How Toyota became the best car manufacturer

rmclements10

10 minutes ago

9 min read

I LOVE my Izusu Trooper.

It was my dad's - he bought it off ebay and flew to NY to drive it back after it was in a flood. It's the car I learned to drive in ( a manual transmission, I would like to brag ). This car has been to every corner of the country and finally hit 3000k+ miles when I sold it to a new family for their Colorado adventuring and camping vehicle.

Izusu is owned by Toyota.

And I asked my dad why our family consistently bought Toyota cars. My mom upgraded to a Lexus - but still, Toyota owned. And he told me it was because of a man names W. Edwards Deming (1900–1993), an American statistician who taught Japanese industry how to build quality into the process instead of inspecting for it afterward. And he was why Toyota had notoriously good cars. Because everyone in the factory was focused on creating a good car.

My dad was frugal and data driven - he believed in the "buy it once and buy it for life" principal. He lived in Patagonia and New Balance tennis shoes. He wasn't hesitant to put down money, but he wanted to know he was getting the best possible product. And for him (and a family, so of course safety ratings) Toyota was it.

When it came time to buy my first car, obviously, I had to deep dive on my own because I really wanted a cute VW.

Deming learned statistical process control from Walter Shewhart at Bell Labs. After WWII he went to Japan to help with a census. In 1950, the Union of Japanese Scientists and Engineers invited him to lecture, and he spoke to the heads of companies controlling a large share of Japan's industrial capital. Japanese products then had a reputation for being cheap junk. His promise was bold: follow these methods and you'll capture world markets within five years. Japan created the Deming Prize in his honor in 1951, and it's still one of the top quality awards in the world.

His core ideas

Quality lowers cost. Defects, rework, and waste are expensive, so improving quality makes production cheaper, not more expensive.
Most problems come from the system, not the worker. Deming argued that the vast majority of defects (he put it at 85–94%) come from how the process is designed. That's management's responsibility, so blaming workers is pointless.
Reduce variation. Use data to tell normal fluctuation apart from real problems, so you fix actual causes instead of guessing.
Plan-Do-Check-Act. Make a change, measure it, learn, and repeat, forever.
Drive out fear and restore pride of workmanship. Two of his famous "14 Points" were to remove fear so people speak up about problems, and to remove the barriers that rob workers of pride in their work. He hated quotas, slogans, and blame-based performance ratings.

The assembly line part, and where Toyota fits

Taiichi Ohno built the Toyota Production System around the andon cord, In the 1920s, Sakichi Toyoda invented a loom that stopped itself when a thread broke, so one flaw didn't ruin a whole roll of cloth. That idea became jidoka, and on the car assembly line it became the andon cord.: any worker who spots a defect pulls it, and the line slows or stops until the problem is solved at its root. In most American plants of that era, stopping the line could get you fired.

Toyota paired that with kaizen (continuous small improvements suggested by workers) and quality circles (small groups of line workers solving problems together, championed by Kaoru Ishikawa).

Workers submitted many improvement ideas, and most were actually implemented. That's where the pride came from: you weren't just another robot on the assembly line, you were improving the system. You were personally creating a better car. Toyota won the Deming Prize in 1965, and by the 1970s and 80s Japanese cars and electronics were beating American ones on reliability and cost.

How it reached the US

American companies had booming postwar demand and didn't think they needed Deming. Then Japanese competition began crushing Detroit. In 1980, an NBC documentary called If Japan Can... Why Can't We? featured Deming, and suddenly everyone wanted him. Ford hired him in 1981. The "Quality is Job 1" era and the hugely successful Ford Taurus followed.

The most striking proof was NUMMI, a 1984 GM–Toyota joint venture in Fremont, California. It reopened one of GM's worst plants, known for absenteeism, sabotage, and poor quality, and rehired many of the same workers. Under Toyota's system, it soon became one of the highest-quality plants in GM.

Legacy

Lean manufacturing, Six Sigma, agile software development, and modern hospital safety programs all trace back to these ideas. The lasting lesson is that the people closest to the work see problems first. Organizations that let them speak up and act without fear get better every day.

Except,

I've taken Six Sigma. I track OKRS and KPIS. I've utilized agile software development.

And It doesn't look like Demming's approach in corporate America. So why are all of these innovative Fortune 500 companies being recognized by Forbes and Fast Company not doing this approach? And what are they doing instead? and is it working?

Thinking vs. doing. American factories were built on Frederick Taylor's "scientific management": engineers and managers designed the work, and workers followed instructions without questioning them. Deming said front line workers knew things about the process that managers didn't, and that ignoring their knowledge was a huge waste.
Inspection vs. prevention. The American approach was to build the product, inspect it at the end, and scrap or rework the bad ones. Deming said this paid people to make defects and then paid other people to catch them. His alternative was to fix the process so defects didn't happen. His famous line was that you can't inspect quality into a product.
Blaming people vs. fixing the system. When something went wrong, American managers looked for the guilty worker. Deming said most problems were built into the system by management, so punishing workers changed nothing and just taught them to hide problems.
Quotas and targets. American companies loved production quotas, management by objectives, and numerical goals. Deming called for eliminating them, because people hit the number by cutting corners or gaming the metric rather than by improving the work.
Performance reviews. Annual merit ratings and ranking employees against each other were standard practice. Deming considered them among the most destructive habits in American management. They created fear, killed teamwork, and mostly measured random variation in the system rather than individual skill.
Short-term vs. long-term. American executives were judged on quarterly earnings, and managers moved between jobs and companies frequently. Deming called short-term thinking a "deadly disease" and pushed for patient, decades-long commitment to improvement. Honestly - I have ZERO idea on how this can be changed in 2026 when quarterly earning calls seem to control EVERYTHING.
Suppliers. The American norm was to buy parts from whoever bid lowest and to play suppliers against each other. Deming argued for fewer suppliers and long-term, trusting relationships, because cheap parts with high variation cost more in the end.
Departments. American companies were organized in silos, with design, manufacturing, sales, and purchasing each optimizing their own numbers. Deming wanted barriers broken down so the whole company worked as one system.
Fear. Perhaps the deepest difference was culture. In many American plants, raising a problem was risky: you could be blamed, or seen as a troublemaker. Deming focused on "drive out fear," because a company where people are afraid to speak up can't improve.

