Book Summary: Stitched Stories
Substory: Sony: Pixar and Toyota
Mukris Notes: Pixar started as a hardware company and one of its struggles was to price its hardware. Ed Catmull book “Creativity Inc” talks about this challenge and how he took the wrong approach. Eventually he took his inspiration for Japanese firms of Sony and Toyota and incorporated them at Pixar – “You don’t have to ask permission to take responsibility”.
Book Description from Amazon:
As a young man, Ed Catmull had a dream: to make the world’s first computer-animated movie. He nurtured that dream first as a Ph.D. student at the University of Utah, where many computer science pioneers got their start, and then forged an early partnership with George Lucas that led, indirectly, to his founding Pixar with Steve Jobs and John Lasseter in 1986. Nine years later and against all odds, Toy Story was released, changing animation forever.
Since then, Pixar has dominated the world of animation, producing such beloved films as Monsters, Inc., Finding Nemo, The Incredibles, Up, and WALL-E, which have gone on to set box-office records and garner twenty-seven Academy Awards. The joyousness of the storytelling, the inventive plots, the emotional authenticity: In some ways, Pixar movies are an object lesson in what creativity really is. Now, in this book, Catmull reveals the ideals and techniques, honed over years, that have made Pixar so widely admired―and so profitable.
Creativity, Inc. is a book for managers who want to lead their employees to new heights, a manual for anyone who strives for originality, and the first-ever, all-access trip into the nerve center of Pixar Animation Studios―into the story meetings, the postmortems, and the ‘Braintrust’ sessions where art is born. It is, at heart, a book about how to build and sustain a creative culture―but it is also, as Pixar co-founder and president Ed Catmull writes, ‘an expression of the ideas that I believe make the best in us possible.’
Story from the book:
My first order of business as Pixar’s president was to find and hire good people, a core staff that could help us begin to address our inadequacies. If we were going to make a business out of selling hardware, then we’d need to set up proper manufacturing, sales, service, and marketing departments. I sought out friends who’d started their own Silicon Valley companies and solicited their input on everything from profit margins and prices to commissions and customer relationships. While they were generous with their advice, the most valuable lessons I learned were gleaned from the flaws in that advice.
The first question was pretty basic: How do we figure out how much to charge for our machine? I was told by the presidents of Sun and Silicon Graphics to start with a high number. If you start high, they said, you can always reduce the price; if you lowball it and then need to raise the price later, you will only upset your customers. So based on the profit margins we wanted, we decided on a price of $122,000 per unit. Big mistake. The Pixar Image Computer quickly gained a reputation for being powerful but too expensive. When we lowered the price later, we discovered that our reputation for being overpriced was all anyone remembered. Regardless of our attempts to correct it, the first impression stuck.
The pricing advice I was given—by people who were smart and experienced and well-meaning—was not merely wrong, it kept us from asking the right questions. Instead of talking about whether it’s easier to lower a price than raise it, we should have been addressing more substantive issues such as how to meet the expectations of customers and how to keep investing in software development so that the customers who did buy our product could put it to better use. In retrospect, when I sought the counsel of these more experienced men, I had been seeking simple answers to complex questions—do this, not that—because I was unsure of myself and stressed by the demands of my new job. But simple answers like the “start high” pricing advice—so seductive in its rationality—had distracted me and kept me from asking more fundamental questions.
At the time, we were a computer manufacturing company, so we had to learn very quickly what it meant to produce computers. It was at this time that I happened upon one of the most valuable lessons from the early days of Pixar. And the lesson came from an unexpected source—the history of Japanese manufacturing. No one thinks about the assembly line as a place that engenders creativity. Until that point, I’d associated manufacturing more with efficiency than with inspiration. But I soon discovered that the Japanese had found a way of making production a creative endeavor that engaged its workers—a completely radical and counterintuitive idea at the time. Indeed, the Japanese would have much to teach me about building a creative environment.
