Have you ever considered a completely different approach to strategic planning for your firm? An approach kind of like Toyota’s?

Let me explain.

There are traditional and classic strategic plans, which typically focus on practice group and geographic reach, perhaps with an overlay of a third dimension of client or industry focus. These can be amplified and implemented by organizational and structural adaptations including practice group management, client relationship initiatives, and business intelligence and profitability analysis toolkits.

These are relatively familiar—even if honored most often in the breach—but consider a different approach entirely, namely Toyota’s.

Now, understand that Toyota is light-years away from being a stranger to classic strategic planning. They came to the US marketplace with extremely modest offerings (early critics called their first cars "two motorcycles bolted side by side," and worse) but relentlessly and purposefully moved upscale, with the Camry now the best-selling car in the US. (The Toyota Corolla is number 5, the Honda Accord #2, the Nissan Altima #3, and the Honda Civic #4, shutting the US out of the top five altogether, but that is not only a topic for another day, it’s not a topic for "Adam Smith, Esq." tomorrow or ever.)

Finally, Toyota has gone upscale in a large way with its introduction of the Lexus line. (And for my earlier thoughts on what that might mean for law firm land, see Lessons from Lexus.)

The real genius of Toyota’s rise to becoming top automotive manufacturer in the world lies elsewhere altogether. It’s simply the "Toyota Production System," as described summarily in this wonderful New Yorker "Financial Page" piece by James Surowiecki (who’s always worth reading, by the way).

The "TPS" began after World War II when Japan was rebuilding and capital, equipment, and labor were all hard to come by. A Toyota engineer named Taiichi Ohno decided to make a virtue of necessity by instituting a system to get the absolute most out of every part, every machine on the assembly line, and every worker. The principles were, and are:

  • Do away with waste;
  • Have parts arrive the moment they’re needed, not before and not after; and
  • Fix problems as soon as they arise.

You may be saying to yourself that these principles are not new, and they’re not. Ohno borrowed from both Andrew Carnegie and Henry Ford, among others, not to mention throwing in a healthy dose of common sense. But the secret of the TPS is that it’s no secret at all. According to Surowiecki, more than 3,000 books and articles have analyzed Toyota, they regularly give exhaustive factory tours, and concepts such as the andon system (a simple pull-cord that any worker can yank at any time to signal a problem and shut down the entire assembly line) have been widely adopted.

Let me remind you of another company that did things differently, was wide open about it, and ran away from its peers in the industry (at least for awhile): Dell Computer, with its zero-inventory model, building no computer until a customer had ordered it, collecting the cash payment upfront and delivering the machine later, thus becoming one of the first companies of any substance to have negative working capital–the higher its order level, the more cash it had on hand.

The Dell model worked brilliantly until laptops slowly began to overtake desktops in market share. What’s wrong with that? Simply that people like to physically see, handle, pick up, and hold onto laptops before they buy them, whereas they’re comfortable buying desktops (physical) sight unseen. Dell has since regrouped, but the point is simply this: Dell’s model was totally transparent; everyone knew what it was; Michael Dell himself was happy to explain it ad infinitum in the business press; and yet no one managed to copy or even seriously emulate it.

Which brings us back to Toyota. The TPS is the world’s worst-kept secret competitive advantage. Let’s revisit some of its components:

  • Employees contribute suggestions–by some counts, a million suggestions a year. They can be large but mostly they’re small: Move this shelf of parts closer to me, change the angle of the lighting, let me pick up the part with my left hand before I install it with my right, etc.
  • Embrace the notion of kaizen, or continuous improvement; you needn’t go for the touchdown pass or the home run. Singles, bases on balls, and 4 yard runs will get you where you need to be.
  • "Innovation" is not reserved to the executive suite or the elect; everyone is involved, every day.
  • Not every suggestion works. Fine. Even Toyota has had its miscues, including a batch of quality problems in 2006. But cumulatively, the impact is game-changing.

Note what this is the antithesis of: The bolt-from-the-blue approach to change, where everyone invests their hopes in a grand scheme. As Surowiecki puts it, this is more like the regular sustained diet approach to weight loss (competitive advantage) as opposed to the miracle 90-day cure. (According to McKinsey, two-thirds of companies that put quality improvement programs in place abandoned them.) And that’s precisely why the relentlessness of the Toyota approach is so hard to emulate.

Now, what has this to do with law firms?

Let’s pretend you have a basically sound, classic Strategy in place: You know what geographic markets, practice areas, and clients/industries you want to focus on, and you are aware of your strengths, opportunities, weaknesses, and threats. You believe your capabilities are well aligned with your opportunities.

Congratulations; that’s a start.

Now consider what adopting the TPS in your firm would need. Here are just some thoughts:

  • Can associates suggest changes to the KM system or procedures for finding precedent, template, and sample documents and clauses?
  • How are assignments made? Who has input? What are the criteria?
  • Are "vacuums" in training part of the assignment process? How are they monitored and addressed?
  • Has anyone thought about how time worked is lost between the actual work and the final bill? Where are the leakages?
  • Do associates have the opportunity to be exposed to other practice areas than the one they first choose, even tangentially?
  • When partners are assembling teams for deals and cases, who has input?

The point is not, really, to suggest anything specific for your firm. The point is to suggest that you might embark on the continuing pursuit of excellence in all you day. Even matters so small as moving a parts shelf closer. For surely, part of the genius of the TPS is not just its concrete suggestions, multitudinous as they are: It’s the sense of engagement it engenders. By some measures, Toyota workers generate one hundred times as many suggestions per capita as workers at their competitors.

That, without doubt, is the single most significant component of the genius of the TPS. Why wouldn’t you want to embrace that? And remember: It’s extremely difficult to emulate, as wide open as it is for all to see. You don’t need to fear others seizing upon it as a competitive advantage after they see your example. Or if they try, just remind them that they need to get more exercise, lose weight, and stop smoking.

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