There are a number of very valuable lessons that
you can take from Lexus, the car maker that will
directly benefit you as a trader.
You may not realize it, but the leaders of many
successful companies will intentionally look at
what the leading companies in other industries are
doing.
They do this specifically to see if there is something
that they can take and apply in their own industry and
gain advantage.
This posting will cover several things that Lexus
applies that you can take advantage of in your trading.
You may recall from a short while back, that Lexus
began using the slogan in all their advertising
“The relentless pursuit of perfection”.
The message is clear: Lexus is all about the highest quality.
Back in the 70’s, the Japanese cars had the position
of being cheap and of considerably lower quality than
their American competitors.
This had direct impact on their business.
- Their reputation was not good – which affected sales,profits and their selling price.
- Their scrap rates were high.
- Rework costs were high.
- Efficiency was inconsistent
- Production was inconsistent
- Profits were subsequently inconsistent and lower than desired.
Their futures as car makers was not particularly bright.
It’s tough to compete when you’re on the low end and
your operation has a lot of inconsistencies.
What the Japanese learned from Demming, whom the
Americans largely shunned, was that Quality is really
where business success is to be found.
They had been focusing primarily on the short term,
trying to make as much possible money each month
through:
- running their machines every possible minute
- buying cheaper materials
- accepting inconsistent work from their people
- accepting inconsistent production on their lines
- skipping periodic maintenance
- buying cheap equipment to make the cars
- doing marginal repairs on broken equipment instead of fixing them properly
- cutting back on research and development
- cutting back on training
They saw that this focus was the root of their problem.
What they learned is to focus on the long term and to
give primary attention to consistency and Quality
through process control.
They also learned that they had held an incorrect view
of Quality. They had been looking at it as a cost-center.
Such views as,
- “The better materials cost too much”
- “The better running equipment cost too much”
- “We can’t afford the downtime to fix the machine properly, just get it running”
- “We can’t afford the downtime for preventive maintenance”
- “We can make this month look good by dropping the training programs”
- “We can cut labor by eliminating the Quality inspectors”
At the end of process, they learned that these “costs” that
they had been associating with Quality were much lower
than the cost of POOR quality in their operations.
They learned that they had been looking at the matter
all wrong, viewing those expenditures to produce good
quality as “costs” and “expenses”. What they needed to
do was change their perspective and realize that these
expenditures were indeed very wise investments.
Investments in Quality are just that, money put into
something to realize a return.
By investing in the better equipment that would run
reliably and produce more consistently, they would
save both downtime and scrap.
Same for buying better materials with which to make
their cars.
By investing the time and money to perform the
periodic maintenance, the machines would also
have better efficiency and consistency.
By investing in training, their people would perform
better and more consistently, thus again lowering
costs of scrap, rejects and rework.
By standardizing procedures to the known best-
practices, then documenting them and training their
workers, the entire operation improves.
They also learned to monitor their processes very
closely and keep them under control.
Process control is at the heart of the success of Lexus.
By focusing on their processes, with an intent of consistency,
reliability and repeatability, then improving those
processes systematically, their Quality continues to go up
right along with their reputation, sales and profits.
Lexus now has a very respectable position as one of the best
car makers, in addition to admirable profitability.
Okay, so what does this have to do with trading?
E-V-E-R-Y-T-H-I-N-G
Trading is a process.
You have tools and equipment that you use to produce
profitable trades.
You want consistent production of high-quality trades, with
a low scrap rate.
You have a trader that needs to be trained to do the best
work possible, and in a consistent, reliable and repeatable
manner.
Focus on Quality – it pays handsomely.
Focus on process control and consistency.
Focus on research and development.
Focus on training and skill building.
The biggest lesson that the Japanese learned and that
Lexus has come to exemplify is that if you focus solely
on making money short term, you’ll struggle.
Focus on Quality and the money will come.
Same goes for trading.
Being a trader, business consultant and a Certified
Quality Engineer, I’ve seen it in action. It works.
You are the heart and soul of your trading business.
Invest in yourself and the Quality of your operation. You’ll
see the benefits both short term and long term.
If you want more on how to put Quality into your trading
to realize the benefits, visit my site. There are resources
there specifically created to help you do this.