APPENDIX B
Constructing the Value Curve
THE VALUE CURVE is deeply rooted in the very different way that Toyota looks at measuring its business. Taiichi Ohno, the architect of the Toyota Production System, disagreed with the way that traditional companies set the prices for their products.
When we apply the cost principle selling price = profit + actual cost, we make the customer responsible for every cost. This principle has no place in today’s competitive automobile industry.… The question is whether or not the product is of value to the buyer.1
Toyota shifts the equation around in a way that is mathematically equivalent but creates an entirely different meaning: selling price – actual cost = profit. The company recognizes that customers—not ...
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