Wow, excellent read.
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| Soichiro Honda(right), founder of the Honda
Motor Company, laughs after Chrysler Motor Company Chairman Bennett
Bidwell (not pictured) told Honda that he would have less gray hairs if
he had not started tinkering with motorcycles, and not threatening to
become the third largest automobile company in1989. Honda was a
perfectionist who embraced mistakes as a way to learn and improve.
(Blake J. Discher/ASSOCIATED PRESS) |
by Kelly Johnson of
www.washingtonpost.com
When financial
journalist Jeffrey Rothfeder set out to understand why globalization has
failed, he got pulled into the story of Honda, a company that has
thrived as a multinational. In more than 60 years in business, Honda has
never lost money. Its profit margins are the highest in the industry
and its factories among the most productive. Rothfeder talked with The
Washington Post about “Driving Honda,” in which he explores the enduring
culture established by company founder Soichiro Honda, a perfectionist
who embraced mistakes as a way to learn and improve. He also goes inside
Honda’s plant in Lincoln, Ala., a model of flexible manufacturing. The
following was edited for length and clarity.
How did this book come about?
I
didn’t think I’d be writing about Honda or even a specific company.
What interested me more was the issue of why globalization is failing,
because for two decades now it’s been the guiding principle that runs
U.S. economic policy — that there is going to be free trade and we’ll
lose the borders and there’s no difference between General Electric here
and General Electric in China. And essentially globalization was going
to lift all boats economically.
But it isn’t working out the way
people had hoped. Most multinational companies do not make money in
their globalized operations. Classically, General Electric will say that
they make more than 50 percent of their revenue outside the U.S., but
they are losing money in many parts of the world.
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| Riding
on a Honda, Brazilian soccer king Pele poses with Soichiro Honda during
a press conference in Tokyo on Jan. 20, 1976. (K. Mori/AP) |
So
I was wondering, what would it take to make a successful multinational?
I was also interested in the auto industry because it is such a global
industry.
Why Honda?
Because
it is one of the few multinational companies that has succeeded at
globalization. Their profit margins are high in the auto industry.
Almost everywhere they go — over 5 percent profit margins. In most
markets, they consistently are in the top 10 of specific models that
sell. They’ve never lost money. They’ve been profitable every year. And
they’ve been around since 1949, 1950. And it’s a company that really
does see the world as its market and thinks very hard about what it
takes to be successful at that.
Everything it does — from corporate culture to its operational
principles to the way it globalizes — was different from any other
company I’ve ever looked at.
Tell us about Soichiro Honda, the founder of the company.
 |
| In
“Driving Honda,” financial journalist Jeffrey Rothfeder explores the
enduring culture established by company founder Soichiro Honda.
(Courtesy of Penguin/Courtesy of Penguin) |
You
cannot look far into the company without meeting Soichiro Honda. He
died in the early ’90s. He was so colorful. He emblemizes what the
company is, and the company emblemizes what he was.
He was one of
the world’s greatest engineers. And yet he never graduated college. He
believed that hands-on work as an engineer is what it takes to be a
great manufacturer.
When he was not even 10 years old, a car came
through his hometown in Japan — a Model T. They’d never seen a car
before. He talked about how the car dripped oil as it came through town.
And all the kids were chasing it. His first reaction was to bend down
and smell the oil because there was something about it that intrigued
him. He tinkered with bicycles. His father was a bicycle repairman. But
this was real heavy metal.
That moment changed his life. He knew
he wanted to manufacture big items that used oil, that required heavy
machinery and that provided mobility. He was amazed at seeing this car
ride through town effortlessly.
Within 20 years, he started to make pistons for Toyota. He invented them.
He
created one of Honda’s first great principles. It is “to be there.”
Whatever you’re going to design or develop, they call it sangen shugi,
you have to be there on the ground. You have to know how are things made
from the moment they are a slab of metal to when they come out as a
piston. How do people make it?
How does the car use it? What are some of
the distinctions you can make for it? All of that can only be
determined by asking the right questions and being curious and
observant. And that’s one of the precepts of Honda Motor.
Soichiro was a tempestuous man. He was a perfectionist. Yet he
understood — because he watched the way factories operated and didn’t
just learn about it in school — that the process was messy and that
something was bound to go wrong.
Honda Motors stands out in the
same way because it reflects him. There’s a real cult of personality
around him that exists even though he’s been gone 20 years.
So
all of that makes me think of another famed perfectionist, Steve Jobs. I
wonder if Soichiro Honda had the same eye for design as being core to
innovation? Do you see any comparisons between the two?
Honda
and Jobs — if you worked for them, you would say that both were
hard-charging people, critical of mistakes, perfectionist. But really
that whole design aesthetic, it’s interesting when you see that in a
technologist. If you would, say, compare Jobs and Bill Gates, certainly
the way one views Microsoft is not as a great design firm. But Apple,
the design is really where the innovation is.
