>> Announcer: It's The Cube. Covering HPE Big Data Conference 2016. Now here are your hosts, Dave Vellante and Paul Gillin. >> Welcome back to Boston, everybody, this is The Cube, we're here live at HP's big data conference, hashtag seize the data. Steve Spear is here, he's an author, MIT professor, author of The High Velocity Edge, welcome to The Cube, thanks for coming on. >> Oh, thanks for having me. >> I got to tell you, following Phil Black, you were coming onstage, I have never heard you speak before, I said, "Oh, this poor guy," and you did awesome, you were great, you held the audience, so congratulations, you were very dynamic and he was unbelievable and you were fantastic, so. >> Today was second-worst speaking setup, one time I was on a panel where it was three admirals, a general, and then the other guy wearing a suit, I said, "Well at least another schmo in a suit," and his opening lines were, "You know, this reminds me, "when I was on the space shuttle and we were flying "to the Hubble," and I'm like, "A flipping astronaut, "I got to follow an astronaut?" So anyway, this was only a SEAL, there were a lot of them, there were far fewer astronauts, so that was easy. >> What I really liked about your talk is, first of all, you told the story of Toyota, which I didn't know, you may. >> No, my experience with Toyota was in the early '70s, I remember the Toyota sort of sweeping into the market but you talked about 20 years before it when they were first entering and how this really was a company that had a lot of quality problems and it was perceived as not being very competitive. >> Yeah, Toyota now people look at as almost, they just take for granted the quality, the productivity, they assume good labor relations and that kind of thing, it's non-unionized, not because the unions haven't tried to unionize, but the employees don't feel the need. And again, in the '50s, Toyota was absolutely an abysmal auto-maker, their product was terrible, their productivity was awful and they didn't have particularly good relations with the workforce either. I mean, it's a profound transformation. >> And you gave this test, in the 50s, I forget what it was, it was one-tenth the productivity of the sort of average automobile manufacturer and then they reached parity in '62, by '68 they were 2X, and by '73, they were off the charts. >> Right, right, right. >> Right, so amazing transformation and then you try to figure out how they did it and they couldn't answer, but they said, "We can show you," right? And that sort of led to your research and your book. >> Yeah, so the quick background is in some regards, this fellow Kenneth Bowen, who was my mentor and advisor when I was doing my doctorate, he could argue we were late to the game because people started recognizing Toyota as this paragon of virtue, high quality at low cost, and so that in the 1980s prompted this whole investigation and the term lean manufacturing came out of the realization that on any given day, Toyota and suppliers were making basically twice the product with half the effort and so you had this period of '85 to about '95 where there was this intense attempt to study Toyota, document Toyota, imitate Toyota, General Motors had a joint venture with Toyota, and then you have the mid-'90s and there's no second Toyota, despite all this investment, so we go to the Toyota guys and say, "Look, clearly if everyone is studying you, imitating you, "copying you, and they haven't replicated you, "they've missed something, so what is it?" And they say, "I'm sorry, but we can't tell you." And we said, "Well you got to be kidding, I mean, "you have a joint venture with your biggest competitor, "General Motors," and they said, "No, no, it's not that we wouldn't tell you, "we just actually don't know how to explain what we do "'cause most of us learn it in this very immersive setting, "but if you'd like to learn it, "you can learn it the way we do." I didn't realize at the time that it would be this Karate Kid wax-on, wax-off, paint-up, paint-down experience, which took years and years to learn and there are some funny anecdotes about it but even at the end, their inability to say what it is, so I went years trying to capture what they were doing and realizing I was wrong 'cause different things wouldn't work quite right, and I can tell you, I was on the Shinkansen with the guy who was my Toyota mentor and I finally said, "Mr. Oba, I think I finally "figured it out, it all boils down to these basic "approaches to seeing and solving problems." And he's looking over my cartoons and stuff and he says, "Well, I don't see anything wrong with this." (laughs) >> That was as good as it got. >> That was as good as it got, I was like, "Score, nothing wrong that he can see!" So anyway. >> But so if you talk about productivity, reliability, you made huge gains there, and the speed of product cycles, were the three knobs that Toyota was turning much more significantly than anybody else and then fuel efficiency came. >> Right, so if you start looking at Toyota and I think this is where people first got the attraction and then sort of the dismissive of, we don't make cars, so the initial hook was the affordable reliability, they could deliver a much higher-quality car, much more affordable based on their productivity. And so that's what triggered attention which then manifest itself as this lean manufacturing and its production control tools. What then sort of started to fall off people's radar is that Toyota not only stayed ahead on those dimensions but they added to the dimensionality of the game, so they started introducing new product faster than anybody else and then they introduced new brand more successfully so all the Japanese, Nissan, Honda, Toyota, all came out with a luxury version, but no one came out with Lexus other than Toyota. The Affinity and the Acura, I mean, it's nice cars, but it didn't become this dominant brand like the Lexus. And then in trying to hit the youth market, everyone tried to come up with, like Honda had the Element but nothing like the Scion, so then Toyota's, and that's much further upstream, a much more big an undertaking than just productivity in a factory. And then when it came time to this issue around fuel efficiency, that's a big technology play of trying to figure out how you get these hybridized technologies with a very very complex software engineering overlay to coordinate power flow in this thing and that, and everyone