Using Genchi Genbutsu as the Ultimate ERP and Management System

Toyota Productions Systems’ (TPS) leadership and their employees refer to it as, “genchi genbutsu.” It is one of the most important and powerful analytical tools available to the executive today. What is it, and how can chief executives use the tool to help them improve their businesses and the performance of their employees?

December 1 2013 by Colin D. Baird


Genchi genbutsu means going to the place where things are happening, and seeing and experiencing them for yourself. When properly utilized, this helps leaders improve employee engagement, deliver higher quality products to our customers and develop more consistency in identifying waste where things are happening. It is not dissimilar to the idea behind management by walking about (MBWA), an all-too-briefly popular American version of the same principle, according to The Economist.

Both MBWA and genchi genbutsu are more a frame of mind than a plan of action. They acknowledge that when information is passed around within organizations it is inevitably simplified and generalized. The only real way to understand a problem is to go and see it on the ground.

Toyota is the most devoted exponent of genchi genbutsu. A good example is Yuji Yokoya, a Toyota engineer, who was given responsibility for re-engineering a new generation of the Toyota Sienna minivan for the North American market. He sought to understand what it would take to improve the 2004 Toyota Sienna minivan with features that would make the car more attractive for buyers of the 2005 model. You might say he was given MBO, or “Management By Objectives” from the executive team. Toyota had mounds of data and analytics in their ERP system on who their customers were, what conditions they drove in, and how many children or guests were typically in the minivan. Data on the Sienna itself, and on customers had been collected by Toyota over the years they sold the minivan that replaced the Previa in 1997.

In leadership however, ERP systems often only tell part of the story.

The TPS engineer poured over the information from the ERP system, visited the production plant and dealer showrooms and spoke with customers. All pretty standard stuff when making important business decisions on product development. Then he did something different, he asked other leaders if he could experience driving the car. Toyota encourages this sort of thinking and employee engagement, and trains its leaders to think, “what is the value like that my customers are experiencing?”

Driving from Florida to California, and from Alaska to Mexico he logged a total of 55,000 miles in pursuit of genchi genbutsu. What he learned led to significant improvements from the 2005 model. In New Mexico, for example, he learned the older model didn’t have a tight enough turning radius for narrow streets; in the Midwest he experienced high winds which caused stability issues; and driving in Alaska on gravel roads, the car didn’t steer as effectively as the data indicated it would. Because he logged so many miles himself, he also recommended the minivan be upgraded to better suit children on long trips. This led to improvements in areas such as seat quality, roll down windows in the back seat and an optional DVD center.

Experiencing and seeing things for ourselves helps us better understand the analytics that we may be seeing on paper. It gives us valuable pieces of additional information that may sometimes not make it up the corporate ladder.

Modern day key performance indicators (KPI) give us immediate insight, but they neither provide important human interaction nor encourage leadership teams to more actively engage employees. TPS has used genchi genbutsu for years, while many American executives are finally warming up to the idea. Toyota has maintained nearly 50 years of consistent profitability, and very high inventory turn rates because of the efficiencies that were developed while using this tool. It remains an active and integral part in TPS training programs for leadership development throughout Toyota worldwide. Few have been able to mirror the TPS system, but everyone can learn how to go, see and experience things for themselves where the action is actually taking place.

When Chris Bright, Expedia’s senior technology engineer sought to upgrade his company’s customer experience on the online travel booking site, he went about his task in a somewhat similar way. His idea was to create a customer experience council. In his view it was to be led by senior executives but ideally it needs to involve the whole organization. That’s because one needs to understand the end-to-end journey the customer goes through, not just one particular silo the marketing, ecommerce, or service manager is focused on. “If the customer is tweeting, calling, emailing, texting or using some other method of communication, all those interactions should be aggregated, so that that you understand what your customer is trying to do and address that person on his or her terms,” says Bright.

“At the end of the day, all your customer touchpoints impact one another, he adds. “When you streamline the front end of your website to make it easier for customers to use, you can invest more heavily in training your call center so those representatives handle the more challenging problems they will inevitably get.” By doing this, Expedia created a feedback loop where it tries to understand what is not working for its customers during their experience and push solutions to those problems back into the company’s strategic business planning.

Read: http://www.oracle.com/us/corporate/profit/big-ideas/062113-cbright-1963174.html

Read: http://privateequityriskmanagers.blogspot.com/2013/11/genchi-genbutsu-ultimate-erp-and.html