Until just a few months ago, the Toyota Production System (TPS) was the global manufacturing sector’s holy writ. In order to get a proper perspective and appreciate the magnitude of what has just happened with the series of product recalls over faulty brakes, we have to go back in time.
Japan’s post-World War II economic miracle and its phoenix-like rise from the ashes has been the subject of innumerable publications.
|The key factors in Japan’s erstwhile inexorable rise were two fundamental mindset qualities: Curiosity and humility.|
All of them have featured education, the country’s work ethic, discipline, industrial policy, corporate structure (the so-called keiretsu system), production engineering and techniques (notably JIT = just-in-time and kaizen = continuous improvement) — and human resource management as key ingredients of success.
As a close observer of Japan for many decades, I would emphasize that the key factors in Japan’s erstwhile inexorable rise were two fundamental mindset qualities: curiosity and humility.
There was also an element of luck. When the U.S. occupation forces arrived in September 1945, the initial intention was to neuter Japan militarily and industrially, while U.S. policy back then was to partner with China.
However, the 1949 Liberation of China — and the Korean War that broke out shortly thereafter — dramatically changed the situation. Occupation policy did a U-turn and sought rapidly to assist in rebuilding the Japanese economy.
In particular, the desire was to make Japan an international manufacturing and exporting hub of labor-intensive industries in consumer goods since Japan had a massive labor surplus at the time.
There was one big problem, though. Contrary to the country’s reputation today, its production quality in pre-war decades was pretty much crap, quality-wise.
|In the late 1980s, Japan’s atmosphere changed profoundly, from curiosity to self-congratulatory introversion — and from humility to hubris.|
General MacArthur, the Supreme Commander of the Occupation, happened to hear of an American professor called Edwards Deming, the great pioneer of manufacturing quality control, and had him brought to Japan, where he was received like a deity.
Japanese engineers and managers sat at his feet, absorbed his lessons with determined diligence and, at least until recently, never looked back. The label “Made in Japan” metamorphosed in a couple of short decades from a source of embarrassment to a source of pride.
Toyota cars, too, were transformed from a subject of derision — some may remember the Toyopet series of the early/mid-1950s — to awesome respect in terms of quality, reliability and innovation.
In the 1950s, 1960s, 1970s and I would say until roughly the early/mid-1980s, curiosity and humility were pretty pervasive throughout Japanese society.
For those who did not experience Japan first-hand back then, it is difficult to imagine what an exciting place it was in every respect — and especially, culturally and intellectually.
These stimulating experiences were by no means limited to exchanges with the country’s elite. Some of the liveliest conversations I remember were with taxi drivers and with sarariman (white collar office employees) in the low-end bars they frequented in the Shinbashi district of Tokyo.
The intellectual curiosity was infectious and gripped many. I remember hearing the Oxford philosopher Isaiah Berlin speak in quite ecstatic terms about the intellectual and cultural climate he had discovered in Japan.
|One effect of the newly attained hubris-cum-lack-of-curiosity was that the Japanese establishment was blindsided by China.|
In the mid-1980s the climate began changing radically. There were a number of complex forces at work. While the Japanese had been curious about the outside world generally, for them the United States had become the model.
But in the 1980s, the American model seemed to be crumbling and, in the process, U.S. politicians and public opinion turned quite nasty toward Japan with a lot of Japan-bashing going on.
As the U.S. economy slumped, Japan’s continued to rise, resulting in confident predictions that, within a matter of a decade or two, Japan would overtake the United States.
The inflection point came in September 1985 with the New York Plaza Agreement which resulted in the major revaluation of the yen, which within two years doubled in value from ¥250 to the U.S. dollar to ¥120.
Rather than cripple Japanese competitiveness, the sudden stratospheric rise of the yen led the Japanese to buy up sundry U.S. assets, including corporations and prestigious real estate, golf clubs, etc.
Japan’s atmosphere changed profoundly, from curiosity to self-congratulatory introversion — and from humility to hubris. The seminal document of Japanese hubris was the 1989 publication of a book entitled no to ieru nihon (“The Japan That Can Say No”). It was co-authored by the right-wing governor of Tokyo Shintaro Ishihara and the co-founder of Sony, Akio Morita.
One effect of the newly attained hubris-cum-lack-of-curiosity was that the Japanese establishment was blindsided by China. In the mid-to-late 1980s, I had frequent conversations with Japanese corporate, government and opinion leaders about China’s potential rise.
|I often asked my Japanese interlocutors, “don’t you risk making vis-à-vis China the same mistake we (the West) made vis-à-vis Japan?”|
I was struck by the fact that all of them were remarkably dismissive. I often asked my Japanese interlocutors, “Don’t you risk making vis-à-vis China the same mistake we (the West) made vis-à-vis Japan?” — namely: underestimating it and judging it on preconceived notions and stereotypes? That is precisely what they did.
Two years after the publication of the Ishihara-Morita book, Japan’s economy tanked — and the era of the lost decades began. Japan has been the worst-performing OECD economy for the last 20 years, and its future prospects are poor.
In the process, a number of Japanese icons have fallen. Companies whose names used to resonate across global markets and strike awe — if not outright fear — in their competitors, have retreated or in some cases disappeared.
Sony has been in the doldrums for years and has been overtaken and is being overshadowed by Korea’s Samsung and LG Electronics. The recent collapse of Japan Air Lines (JAL) was yet another blow to corporate pride — as has been the announcement by Standard & Poor of its downgrading of Japan’s credit rating of its sovereign debt.
But now Toyota! The cruel irony of the Great Toyota Crash is that it was only last year that Toyota realized its long-held ambition to overtake its key global rival, General Motors.
Japan is to the global economy in the early 21st century what the Ottoman Empire was to the global system in the early 20th century — the sick man. This is not just an unhealthy state of affairs for Japan. It is also unhealthy for the Asia-Pacific region, which is undergoing tremendous transformation — and it is unhealthy for entire the world economy.
|The main universal lesson from the Great Toyota Crash of 2010 is that humility is best, while hubris eventually leads to humiliation.|
Can Japan recover? Certainly the political change that occurred in late 2009 with the ousting of the LDP (Liberal Democratic Party) would seem a step in the right direction, though the wave of optimism it initially generated is dwindling fairly rapidly.
There is still a massive need for reform. By virtually any criterion, Japan is the most closed among the OECD economies — and indeed far more closed than many emerging economies. That cannot continue. Recovery, reform and renaissance require opening up.
The main universal lesson from the Great Toyota Crash of 2010 is that humility is best, while hubris eventually leads to humiliation.
Curiosity and the desire to learn are primordial human qualities. The paradoxical thing is that hubris would seem to come naturally to man, while humility requires a lot of effort. But as the contrast of the story of Japan until the mid-1980s and the current Great Toyota Crash demonstrate, the effort to preserve one’s humility is well worth it.