Toyota Will Win: Preserving Culture in the Face of Growth
Thursday’s New York Times had a terrific story on Toyota and the challenges they’ve had in spreading the “Toyota Way” across cultures, geographies and generations. I truly understand what they are going through, being a long-time supporter and student of Japanese quality management principles (TQM) (or, rather, U.S. quality management principles, if one considers the genesis of Japanese TQM as being the American visionary W. Edwards Deming. The weak U.S. response to Deming’s teachings in the late 1940’s likely squandered as much value for Corporate America as Xerox PARC’s inability to commercialize leading-edge technologies that represented the foundation for 30 years of hardware and software innovation squandered for its shareholders).
But what the Toyota story highlights is an inexorable clash between culture and growth that is being faced by all global companies today, where the phase “Think Global - Act Local” is on the lips of senior managers everywhere. The big challenge: who will successfully navigate the rocky shoals of globalization, particularly as growth opportunities migrate from a handful of long-time “first world” countries to those that are less developed but approaching first-world status at a rapid rate, i.e., India and China (remember Ebay in China?). And this doesn’t take into account the challenges of further penetrating those first-world countries where differences in culture and industry structures are significant, i.e., Toyota in the U.S., Wal-Mart in Germany. Here are some interesting extracts from the NYT article:
********************
Toyota’s corporate culture has transformed it from a small
manufacturer into a market-gobbling giant famous for quality circles
and giving workers control over production lines. For years, aspiring
factory leaders have come here to attend Toyota’s select technical high
school, the Toyota Technical Skills Academy in Toyota City.But
Toyota — on course to become the world’s largest automaker — needs to
sharpen its game to meet even larger challenges, including raising
quality in the face of rapid overseas expansion and its largest recalls
in history.********************
It is the Toyota Institute, charged with preparing executives to enter
the leadership class at Toyota by inculcating in them some of the most
prized management secrets in corporate Japan. The institute sends off
its executives to offices around the world as missionaries of sorts for
the Toyota Way. The institute does not quite aspire to be Japan’s
answer to General Electric’s
famed Crotonville training center in Ossining, N.Y., which spawned a
generation of top executives across American industry. But it is
Toyota’s best effort to avoid corporate short-sightedness and to keep
the company true to its original mission of winning customers with
quality cars, even as it comes under intensifying scrutiny.********************
“Before, when everyone was Japanese, we didn’t have to make these
things explicit,” Mr. Konishi said. “Now we have to set the Toyota Way
down on paper and teach it.”“Mutual ownership of problems,” is
one slogan. Other tenets include “genchi genbutsu,” or solving problems
at the source instead of behind desks, and the “kaizen mind,” an
unending sense of crisis behind the company’s constant drive to improve.The
whole company prizes visibility. To nurture a sense of shared purpose,
Toyota has open offices — often without even cubicle partitions between
desks.Dissemination of the Toyota Way overseas, however, can
be spotty, executives and analysts warn. Toyota prides itself on
pampering customers, but analysts are reporting weak or uneven service
at Toyota sales subsidiaries, particularly in emerging markets like
China and India.Worse, some executives like Mr. Konishi
complain of managers at Toyota factories who have not adhered to some
of the company’s most basic creeds, like allowing workers to stop
factory lines when they spot defects. Empowering factory workers has
long been central to Toyota’s quality control.********************
“If Toyota can’t infuse its philosophy into its workers, these quality
problems will keep happening,” said Hirofumi Yokoi, a former Toyota
accountant who is now an auto analyst at CSM Worldwide in Tokyo. “The
institute was founded because Toyota is afraid of growing too fast and
losing control. It’s still too early to know if it will work.”********************
Toyota’s culture, she said, is still grounded in a Japanese-oriented
brand of group-think. But in some cases, Toyota has also adapted it to
fit American culture, she said, dropping group calisthenics at American
factories, for example, although that is still common at Japanese
plants.She said she understood the Toyota Way better after
learning from people who had lived it their entire professional lives.
She now uses the wall chart as a critical motivating tool for managing
her employees.“When I saw folks in high ranks, like Mr.
Watanabe, and how consistent and dedicated they were, I knew they were
true believers” in the Toyota Way, Ms. Newton said. “Now, I’m a true
believer, too.”
What I am seeing here are a few things that make me confident that Toyota will get it right, and that they will become (if they aren’t already) a model for how to globalize in the context of a complex, culture-laden industry:
They know they have a problem. Yes, uncharacteristic quality problems have cropped up all over the place. This is unacceptable and they know it. But rather than spitting out platitudes like “We’ll get to the bottom of this; it will be better next quarter” or “These things happen; we’re all about increasing our global footprint and increasing revenues,” they are focusing on root cause. This is how you build a winner for the long-term instead of a hype machine for the short term.
They have defined the problem. “We need to grow but need to do so in a way that builds brand value. And increasing quality defects in the face of growth damages brand value.” Toyota’s is a problem akin to one playing Monopoly: is the right strategy to buy every property one lands on (the “Land Grab” strategy, where one has a lot of negotiating power if you survive but could result in bankruptcy with a little bad luck), to hoard money and only buy those prime properties that one can use to assemble a desired monopoly (the “High End” strategy, which could be successful if a monopoly is assembled but results in a small footprint and a potentially slow death if others don’t land on you and build around you) or some combination of the two. I’d argue that Toyota’s goal is a blend, where a measure of “Land Grab” (read: global expansion well beyond its own culture) and “High End” (read: expand in areas where it has a high likelihood of success) is at play. They have a clear sense of what they are trying to do. It is now a problem of execution.
They want to get the culture right. They have a way of doing things that has worked for a long, long time, but are breaking down in the face of rapid global expansion. As a result, they are emphasizing the Toyota Institute as a vehicle for training experienced evangelists who can bring the Toyota Way across the globe. But they are seeking to apply these principles in a manner that is acknowledging and respectful of the different cultures in which they operate. This strikes me as being somewhat similar to the Six Sigma training at GE, where it is an integration of scientific methods and tools and management techniques for instilling culture in far-flung operations. This a necessary element to building long-term success across geographies and cultures. This is just smart.
For people and companies committed to quality it is a sacred quest, spreading the mantra of TQM across the world. It is this kind of vision, commitment and long-term perspective that will make Toyota one of the winners in a rapidly flattening world. Globalization is a high-risk/high payoff game, and they are doing everything in their power to stack the odds in their favor. I hope they win. I think they will.
