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Against strategy

By Nicholas Gruen - posted Thursday, 6 April 2017


However, the most important strategic thing Toyota did was to come up with a response to the dysfunctions of central planning which, as the famous pro-market philosopher Friedrich Hayek had pointed out since the 1920s (I presume unbeknown to the boffins at Toyota) related to the need to access distributed intelligence.

Hayek's answer was always readymade - to embrace the way markets can harness distributed information. But by the late 1940s Hayek had wrapped his argument for the indispensability of markets in a larger story about the way in which systematic knowledge taught in universities - the knowledge of the scientist, engineer or accountant - came to dominate the more mundane knowledge of context and place at the 'coalface'. This was a story about the hubris of the professional classes, if anything amplified by the groupthink and routines of bureaucracy.

However, though the foibles of bureaucracy and central planning were a problem for Toyota, there was no readymade deus ex machina that could be accessed to solve the problem because firms are necessarily centrally planned. Toyota had to imagine how one might tame bureaucratic hubris to access the collective intelligence distributed throughout Toyota's workforce on the production line and even the intelligence of suppliers and customers. It then did the harder and more painstaking work of building a system that accessed it for decision making throughout the company. And that required applied humility - rather as I'm arguing cultivating and accessing critical thinking throughout an organisation does.[7. On humility, a close reading suggests it may not be much more than a bit of scientific linkbait, but this article is being promoted through a Medium Post as showing "Why Humble People Make Better Decisions". They do, but the reasoning in the paper seems perilously close to circular to me.]

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Finally, a story I love which, for me, sums up the importance of critical thinking and applied humility. It's told by Edwards Demming, the American musician and process control statistician who helped conceive and build the Toyota production system. Once it was proving its power the Americans from whom Toyota had originally learned and whose ideas on driving down waste they'd taken much further started making a beeline for Toyota's factories in Japan. As I understand it the Japanese were quite open in demonstrating their operations, their production ideas and culture. As Demming said, they come they watch and they go home and they copy. "But they never know what to copy".

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About the Author

Dr Nicholas Gruen is CEO of Lateral Economics and Chairman of Peach Refund Mortgage Broker. He is working on a book entitled Reimagining Economic Reform.

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