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The carmaker's determined willingness to try new ideas has allowed it to build a commercial fortress and an astonishing record of success
Pundits and professors have been trying for decades to figure out what makes Toyota (TM) so successful—but many may have been looking in the wrong places. In his new book, How Toyota Became #1 (Portfolio; November, 2007), David Magee convincingly argues that the spirit of Toyota people, as much as anything, has determined Toyota's success.
Toyota's performance (BusinessWeek.com, 04/24/07) has been stunning. The company has not lost money in a single quarter since 1951. As U.S. automotive powerhouses are drowning in red ink, Toyota earned its highest ever net profit in 2006—$17 billion.
So what keeps Toyota growing and improving year after year? In his book, Magee suggests the driver is a handful of principles embedded deeply in the company, including a respect for people, a willingness to take a long-term view, and the determination to improve the business a little bit every day.
As I read Magee's book one idea kept surfacing in my mind. Throughout its history, Toyota appears to have put an emphasis on an important but oft-overlooked characteristic: Curiosity. You can trace Toyota's institutionalized curiosity back to its founder, Sakichi Toyoda (1867-1930), who became interested in improving the effectiveness of weaving looms, and who went on to revolutionize weaving technology in Japan and secure more than 100 patents on his ideas. You might say Toyota's founder was "loopy" for looms. Not content just to build the best looms in Japan, Toyoda traveled to Europe, toured leading Western loom makers, and carried key ideas back to Japan. Son Kiichiro Toyoda carried on his father's tradition of curiosity—and a visit to a Detroit auto plant in the 1920s inspired him to move a renamed Toyota into the car business.
For more than 70 years, Toyota's curiosity has allowed it to build, brick by brick, a commercial fortress. It has scanned the globe for the best ideas—from styling to manufacturing to quality management—and imbued those ideas with a power that often surprises even the people who came up with them in the first place.
Late for a Meeting
Reading Magee's book I was reminded of the story of Bjarni Herjólfsson—the man who almost discovered the New World. En route to Greenland to visit family in 986, Herjólfsson was blown off course and ended up off the coast of Newfoundland. He and his crew sat in their boat and gazed at a huge, undiscovered continent—which, as it turned out, held some of the richest resources on earth. There was only one problem: Herjólfsson and his crew didn't go ashore. Instead, they turned their boats toward Greenland. After all, they were late for a meeting with family.
Herjólfsson told lots of people about this strange new land, but it would be more than 10 years before anyone would go to investigate—when Erik the Red would buy Herjólfsson's boat and explore, establishing the first European settlement in the New World.
What was the difference between the man who almost discovered the New World and the one who actually did? Simple. One was willing to go ashore, the other wasn't.
"Going ashore" appears to be a culture imperative at Toyota. W. Edwards Deming's concepts of quality management were in wide circulation in the 1950s, but it was Toyota engineers that "went ashore" with his ideas—developing the Toyota Production System, its patented manufacturing methodology. The conceptual ideas of quality management led the carmaker to pioneer such practices as design for manufacturing and lean production. In short, Toyota went ashore in the world of quality.
Cruising Right By
People in the automobile business had been talking for years about hybrid vehicles, sailing along the shores of the New World of automobile fuel economy. Once again, Toyota stepped up—and is expected to sell 430,000 Prius cars in 2007, a 40% jump over 2006 sales.
Perhaps the most important thing a leader of any organization can do is to try to encourage a spirit of going ashore. Too often in the world of work, people hurry from commitment to commitment without noticing the landscape around them—people and companies cruise right by amazing opportunities that are under their noses.
And going ashore is not just important to the behemoths like Toyota. I spent the past five years studying the performance of more than 7,000 growth companies. When I identified the top nine performers over a 23-year period and compared their operations to similar outfits with less impressive performance, one point stood out: Companies achieving breakthrough performance employed workers with great curiosity. These companies pioneered new products, discovered new markets, and created innovative approaches at a much faster rate than their competitors. They went ashore, and reaped the benefits of doing so.