Soichiro Honda had
all those same traits. He would say that if you’re to sell products that
people want to buy they have to be beautiful, products that people
enjoy looking at and enjoy using.
I uncovered a great set of
writings in which Soichiro Honda talked about how he views design. One
thing I loved was that he would visit Buddhist temples to get the spirit
and essence of natural design to put into his machines. In the ’50s,
when he was still just making motorcycles, he had gone to a temple, and
looking at the statue of the Buddha, he saw that the line from the
eyebrow to the bridge of the nose was beautiful — one he said does not
exist anyplace else. And so he designed the fuel tank for his motorcycle
to have that line.
Probably none of the users of the motorcycles know
that. As with anything else in the design aesthetic, the best designs
are the unobtrusive designs. He really got that.
For such a
perfectionist, he seemed comfortable with and even embraced mistakes. I
guess this speaks to the paradox you just mentioned.
Soichiro
didn’t mind mistakes, if you learned from them. He had no patience for
people who made mistakes and hadn’t been there and did it in a lazy way
by not going to the site.
Soichiro entered Formula One races.
Honda the company and Honda the man believed that racing for engineers
is the greatest experimental lab because you’re trying to push these
machines further and further and you really get a chance to experiment
on what you’re making.
One of the early Formula Ones, Honda was
embarrassed because the car they put out went up in flames. It turned
out, when Soichiro investigated it, that the pistons had caught on fire.
The pistons were not built for the heat that they were going to take on
a race course.
So he went back to the man who designed it and
interviewed him. This guy had never tested these pistons, had never
talked to race car engineers, never been on the ground to test pistons
in the conditions they would, never even talked to race car drivers to
find out how the car felt. He didn’t go to the spot, as Honda would put
it. That kind of intellectual or design laziness really bothered him.
And he embarrassed this man completely. He made him go around and
apologize to everyone in the company one after another, holding the
burnt piston.
Now this man, however, also went on to design the
next year’s cars, and those cars came in first place. And this man
became head of Honda in North America. So Honda could be hard on you.
But he also felt if you learned from it, you could be the next president
at a unit of his company.
What is waigaya? And can you talk about the role of argument at Honda.
Honda
believed that you have to argue all the time. You have to see both
sides of every issue. Most companies have a difficult time with this.
Even a company like Toyota, which famously talks about continuous
improvement and that workers should be empowered to say, “This isn’t
working right, let’s fix it.” While Toyota does that, it’s not so deeply
ingrained in the company that everybody does that.
These
argumental discussions, which go on at every level of the operation,
from the assembly line to the CEO’s office, is what Honda calls waigaya,
which is a word they made up. Which in English would be “blah blah
blah.” It’s the sound of people chattering. These waigaya can last two
minutes or two years.
I’ve been at factories where suddenly you
see a group of workers standing together and not so much yelling but
talking over each other. You ask what’s going on. They say, “The
dashboard isn’t fitting right,” so they started a waigaya. They argue
over every little piece of why it’s not fitting right, what they’ve seen
in other places, what they could do better. Even the CEO doesn’t make
decisions without something like that happening.
Is there an example of how that’s shaped a decision?
When
Honda first decided to come make automobiles in America, the CEO had to
decide what he wanted to do. This was the early ’80s. And everything
dictated against it: They weren’t going to make money for a few years,
they didn’t understand the American market, they’d never manufactured
outside of Japan. Most other companies would have said, “We’re not going
to do it.” In fact, the first foreign company that tried to make cars
in America was Volkswagen a few years before. They failed. They lost so
much money they just gave up on it.
So for Honda, it was not an easy decision. And one that, as the CEO
said, he was inclined to say no to. He kept asking people, “Why should I
do it?” These waigayas would occur. Really spontaneous, someone would
jump in and say, “Hey, I thought of another reason we shouldn’t do
that.” He focused people on, “Just give me the positive reasons. The
negative are so overwhelming.”
In the end, he felt the enthusiasm
for doing it was strong in the company. By looking at the opposite side
— they’re a dialectical company, everything has two sides to it —
they’ve made some of their best decisions. Honda became the first
Japanese company to make cars in America and beat Toyota by 10 years.
What do you think was his most enduring legacy?
I believe that you need to have a culture of risk-taking and culture of paradox to do what Honda does so well.
So
today the thing that stands out is that Honda can make any number of
cars on the same assembly line, one after another. They can have a Civic
and then an Odyssey or Pilot follow on the same assembly line. No one
else has a flexible assembly line like that.
How did that come to be?
Honda
is a decentralized operation. You have to be willing to let the guy
who’s building the factory in the United States dictate to Japan that
this is how we’re going to build the factory.
So every time Honda
does something, like build a factory, they’re building from scratch.
Again, it’s on the ground: Go look at what we’ve been doing. Learn from
it. Then build something else. Almost by definition, if you follow that
approach you’re going to have a much more flexible factory each time you
build one.
