As some of you know, I have an undergraduate degree in industrial and labor relations -- which I got in the mid-90s. One of the things I remember clearly was that the big concerns at the time were over competition not from India or China -- which is what you hear about today -- but competition from Germany and Japan. I had multiple classes where we looked at how organizations and businesses worked in the US compared to Japan and Germany, with questions being asked about what methods made the most sense. A key case study was the case of NUMMI -- the New United Motor Manufacturing Inc. I remember having to do case studies on NUMMI in three separate classes.
The Classic NUMMI Story
The simple story: GM had an auto plant in Fremont California that was the worst of the worst in terms of quality and productivity. The cars coming out of the factory were dreadful, and management and labor were constantly fighting -- even more than elsewhere, in an industry where labor and management have never been close. Eventually, in the early 80s, GM shut down the plant, but later worked out a deal with Toyota, to reopen the plant, under joint ownership -- with Toyota effectively running the plant. Both car companies could get something out of this. Toyota could start building cars in the US -- which was important as the US was threatening very high tariffs on imported Japanese cars, and GM would learn about how Toyota was able to build cars of much higher quality than GM. Amazingly (and against the wishes of both companies initially), the same awful workers who had worked at the plant previously were rehired.
But, then something amazing happened. Under the Toyota process, the plant flourished. The relationship between labor and management was no longer antagonistic, and the plant became much more productive, and quality shot sky high. It was a success story in almost every way. Through the late 80s and 90s, NUMMI was seen as the key to reviving American manufacturing (especially in the auto industry).
The New NUMMI Story
Today, on April 1st, 2010, NUMMI is shutting down for good. Last weekend's This American Life
had an hour long episode all about what happened to NUMMI
-- from the original, horrible old plant, to the revitalization, and then up through now as it's closing. The episode explains the second half of the story. If NUMMI was so miraculous, why is it now shutting down? Why is GM bankrupt? Hell, why is Toyota now recalling millions of cars over serious quality questions. What the hell happened?
Ideas Are Easy, Execution Is Hard
It really is a fascinating story all around -- but the key to me is that it highlights the vast difference between ideas and execution. We've said it before: lots of people have good ideas, but it's much, much more difficult to execute on a good idea. However, as a society, we tend to assume that the execution is easy, but the ideas are hard
-- getting the equation backwards. NUMMI was
a success -- for both GM and Toyota, but GM got the wrong lessons out of it.
Initially, it really just took the superficial parts of what worked at NUMMI in trying to expand that kind of production elsewhere. GM ignored the nuts and bolts of how to really execute on the teamwork process and how to focus on continual improvement. In one case, a GM manager even told someone to go to NUMMI and photograph every square inch, so that it could be recreated in a different plant, without bothering to care about how the rest of it worked. This is just the "idea." It's the window dressing. It's what people see that's pretty and clean, but not what's really going on behind the scenes.
How NUMMI Became A Cargo Cult
In fact, it sounds like the folks at Toyota knew this all along. While many were surprised that Toyota would "give up its secrets" to GM, someone on the program points out that the GM folks asked all the wrong questions
. They were focused on the shiny front-end stuff, and not the dirty back-end of how it all really worked
. As, we've pointed out before, it's like the infamous cargo cults
that think if they just copy what they see of something, they'll get the same results, totally missing the fact that the execution involves a lot more than you can see.
Following that, GM kept trying and failing (miserably) to replicate the success of NUMMI elsewhere -- but as the report points out, it effectively took two decades, often involving numerous execs who had to spend years at NUMMI before moving elsewhere, before GM finally
realized that what worked at NUMMI involved a lot more than just teamwork and a cable that allowed anyone to stop the line. It was more than a cargo cult. It was more than the idea. It involved a lot of careful, detailed execution. But, of course, by then it was too late. GM's reputation for making crappy cars was well established. Add in a healthy dose of paralyzing union agreements and whack the whole thing around with a freefall economy, and you have a bankrupt car company, now mostly owned by the US government.
Oh, and as for Toyota's more recent problems? It seems that it may have learned some of GM's bad lessons in return. It started focusing on rapid growth over quality in an attempt to bulk up and compete -- and now it may be facing some of the same problems that GM faced.
It's The Execution, Stupid...
In the end, though, it really is a fascinating case study. The original case studies from back in the 90's of what worked at NUMMI only told half of the story. The closing of NUMMI today highlights the other half: ideas are easy. Executing is hard. Pretending it's the other way around can get you into an awful lot of trouble.