Chasing the Rabbit: Official Blog by Author Steven Spear

The likely ascension of Akio Toyoda to Toyota’s presidency raises questions about how Toyota will navigate the current economic crisis, perhaps compromised by a “cautious management, [that] has become even more conservative and bureaucratic in recent years.” (”Toyota, Needing Change, Taps a Scion to Lead,” by Norihiko Shirouzu, WSJ January 12, 2008).  It is worth highlighting what made Toyota great, what creates vulnerability, and what Toyota needs to do to re-establish vigor.

Toyota’s extraordinary successes–becoming worldwide sales leader, achieving market caps exceeding the cumulative total of its several next competitors, and so forth–is deeply rooted in the pervasive innovativeness of the company, as I explain in my book, “Chasing the Rabbit: How Market Leaders Outdistance the Competition…“.  Hardly competitive in the 1950s, Toyota first innovated process management, pushing the boundaries of initial quality and workplace productivity.  It then innovated product design management, simultaneously diversifying its product portfolio while cutting design times and costs.  It innovated products, moving upscale with Lexus and to entry level with Scion.  Despite off-shoring and outsourcing by other manufacturers, it innovate supply chain management, building design and manufacturing facilities and creating supplier networks in regional markets. It innovated technologically with the hybrid drive.  

With Toyota’s institutionalization of innovation–and the relentless experimentation and learning that underpin it–as a source of competitive  advantage, Toyota’s risk is that people misinterpret the particulars of how they do their job as something essential and fundamental, becoming ritualistically dogmatic about particular artifacts.  They think that the particular pull system, form of standard work, or shop floor ratios of team members to team leaders, for instance, are the ‘right’ answer, with departures from those being ‘wrong.’ They forget that these as tools are meant to foster innovation by increasing the chance that process and product designs capture the best known approaches and reveal when problems have to be solved.  Paralysis sets in.

Mr. Toyoda will be unable to single handedly handle all of the company’s challenges.  He will need the combined creativity of its thousands of employees and suppliers.  To uncork their vast potential and engage their contribution, he will have to lead by example, re-emphasizing that the company’s success depends on innovation done with a ‘hair-on-fire’ urgency to discover problems and their solutions, and that the way to succeed is by racing ever faster.

Related posts:

1. MIT News 3 Questions with Steve Spear: Toyota Troubles–Pace of business growth and product and process complexity overwhelm learning and people development capacity
2. Spear on Toyota Culture: Bloomberg TV, Feb 24, 2010
3. 20 Years After “The Machine That Changed the World,” Why No 2nd Toyota
4. Well meaning promotion compromises GM product innovation…
5. The Basic Science of High Velocity Systems: Principles for generating and sustaining improvement and innovation