I talk in the book about the Lincoln, Ala., plant, one of their
newest plants. That is one of the most productive and flexible auto
plants in the world. Uniquely, instead of setting up assembly line
stations, where one person puts in the dashboard, the next station will
put the radios in, and the next one will put the steering wheel in, at
Honda they have zones of workers, so the zones put in five or six
things. Those zones are also required to look at quality control.
Also,
every car can be built to zone specifications. Whether it’s a Civic
that’s come down the line or an Accord, if you’re putting in a
dashboard, it’s going to be the same process. So workers are agnostic
about what car is there.
Are the plants especially high-tech?
Because
of the flexibility, they are one of the least automated factories.
Because they need human beings to work on these cars. If you’re going to
have a robot put in a dashboard that has differences from one car to
the next, you have to change the arms of the robot for every car. That
can take hours.
Some would say that Honda not being automated and
having more workers would hurt productivity. But it just shows what
they make up for in flexibility. Again, their profit margins are better
than anyone in the industry.
They do automate things once they
feel like it has become a commodity. But once you automate, you can
never improve anymore. A robot will never tell you, “Hey, I could do
this better.” You’re limited by the technology, ironically.
What is localization? And to what end does Honda use it?
That’s really the globalization story, in
terms of Honda. Most companies, when they globalize, will set up
operations in other countries. But they cannot decentralize their most
critical operations. Where in most cases R&D, design, engineering,
all of those critical aspects of the vehicles are still determined at
the home office.
Honda sets up an autonomous subsidiary operation
wherever it goes. So, Honda China, Honda of North America, Honda Europe
are each independent. They’re run by local people, so Honda China is
led by Chinese people. They get input from Japan. Quickly, they’re
running on their own and developing cars and designs for the local
market.
They once found that people in Saudi Arabia are very
concerned about the cleanliness of the cars on the outside because of
the environment, with so much sand. When they started selling cars
there, they got all these complaints that this car doesn’t work. It’s
not as promised. The dealers thought it was mechanical. It turned out
that the real complaint was that it gets dirty. So they had to create
ways that it kicks up and throws off dirt to fix it for that market.
Each
market determines for itself which cars it’s going to sell, which new
designs they want to make. How they’re going to run their operations.
How they’re going to build their factories. To the point that Honda
becomes a local company wherever it goes.
What does Honda’s research and development strategy teach us?
Around
every major factory they have a research and development team and an
engineering team. So that if they need something designed, or if they
make a new model, and the factory is beginning to produce it, the
R&D team is right there through the whole process of the production
of the car.
In most companies, R&D designs the car and it gets passed to manufacturing and R&D is out of the process.
Supply
chain issues have plagued the Big Three. Honda seems to have different
relationship with suppliers. How would you describe that?
Honda never owned its suppliers.
Honda
demands that its suppliers reflect all the risk-taking, all the
paradox, all of the mistake-making of its culture. The continuous
improvement that they demand of every worker, they want their factories
and suppliers to do the same.
Unlike other companies where the
metric is: Can they cut costs on a component every year that they make
it? Honda’s metrics are more based on quality, on improvement, what
changes have they made, how have they shaped corporate culture?
Honda
doesn’t want their suppliers to be exclusive to Honda. That would only
create a sense of “give Honda what it wants.” What Honda wants instead
is to get new ideas all the time — not the ideas they know about but the
ideas they haven’t thought about yet.
What will it take to revive manufacturing in the West? Is Honda showing us?
That’s
a tall order. Honda, I think, points to a lot of the ways. Young
engineers all want to go work in Silicon Valley. None of them want to
work in a Honda plant in Alabama, frankly. Honda’s done a lot more with
that by putting R&D at the factory, engineering at the factory, so
that the great next generation of designers will see that this is the
place they want to be. Working in an auto factory can be cool. It could
be just as much fun as designing an iPod.
Manufacturers need to stop disdaining their
own business and pretending like you can just ship it off. We need as a
society to talk about manufacturing as something of real value. We
certainly did that in the ’50s and ’60s. That was the real growth of the
middle class, through manufacturing.
So you have to rebuild its image. Bring plants back here. Be innovative.
The
government’s role in all this doesn’t have to be social or economic
engineering. It’s more about the R&D and basic R&D the
government is supporting.
Finally, the tax structure needs to be
changed in a way that encourages money coming back here, encourages
setting up businesses, discourages outsourcing and encourages
in-shoring. Like Honda, you can be a local company wherever you go. And
you don’t have to feel like you’re playing multinational games with your
money wherever you go.
Source;
http://www.washingtonpost.com/business/how-honda-makes-globalization-work/2014/08/07/b84f16be-1cd0-11e4-ab7b-696c295ddfd1_story.html?tid=hpModule_a2e19bf4-86a3-11e2-9d71-f0feafdd1394&hpid=z18