has their version of hybrid, but no one has it through six generations, 21 platforms, and millions of copies sold. So it didn't matter where you were, Toyota figured out how to compete on this value to market with speed and ease which no one else in their industry was replicating. >> You're talking about, this has nothing to do with operational efficiency, when you talk about the Scion for example, you're talking about tapping into a customer, into an emotional connection with your customer and being able to actually anticipate what they will want before they even know, how do you operationalize that? >> So I think, again, Toyota made such an impression on people with operational efficiency that a lot of their genius went unrecognized, so what I was trying to elaborate on this morning is that Toyota's operational efficiency is not the consequence of just more clever design of operations, like you have an algorithm which I lack and so you get to a better answer than I do, it was this very intense almost empathetic approach to improving existing operations, so you're working on something and it's difficult so we're perceptive of that difficulty and try to understand the source of that difficulty and resolve it, and just do that relentlessly about everything all the time, and it's that empathy to understand your difficulty which then becomes the trigger for making things better, so as far as the Scion comes in, what you see is the same notion of empathic design apply to the needs of the youth market. And the youth market unlike the folks who are, let's say at the time, middle-aged, was less about reliable affordability, but these were people who were coming of age during the Bannatyne era where, very fast mass customization or the iPod era, which was common Chassis but very fast, inexpensive personalization and the folks at Toyota said, "You know what, "the youth market, we don't really understand that, "we've been really successful for this older mid-market, "so let's try to understand the problems that the youth "are trying to solve with their acquisitions," and it turned out personalization. And so if you look at the Scion, it wasn't necessarily a technically or technologically sophisticated quote-unquote sexy product, what it did was it leant itself towards very diverse personalization, which was the problem that the youth market was trying to solve. And you actually see, if I can go on this notion of empathic design, so you see this with the Lexus, so I think the conventional wisdom about luxury cars was Uber technology and bling it, throw chrome and leather and wood and when Toyota tried that initially, they took what was I guess now the Avalon, full-sized car, and they blinged it up and it was contradictory 'cause if you're looking for a luxury car, you don't go to a Toyota dealer, and if you go to a Toyota dealer and you see something with chrome and leather and wood veneer, you're like, you have dissonance. So they tried to understand what luxury meant from the American consumer perspective and again, it wasn't, you always wish you'd get this job, but they sent an engineering team to live in Beverly Hills for some months. (laughs) It's like, ooh, twist my arm on that one, right? But what they found was that luxury wasn't just the physical product, it was the respectful service around it, like when you came back to your hotel room, you walked in, people remembered your name or remembered that, oh we noticed that you used a lot of bath towels so we made sure there were extra in your room, that sort of thing, and if you look at the Lexus, and people were dismissive of the Lexus, saying, "It looks like slightly fancier Toyota, "but what's the big deal, it's not a Beamer or Mercedes." But that wasn't the point, it was the experience you got when you went for sales and service, which was, you got treated so nice, and again, not like hoity toity but you got treated respectfully, so anyway, it all comes back to this empathic design around what problem is the customer or someone inside a plan trying to solve. >> So Toyota and Volkswagen trying to vie for top market share but Toyota, as you say, has got this brand and this empathy that Volkswagen doesn't. You must get a lot of questions about Tesla. Thoughts on Tesla. >> Yeah, cool product, cool technology and time will tell if they're actually solving a real problem. And I don't mean to be dismissive, it's just not an area where I've spent a lot of time. >> And we don't really know, I mean, it's amazing and a software-defined automobile and autonomous, very difficult to predict, we're very tight on time. >> All the cool people seem to drive them though. >> Yeah, that's true. Last question I have is, what the heck does this have to do with analytics at a conference like this? >> Right, so you start thinking about the Toyota model, really, it's not that you can sit down and design something right, it's that you design things which you know deep-rooted in your DNA is that what you've designed is wrong, and that in order to get it right and actually much righter than anything else in the marketplace, what you need to do is understand what's wrong about it and so the experience of the user will help inform what's wrong, the worker rounds they do, the inconveniences they experience, the coping, the compensation they do, and that you can not only use that to help inform what's wrong, but then help shape your understanding of how to get to right, and so where all this fits in is that when you start thinking about data, well first of all, these are gigantic systems, right, which it's probably well-informed to think in terms of these systems are being designed by flawed human beings so the systems themselves have flaws, so it's good to be attentive to the flaws that are designed in it so you can fix them and make them more usable by your intended clientele. But the other thing is that these systems can help you gain much greater precision, granularity, frequency of sampling and understanding of where things are misfiring sooner than later, smaller than larger, so you can adjust and adapt and be more agile in shaping the experience. >> Well Steve, great work, thanks very much for coming on The Cube and sharing and great to meet you. >> Yeah likewise, thanks for having me. >> You're welcome. Alright, keep it right there, everybody, Paul and I will be back with our next guest, we're live from Boston, this is The Cube, we'll be right back. (upbeat music)