In the aftermath of World War II, as America embarked on a sustained period of prosperity, Japan struggled mightily to rebuild its infrastructure. Its economy had been driven to its knees, and its manufacturing base was chronically subpar, crippled by its reputation for extremely poor quality. I remember as a kid growing up in the 1950s, Japanese goods were seen as inferior—even trash. (There is no comparable stigma today. If you see “Made in Mexico” or “Made in China” on a label, it doesn’t carry anything close to the negative connotation that “Made in Japan” had back then.) America, by contrast, was a manufacturing powerhouse in these years, and the auto industry led the way. The Ford Motor Company had pioneered the smoothly flowing assembly line, which was the key to producing large quantities of goods at low prices and which, in effect, had revolutionized the manufacturing process. Before long, every automobile maker in America had adopted the practice of moving the product from one worker to another via some sort of conveyor until its assembly was complete. The time saved translated into massive profits, and many other industries, from appliances to furniture to electronics, followed Ford’s lead.
The mantra of mass production became: Keep the assembly line going, no matter what, because that was how you kept efficiency up and costs down. Lost time meant lost money. If a particular product in the chain was faulty, you pulled it off immediately, but you always kept the line rolling. To make sure the rest of the products were okay, you relied on quality-control inspectors. Hierarchy prevailed. Only upper managers were given the authority to halt the line.
But in 1947, an American working in Japan turned that thinking on its head. His name was W. Edwards Deming, and he was a statistician who was known for his expertise in quality control. At the request of the U.S. Army, he had traveled to Asia to assist with planning the 1951 Japanese census. Once he arrived, he became deeply involved with the country’s reconstruction effort and ended up teaching hundreds of Japanese engineers, managers, and scholars his theories about improving productivity. Among those who came to hear his ideas was Akio Morita, the co-founder of Sony Corp.—one of many Japanese companies that would apply his ideas and reap their rewards. Around this time, Toyota also instituted radical new ways of thinking about production that jibed with Deming’s philosophies.
Several phrases would later be coined to describe these revolutionary approaches—phrases like “just-in-time manufacturing” or “total quality control”—but the essence was this: The responsibility for finding and fixing problems should be assigned to every employee, from the most senior manager to the lowliest person on the production line. If anyone at any level spotted a problem in the manufacturing process, Deming believed, they should be encouraged (and expected) to stop the assembly line. Japanese companies that implemented Deming’s ideas made it easy for workers to do so: They installed a cord that anyone could pull in order to bring production to a halt. Before long, Japanese companies were enjoying unheard-of levels of quality, productivity, and market share.
Deming’s approach—and Toyota’s, too—gave ownership of and responsibility for a product’s quality to the people who were most involved in its creation. Instead of merely repeating an action, workers could suggest changes, call out problems, and—this next element seemed particularly important to me—feel the pride that came when they helped fix what was broken. This resulted in continuous improvement, driving out flaws and improving quality. In other words, the Japanese assembly line became a place where workers’ engagement strengthened the resulting product. And that would eventually transform manufacturing around the world.
As we struggled to get Pixar off the ground, Deming’s work was like a beacon that lit my way. I was fascinated by the fact that, for years, so many American business leaders had been unable to even conceive of the wisdom of his thinking. It wasn’t that they were rejecting Deming’s ideas as much as they were utterly blind to them. Their certainty about their existing systems had rendered them unable to see. They’d been on top for a while, after all. Why did they need to change their ways?
It would be decades before Deming’s ideas took hold here. In fact, it wasn’t until the 1980s when a few companies in Silicon Valley, such as Hewlett Packard and Apple, began to incorporate them. But Deming’s work would make a huge impression on me and help frame my approach to managing Pixar going forward. While Toyota was a hierarchical organization, to be sure, it was guided by a democratic central tenet: You don’t have to ask permission to take responsibility.
A few years ago, when Toyota stumbled—initially failing to acknowledge serious problems with their braking systems, which led to a rare public embarrassment—I remember being struck that a company as smart as Toyota could act in a way that ran so counter to one of its deepest cultural values. Whatever these forces are that make people do dumb things, they are powerful, they are often invisible, and they lurk even in the best of environments.