What can a law firm learn from an automotive manufacturer? A good deal, according to law firm management consultant and blogger Bruce MacEwen
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 organisational and structural adaptations, including practice group management, client relationship initiatives, and business intelligence and profitability analysis toolkits.
These are relatively familiar – even if honoured 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. It came to the US marketplace with extremely modest offerings (early critics called its 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.
Finally, Toyota has gone upscale in a large way with its introduction of the Lexus line.
The Toyota Production System
The real genius of Toyota’s rise to becoming top automotive manufacturer in the world lies elsewhere altogether.
It is simply the “Toyota Production System” (TPS), as described summarily in a wonderful The New Yorker ‘Financial Page’ piece by James Surowiecki (who is always worth reading, by the way).
The TPS began after World War II when Japan was rebuilding, and capital, equipment and labour were in short supply. 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 are needed – not before and not after
- 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 is no secret at all. According to Surowiecki, more than 3,000 books and articles have analysed Toyota, the company regularly gives 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 a while).
Dell Computer, with its zero-inventory model, by building no computer until a customer had ordered it, collecting the cash payment upfront and delivering the machine later, became 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 is wrong with that? Simply that people like to physically see, handle, pick up and hold on to laptops before they buy them, whereas they are 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 are 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 need not go for the touchdown pass or the home run. Singles, bases on balls, and four-yard runs will get you where you need to be.
- Innovation is not reserved for 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 abandon them. And that is precisely why the relentlessness of the Toyota approach is so hard to emulate.
The law firm analogy
Now, what has this got 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 some thoughts:
- Can associates suggest changes to the knowledge management 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 your days.
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 is the sense of engagement it engenders.
By some measures, Toyota workers generate 100 times as many suggestions per capita as workers at its 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 is extremely difficult to emulate, as wide open as it is for all to see. You do not need to fear others seizing upon it as a competitive advantage after they see your example.
And if they try, just remind them that they need to get more exercise, lose weight and stop smoking.