American companies assumed quality came from controlling workers. Deming believed it came from managers improving the system and trusting workers to help. That's why many American executives found him abrasive. He was essentially telling them that they, not their employees, were the problem.

Why it persists. Deming's ideas required leaders to accept that they, not the workers, own most problems, and to be patient for years. The American system of shareholder primacy, short CEO tenures, and pressure from activist investors and private equity rewards the opposite. It's easier to adopt a tool like Six Sigma than to give up control.

The cautionary tales. Boeing is often cited as a modern example. Analysts have pointed to a shift toward cost-cutting and financial metrics, followed by serious quality failures and reports that employees felt discouraged from raising concerns. Deming would have predicted that outcome. To be fair, Toyota itself has had quality and testing scandals, so no company lives up to the ideals perfectly.

Common practice	What Deming taught
Managers design the work; employees execute it	The people closest to the work see problems first
Hit the quarterly number	Commit to improvement over years, not quarters
Quotas, KPIs, and stretch targets	Targets without a better method invite gaming and shortcuts
Annual ratings and ranking employees	Ratings mostly measure the system, and they breed fear
Find who's responsible when something breaks	Find what in the system allowed it
Layoffs as a routine cost	Security and trust are what let people raise problems
Buy from the cheapest supplier	Fewer, long-term partners with less variation
Departments optimize their own metrics	The whole company is one system

Noticing a theme here? Control. Most of these practices assume that results come from pushing people harder and watching them more closely. Deming believed that results come from leaders improving the system, hiring good people, and then trusting them to help.

When employees feel discouraged from raising concerns, problems stay hidden until they become crises.

Tools without heart don't work

A company can install an andon cord and nobody will pull it if they know they will get a "talking to" or worse be fired or demoted for interrupting progress. You can launch a suggestion program that quietly dies because people actually gave their feedback and then they saw that nothing ever changes.

The tools only work when people believe three things:

It's safe to speak up. - Raising a problem won't cost me my reputation, my bonus, or my job.
Someone will act on it. - My idea won't disappear into a box or a backlog.
It matters. - Fixing this makes the work, the product, and the customer better, and I get to be part of that.

I genuinely believe that if people feel connected to a deeper mission or vision ( if it's 'we are going to put a man on the moon' or 'we are going to build the best car ever made' or 'we are going to solve world hunger') and they see how their daily work moves the company towards achieveing that goal - they are UNSTOPPABLE. And their productivity will be out of this world.

So how do you add back in the "heart"?

Harvard Business School professor Amy Edmondson is the GOAT on this - psychological safety, which she defines as "a belief that one will not be punished or humiliated for speaking up."

Her early work studied hospital teams, and she found that the most effective ones were candid enough to openly admit their mistakes, so errors got caught and fixed instead of buried. (aka Deming's version of - drive out fear) Just as important, she stresses that safety isn't comfort or low standards. The teams that improve fastest pair it with high expectations.

That's the heart. It's not soft. It's the operating system the tools run on. Here's how companies can build it:

Celebrate the first person to find a problem. At Toyota, pulling the cord was the right move, not an embarrassment. Thank the messenger publicly, every time.
Close the loop on every idea. Even a "no" with a reason builds trust. No response = people think you don't care and they won't respond when you ask next time.
Ask "what" before "who." When something fails, start with what in the system allowed it.
Give frontline people real authority. Let teams change their own processes without three levels of approval but FOR REAL.
Measure to learn, not to punish. Use data to understand variation, not to rank people. And idk, maybe not to determine their salary.
Protect people who improve themselves out of a task. If good ideas lead to layoffs, the good ideas stop. Maybe tell people if they train an AI agent to do their job they won't get laid off and replaced by the AI agent, but then they will get to spend their time focusing on what the agent can't do.
Make pride visible. Show teams the customer impact of the fixes they made. Let them present their own improvements to leadership. Invite front line workers to executive meetings, give them they chance to show off their awesome ideas or innovative processes.

What the best executives do on purpose

Culture doesn't survive on autopilot. Every quarter brings pressure to cut a corner, hit a number, or find someone to blame. The executives who keep the heart alive are intentional about it.

They go see the work. Toyota calls it genchi genbutsu: go to the actual place. Great leaders spend time on the floor, in the support queue, or with the engineers, and they listen more than they talk. (remember - they are acknowledging that the front line staff are the experts here!) (and if your team is globally dispersed, maybe fly to different locations to see people in person or at the very least connect over Zoom)
They own the system. When something breaks, their first question is "what did we build that let this happen?" Taking responsibility from the top is what makes it safe for everyone else to be honest. (blame the system not the people)
They talk about the why, not just the what. Strategy decks say what to do. Leaders explain why it matters and how each person's judgment makes it work ( and always link it back to the bigger picture!)
They guard against the metric becoming the mission. They use numbers to understand the business but make sure the customer or product is more important than a spreadsheet or dashboard.
They play the long game out loud. They remind investors and employees that progress happens over years generally not in quarters.
They model the behavior. They admit their own mistakes. They pull the cord on their own decisions when something isn't working.