The Contradictions of Toyota

I'm generally not a big fan of Harvard Business Review articles, believing many of them to be a bit too detached from reality.  However last week they published an analysis of Toyota that was intriguing and insightful.  I still have bit of a problem with it, especially how it separates the human aspects from the Toyota Production System when in reality they are intrinsically linked.

I won't quote huge amounts of the article, but here are the salient points. 

Quite simply, TPS is a 'hard' innovation that allows the company to keep improving the way it manufactures vehicles; in addition, Toyota has mastered a 'soft' innovation that relates to corporate culture. The company succeeds, we believe, because it creates contradictions and paradoxes in many aspects of organizational life. Employees have to operate in a culture where they constantly grapple with challenges and problems and must come up with fresh ideas. That's why Toyota constantly gets better. The hard and the soft innovations work in tandem. Like two wheels on a shaft that bear equal weight, together they move the company forward. Toyota's culture of contradictions plays as important a role in its success as TPS does, but rivals and experts have so far overlooked it.

What are these major contradictions?

• Toyota moves slowly, yet it takes big leaps.  Example: gradual opening of factories overseas, and the leap of the Prius.
• Toyota grows steadily, yet it is a paranoid company.  Example: Steady growth but a culture of "there must be a better way."
• Toyota's operations are efficient, yet it uses employee's time in seemingly wasteful ways.  Example: Toyota meetings have on average more people than other companies.
• Toyota is frugal, but it splurges on key areas.  Example: reputation for spartan offices but $22 billion spent on factories and $170 million spent on Formula One racing. 
• Toyota insists internal communications be simple, yet it builds complex social networks.  Example: simple A3 reports for displaying data and projects, yet company-sponsored clubs for every conceivable social niche.
• Toyota has a strict hierarchy, but it gives employees the power to push back.  Example: employees believe they add value by giving bosses constructive criticism.  More on this later.

From this they authors identified "three forces of expansion" and "three forces of integration."  The forces of expansion are:

• Setting impossible goals
• Customizing products and operations to the level of consumer sophistication in each country
• Experimentation

The forces of integration are:

• Preserving the values of the founders
  • Tomorrow will be a better day
  • Everybody should win
  • Genchi Genbutsu (have you seen it yourself - go to the source)
  • Customers first, dealers second, manufacturing third
• Up-and-in people management: you don't need to move up to succeed
• Open communication
  • Disseminate knowledge laterally
  • Give people the freedom to voice contrary opinions
  • Frequent face-to-face interactions
  • Make tacit knowledge explicit
  • Create support mechanisms

Probably the most interesting, or previously unknown to me, aspect of the article was how far employees could push back, or even ignore, superiors.  In a strong process-oriented organization where all work is standardized you would expect orders to be carried out without question.  Sure a lot of discussion and push-back is expected and desired in a people-centered organization, but outright flaunting of authority?  Yet that's what happens.

Each individual in Toyota is expected to act according to what he or she thinks is right. Every employee enjoys the prerogative to ignore the boss’s orders or not take them too seriously.

Confronting your boss is acceptable; bringing bad news to the boss is encouraged; and ignoring the boss is often excused. In many of our interviews, employees told us how local operations had succeeded by refusing to obey orders or ignoring what headquarters had advised. For instance, the head of Toyota Motor Sales, U.S.A., Yukitoshi Funo, told us candidly: “Before I was sent to the U.S. in 1997 [as senior vice president], I made the rounds of several top executives in Japan. They told me to increase the number of sales outlets. These were executive vice presidents and managing directors. I went to the market to see the situation. Increasing the number of dealerships would have caused more intense competition and threatened proper management of dealerships. I decided to ignore everything those top executives told me.”

The full article is a great read with some good insights.  I'd encourage you to take a look.

Comments

[Pete Abilla]

Kevin,

If you haven't read it yet, check out the book from which the HBR article came -- "Extreme Toyota" -- it's a very good book and, from my experience at Toyota, it is also quite accurate.

[Tony]

OK, but when is Toyota/Lexus going to stop making ugly cars (Echo, Yaris, Rx330, etc)? Style is one place where their innovation needs some help - especially since I can get an equally reliable, but more attractive car from Infiniti (G, Fx series).

Which is better, design excellence (e.g. Apple) or manufacturing excellence (e.g. Toyota) is an interesting question. I suspect it depends on the market - I don't think Toyota's success would translate into the consumer electronics market.

Also, from what I've heard, at least the US dealers don't put the customer first.