BBRT - Beyond Budgeting Roundtable This page contains an archive of news items that have appeared on the BBRT Home Page since 11 December 2009.
24 June 2010
What went wrong with Toyota? - According to Prof. Tom Johnson
In a recent article on the Lean Edge web site (http://theleanedge.org) Prof. Tom Johnson, co-author of “Profit Beyond Measure”, wrote a brilliant article about what may have gone wrong at Toyota. In his article “Financial results such as revenue, cost and profit are by-products of well-run human focused-processes”, he postulates that in his opinion the cause of Toyota’s crisis is found in its very recent surrender to Wall Street pressure to grow continuously, as virtually all large publicly-traded American businesses have attempted to do for the past 30 years or more. This includes those that pursue “lean” practices.
He maintains that the flaw in this finance-oriented growth strategy is the belief that profitability improves by taking steps aimed at increasing revenue and cutting costs. Prof. Johnson queries the approach taken by most Western companies to “lean” and the way that they have implemented it. Fundamental to this is differences between Western and Toyota management practices, particularly in the way each group thinks about “cost”. He concludes the article by saying “This is why for years and years I have said that management accounting (and its lean counterpart “lean accounting” is a meaningless concept – an oxymoron in fact. You can use accounting quantities to describe, but never to explain, understand or control.”
To read the full article (it's excellent) go to: http://theleanedge.org/?p=462
13 May 2010
Future Ready - how to master business forecasting
Rolling forecast are often at the heart of the new "control" system in Beyond Budgeting implementations. Yet many managers ahve little knowledge about good forecasting practice and how to make it a truly effective management tool. Steve Morlidge and Steve Player have written a book "Future Ready - how to master business forecasting" that does just that.
Watch a video of Steve Morlidge discussing this new book (http://www.youtube.com/watch?v=tk_GNveXIIo)
30 March 2010
The Toyota crisis and Beyond Budgeting
Toyota is an exemplar case for BBRT, however, the recent crisis at
Toyota may cause you to wonder if it is still an exemplar and if so why.
Firstly, Jim Collins points out in his new book “How the Mighty Fall”[1],
companies grow great by doing things very well and having great
principles, but they can fail by not sustaining this and going for other
objectives that are not part of their ethos. In Toyota’s case it means
that there is nothing intrinsically wrong with the Toyota Way or the
Toyota Production System, it’s just that they failed to follow this in a
dash for growth
The Lean Institute has recently made us aware that in his latest Lean
Management Column John Shook continues to explore Toyota’s quality crisis
in an in-depth conversation with author and Professor Takahiro Fujimoto of
the Manufacturing Management Research Center, University of Tokyo.
Fujimoto is a long-time Toyota observer who conducted research at Harvard
Business School with Kim Clark on Toyota’s product development system.
John Shook used to work for Toyota in Japan.
In this interview Prof. Fujimoto states that “if there is one primary
reason for the crisis, it is that this overwhelming complexity exceeded
Toyota’s organization capability.”
The interview is well worth reading and you can do this at:
http://www.lean.org/shook/. Look
for “Toyota Troubles: Fighting the Demons of Complexity”
It also appears that Toyota became arrogant about its fabled quality and
believed that they couldn’t have any quality issues. They also seem to
have switched from just focusing on the customer to striving to be the
largest car maker in the world, and look where that got GM! Even before
the crisis at Toyota, Akio Toyoda, the new CEO was trying to shake things
up by telling the staff that Toyota was already at stage 4: grasping for
salvation in Jim Collins’ five stages of decline. The recent crisis
underlines this.
There are many lessons we can all learn from Toyota, both past and
present, but clear one is that trying to be the biggest or the largest can
be a fool’s game. The only thing that matters is focusing on the customers
to ensure that your return on equity (or profit) is the best it can be and
higher than your competitors, then you stand a better chance of a
sustainable future.
[1] Collins, J. (2009) How the Mighty Fall and
why some companies never give in. Random House Business Books, London