How is toyota doing today

Toyota believes that efficiency alone cannot guarantee success. Make no mistake: No company practices Taylorism better than Toyota does. Toyota therefore invests heavily in people and organizational capabilities, and it garners ideas from everyone and everywhere: the shop floor, the office, the field. At the same time, studies of human cognition show that when people grapple with opposing insights, they understand the different aspects of an issue and come up with effective solutions.

So Toyota deliberately fosters contradictory viewpoints within the organization and challenges employees to find solutions by transcending differences rather than resorting to compromises. This culture of tensions generates innovative ideas that Toyota implements to pull ahead of competitors, both incrementally and radically. In the following pages, we will describe some key contradictions that Toyota fosters. We will also show how the company unleashes six forces, three of which drive it to experiment and expand while three help it to preserve its values and identity.

Finally, we will briefly describe how other companies can learn to thrive on contradictions. In fact, it resembles a failing or stagnant giant in several ways.

Toyota pays relatively low dividends and hoards cash, which smacks of inefficiency. For instance, its payout of By any standard, the company pays executives very little. Their compensation was lower than that of their counterparts at the 10 largest automobile companies, save Honda. For example, the company started production in the United States gradually.

It began in by forming a joint venture with GM called New United Motor Manufacturing, in Fremont, California, and opened its first plant in Kentucky four years later. However, the launch of the Prius in Japan in was a huge leap. Toyota came up with a hybrid engine that combined the power of an internal combustion engine with the environmental friendliness of an electric motor much earlier than rivals. In the early s, the company faced near bankruptcy, but over the past 40 years, the company has recorded steady sales and market-share growth.

The company assigns many more employees to offices in the field than rivals do, and its senior executives spend an inordinate amount of time visiting dealers. Toyota also uses a large number of multilingual coordinators—a post that Carlos Ghosn abolished at Nissan soon after he became CEO in —to help break down barriers between its headquarters and international operations. In Japan, the company turns off the lights in its offices at lunchtime. Staff members often work together in one large room, with no partitions between desks, due to the high cost of office space in Japan.

At the same time, Toyota spends huge sums of money on manufacturing facilities, dealer networks, and human resource development. When making presentations, they summarize background information, objectives, analysis, action plans, and expected results on a single sheet of paper. They felt they were doing the right thing by offering executives constructive criticism.

However, digging into Toyota is like peeling an onion: You uncover layer after layer, but you never seem to reach the center. After we had written a half-dozen case studies, a pattern finally emerged. We identified six forces that cause contradictions inside the company. Three forces of expansion lead Toyota to instigate change and improvement.

Not surprisingly, they make the organization more diverse, complicate decision making, and threaten its control and communications systems. To prevent the winds of change from blowing down the organization, Toyota also harnesses three forces of integration.

Established practices become standardized and create efficiencies. Over time, however, those methods can prevent the adoption of new ideas. Toyota prevents rigidity from creeping in by forcing employees to think about how to reach new customers, new segments, and new geographic areas and how to tackle the challenges of competitors, new ideas, and new practices.

In , the founder, Kiichiro Toyoda, wanted to produce automobiles in Japan without using foreign technology. It seemed like an impossible goal; even mighty zaibatsu such as Mitsubishi and Mitsui had decided against entering the automobile industry at that stage because of the investments they would have to make. Toyoda dared to—and the rest is history. Besides, the strategy runs contrary to management thinking, which espouses the merits of making trade-offs.

Strategy guru Michael E. Porter, for instance, says that the essence of strategy is choosing what not to do. However, Toyota tries to cater to every segment because of its belief that a car contributes to making people happy.

This is our duty. This is Toyota. Zenji Yasuda, a former Toyota senior managing director, points out the wisdom of painting with broad strokes. The vague nature of this goal confers freedom to researchers to open new avenues of exploration; procurement to look for new and unknown suppliers who possess needed technology; and sales to consider the next steps needed to sell such products. This strategy pushes Toyota out of Japan, where it is dominant, and into overseas markets, where it has often been the underdog.

Pursuing local customization also exposes Toyota to the sophistication of local tastes. Local customization forces Toyota to push the envelope in numerous ways. For instance, the company faced complex challenges in when it developed the Innovative International Multipurpose Vehicle IMV platform.

Toyota engineers had to design the platform to meet the needs of consumers in more than countries in Asia, Europe, Africa, Oceania, Central and South America, and the Middle East. The IMV platform is used for three vehicle types—trucks, minivans, and sport utility vehicles—so Toyota can minimize design and production costs.

Notably, the IMV-based vehicles were the first that Toyota produced overseas without first making them in Japan, which led to the decentralized development of production know-how, manufacturing technology, and production planning technologies.

Many executives thought it was risky to relinquish the label since it had become synonymous with quality. However, executive vice president Akio Toyoda, then in charge of sales and production in Asia, launched a personal crusade to persuade employees that the company should replace Made in Japan with Made by Toyota. People test hypotheses and learn from the consequent successes and failures. You are already subscribed, your mailing lists have been updated. All materials on this site are for editorial use only.

The use of these materials for advertising, marketing or any other commercial purpose is prohibited. They may be cropped but not otherwise modified. To download these materials, you must agree to abide by these terms. Takata Recall 0. November 11, We will introduce global and regional models and augment our production bases in those countries. Those countries are growth markets, and they will continue to grow.

As our former executive vice president Mr. We would do better to wait than to jump into the market; we should let the market come to us. Does the fear that Toyota may have to compromise on quality prevent you from entering the emerging markets more aggressively? Those markets demand low-priced vehicles, which embody cost-quality trade-offs that Toyota may not want to make. Is quality proving to be the enemy of growth?

