you used... Well actually the thing is, if I ask, what do you call the person who graduates last in their class at the United States, US Army's Military Academy, known as West Point, one answer is Second Lieutenant. 'cause they're all Second Lieutenants. But West Point uses continuum thinking to define the very last person in their class. So, it's the last person in class is not called second lieutenant. The last person in the class is called goat, as in the animal.

 

0:28:43.2 BB: And a very famous goat at West Point, who from my reading, was very proud to have graduated last because there's... I think Mike Pompeo, who was Secretary of State under president Trump, was first in his class at West Point, first in his class. A very famous, I wanna be the last person in my graduating class at West Point was George Custer. You've heard of him?

 

0:29:14.3 AS: Yep.

 

0:29:15.5 BB: And, he was deliberately lazy, so he wanted to be the very last person in his class. But that's, but the idea is that category thinking says they're all Second Lieutenants, they're all doctors. Continuum thinking is when you say this is the first, this is the second, this is the third. And when you come up, when you start to order them and say, the last one is goat, that's looking at things on a continuum, which is continuum thinking. Well, given that most quality systems, including Boeing's Advanced Quality System, are based on category thinking and category thinking, you have good parts and bad parts. When I ask a question as I brought up in the podcast five. I said I go to audiences and ask, how much time do you spend discussing parts which are good, that arrive on time? And the answer is none. And I say, well why is that? 'Cause in that system they're focusing on taking things from bad to good. And then what? Stopping at good.

 

0:30:20.0 BB: Well, part of the thing I wanna get across in this episode is the reason we're stuck in that model of stopping at good is because the quality system is based on category thinking of bad and good. And in a world of good and bad, there is no better. In a world of short and tall, there is no taller. And, so, continuum thinking allows us to go beyond that. And, so, going back to Dr. Deming's quote, conformance requirements, which is category thinking, zero defect, Six Sigma quality, those are all category based systems, which means it's good parts and bad parts. But then I come back to how does a system which is based on good parts and bad parts deliver such incredible reliability in the products? And, I believe it's because they're using continuum thinking. Not... And again not continuum thinking everywhere, but I think they have very judiciously figured out where to use continuum thinking and that is their differentiator. In my admiration for Dr. Deming's System of Profound Knowledge is, I've not come across any other type of management theory, which has that level of fidelity to explain that. And, in order to practice continuum thinking, implement it, you have to work together.

 

0:31:43.9 AS: And I'm gonna wrap this up by... One of the revelations that I come upon when I listen to what you're saying is. That's also what makes Deming's teachings sometimes hard to grasp, because there is no clear category and there is no clear beginning and end. There is no certification and therefore it's just hard for us who are used to being in categories to grasp. And that's my conclusion what I draw from everything you've just said.

 

0:32:16.6 BB: Well and let me add to that, really appreciate you saying that. Let me add to that,much of what I was doing at Rocketdyne... When I began to appreciate that the reason I was focusing on solving problems, solving problems and the problems we didn't solve were the problems where the customer, NASA said, we're gonna take this work and take it to the company down the street because you guys can't make it happen.  And, that scared the hell out of me that we're gonna lose this work to competitors because... And when I looked at it, was why are we stuck?  And I looked at Dr. Deming's work, the reason we're stuck is we're... 'cause our quality system is based on good parts and bad parts. We're waiting for trouble to happen. And, so, but still what I found is, and when I started to focus on... I went from being 100% Taguchi to more about Dr. Deming's work and trying to come up with everyday examples to make Dr. Deming's work more accessible.

 

0:33:16.9 BB: So, in Dr. Deming's work, you're not gonna find category thinking, continuum thinking. So many of the concepts we talk about in this series, in the prior series are... I refer to them as InThinking Concepts, just trying to make it easier for people to begin to absorb the brilliance of Dr. Deming's work. Because, I think absent that, when he says quality, what kind of quality is he talking about? Acceptability quality, desirability quality. So, I'm with you, I think the work is brilliant. I'm just hoping through our conversations and these podcasts that we can make his work far more accessible.

 

0:33:56.4 AS: Yep. Well, I think we're doing that. And Bill, on behalf of everyone at The Deming Institute and the audience, I wanna thank you again for this discussion. For listeners, remember to go to deming.org to continue your journey. Of course, if you wanna keep in touch with Bill, just find him on LinkedIn. This is your host Andrew Stotz. And I'm gonna leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work."