Brazil is different from China, which is different from India, and so on. In Brazil the Corolla sells well; in Russia the Lexus sells extremely well. Anyway, it would be wrong to say that these markets want lower-quality products. But yes, one factor they have in common is that many of their consumers want low-cost automobiles. The moment I became president, I created a team to work on a project related to that. But I told our engineers, let us not focus on developing low-cost automobiles; let us develop technologies and processes that will allow Toyota to manufacture all our vehicles at lower costs.

If we do that, we can produce cars for BRIC and we can use the same processes to reduce the cost of automobiles for other countries, too. By conceptualizing the problem in that fashion, we will also meet our quality standards rather than worrying about whether we have to compromise on them in emerging markets.

We have started developing those technologies already. Our rivals may be trying to create low-cost vehicles for emerging markets, but Toyota will go beyond that and develop the optimal vehicles for all worlds. Toyota is clearly trying to grow as it has always grown, at a steady pace. But the forces of the global market are pulling you, and you are being pushed to move faster and faster to keep up.

Are those forces so strong that they might pull Toyota apart? The Toyota Way has been and will continue to be the standard for everyone who works for Toyota all over the world. The Toyota Way has two main pillars: continuous improvement and respect for people.

Respect is necessary to work with people. That leads to teamwork. That nurtures your ability to identify problems, and if you closely observe things, it will lead to kaizen: continuous improvement. The question is how long it takes to train people to develop the Toyota mind-set.

Challenge We form a long-term vision, meeting challenges with courage and creativity to realize our dreams. Respect We respect others, make every effort to understand each other, take responsibility, and do our best to build mutual trust. Teamwork We stimulate personal and professional growth, share the opportunities of development, and maximize individual and team performance.

Just yesterday I spent a whole day with 30 of our young executives. They had been broken up into teams to tackle different problems, and they made presentations based on what they had learned about using the Toyota Way to tackle them.

I listened and commented. The managers felt happy and said that they had learned a lot. When I asked, many of them said they were now able to understand the Toyota Way fully.

I asked them to explore that. How will Toyota balance demand for its products with the longer-term need for human resources? Making cars is a capital-intensive business, but manufacturing at Toyota is a human capital-intensive business. Your executive vice presidents all say that Toyota is facing a serious shortage of trained people. Will you be able to catch up and keep up with the demand for people? As our executive vice president Mr. It takes time to develop Toyota people, who are trained on the job rather than in a classroom.

Only when employees start working at Toyota do they learn from their superiors what values and skills they need in order to do their jobs. Most of our plants outside Japan were set up in the past ten years, so even senior employees overseas have relatively little experience with the Toyota Way. Toyota develops T-type people. Creating T-type personnel is a time-consuming process. The moment we start operations, employee turnover begins.

So we are learning how to retain people. We used to transmit the Toyota Way through the mother plant system, whereby a Japanese plant served as the parent of each new overseas plant we set up.

That Japanese plant was responsible for training people in the overseas plant and instilling the Toyota Way in them. Because of the rate at which we are growing overseas, we have done away with that system. We now send people from Japan, coordinators, to instill our philosophy and concepts in our overseas companies. When a new company is established, the coordinator will serve as a teacher, or sensei , for its employees.

After some years a second-generation coordinator will serve as a coach rather than a mentor. After several more years a third-generation coordinator will act as an adviser rather than a coach. The coordinators are critical to training people in the Toyota Way, but we have only about 2, coordinators.

Our people in Japan take turns serving as coordinators every three to five years. Given the size of our business, we need three times as many coordinators as we have at present. As you try to keep the learning curve rising as fast as the demand curve for people, how long will it take you to triple the number of coordinators?

We spent many years developing our human resources to be able to create 2, coordinators. Tokuichi Uranishi told you. We have taken several steps to cope with the situation. First, we formally documented the Toyota Way. We had communicated its principles orally for decades, but six years ago we decided to write it down so that it could serve as a bible for overseas executives. They also use it as a measurement tool to see where they stand and how they can improve.

Second, Toyota retains Japanese employees who are over 60 years old if they wish to continue to work. Third, we created several new training facilities. In we set up the Toyota Institute to train executives in the Toyota Way. The institute runs a global leadership school, which develops executives from all over the world for our businesses, and a management development school, which trains our people in the application of the Toyota Way. We also set up a global production center in Japan in , which you visited, and regional centers in Thailand, the United States, and the UK.

The time has come to send employees from those companies to serve as coordinators, especially to other English-speaking markets. This will be the first time we will be using non-Japanese employees to train other non-Japanese employees. There is a sense of urgency in the company, and we should be able to develop enough people to sustain the pace of our global expansion.

You described the importance of kaizen, continuous improvement, in speaking about the Toyota Way. But we heard on this visit, for the first time, that you have recently started talking about kakushin —revolutionary change or radical innovation—as well. Is incremental improvement no longer enough in these revolutionary times? Fifteen years ago I would have said that as long as we had enough people, Toyota could achieve its goals through kaizen.

When the rate of change is too slow, we have no choice but to resort to drastic changes or reform: kaikaku. Take the movement of parts in a factory, for example. So the movement of components should be limited as much as possible. I want our production engineers to take on the challenge of ensuring that things move as little as possible—close to the theoretical limit of zero—on shop floors. Doing that requires courage—and radical thinking. Does the new manufacturing facility that Toyota is building at Takaoka incorporate the kind of radical change you think is needed?

The new manufacturing processes at Takaoka will completely change the way Toyota makes cars. Right now our processes are complicated, so when a problem occurs, it is difficult to identify the cause. Simple and slim systems make it easier for people to notice abnormalities immediately.