This post explores the results and the rewards of Toyota’s sustained innovation in development and launch.
Listen to " Results and Rewards of Sustained Innovation in Development and Launch: Toyota's Success " [10 minutes, 10 MBytes, Apple QuickTime / iTunes is required]
Two articles published about Toyota in the Summer 2007 issue of Strategy and Business magazine inspired this podcast. Strategy and Business magazine is a Booz Allen Hamilton Incorporated publication.
In an article titled Innovation Agility, authors Kevin Dehoff and John Loehr summarized. “Toyota can launch more new vehicles than its competitors in the same timeframe, trying new designs in the market sooner. Faster market feedback means less reliance on long-range ‘guesses’ about customer preferences three years hence. This significantly reduces Toyota’s market risk.”
Toyota is expected to become the global leader in vehicle sales in 2007 taking over the position that General Motors has occupied since 1931. Let’s explore how has Toyota systematically strengthened its position.
Dehoff and Loehr propose a set of six capabilities that enable Toyota launch projects to succeed. These are:
- Structure and organization
- Development process
- Extended enterprise
- Institutional learning
- People development
- Culture
The following examples from each these six capabilities highlight the essential factors that work together for Toyota’s success.
Capability Number 1 - Structure and organization
A key element of the Toyota product development engine is achieving a harmonious, efficient team effort. Program leaders called shusa’s are key to the success of this management process. The shusa provides the system-level perspective to direct contributors to an effective, unified effort that leads to a successful launch.
As explained by James P. Womack, the author of the book “The Machine that Changed the World,” a shusa is a super-craftsman. The shusa’s role is interdisciplinary. In addition to engineering decisions, the shusa is responsible for the program’s business success. The shusa must have the technical skills, business insights, and managerial experience to ensure that everything works together to create value for customers. At Toyota, becoming a shusa is a 20-year process.
In companies that don’t have the equivalent of a shusa, launch results are often less successful because of differences in priorities and preconceptions in groups such as engineering, marketing, and sales. Concepts such as launch architecture can provide the unifying design that maximizes synergy.
Capability Number 2 - Development Process
Toyota’s development process enables them to design, develop, and launch great products faster with fewer resources than most of their competitors.
The Toyota Production System emphasizes quality and efficiency to reduce waste through lean manufacturing concepts. John Krafcik coined the phrase lean production to emphasize that lean methods uses less resources than many traditional mass production methods to produce outstanding products in less time. The Toyota Production System has been described as a manufacturing phenomenon that seeks to “maximize the work effort of a company’s number one resource, the People.”
According to Dehoff and Loehr, the Toyota development model incorporates an intensive form of coordination. Their development process relies on concurrent engineering. Parallel path development activities are encouraged. The Toyota development model uses “a great deal of communication among engineers on product launch, an activity that is often seen as a waste of time in other companies.” This system delivers value and reduces project risk.
The bad news for Toyota’s competitors is that Toyota’s development process is very good now and because of the reinvestments they have made, the momentum for continuous improvements within Toyota will likely surpass the efforts of many of their competitors for the foreseeable future.
Capability Number 3 - Extended Enterprise
The goal of program success is shared throughout the extended team. In the Win-Win Sourcing article, Bill Jackson and Michael Pfitzmann conclude that “The most effective procurement model fosters knowledge sharing, not mistrust.” Toyota prefers suppliers that favor quality to cost reduction. Toyota’s prefers to treat its suppliers as partners.
Contrast this with price-based sourcing which may foster a combative posture between manufacturers and suppliers.
In the “Get it right the first time” section, Jackson and Pfitzmann state “But no matter how it’s justified, the net effect of the price-based system is to raise costs.” The authors cite three insightful reasons for the unintended result of lost opportunity. They conclude that price-based systems can:
- Sanction sloppy engineering
- Foster gamesmanship that includes initial over-design of components to facilitate cost reduction efforts later
- Penalize developers by requiring them to fix old problems instead of creating new products
Toyota’s implementation of extended enterprise maximizes cooperation within a diverse development team.
Capability Number 4 - Institutional Learning
Toyota success depends on its systematic effort to capture, institutionalize, and share knowledge. This enables teams of multi-skilled workers to develop and produce a large variety of products.
Capability Number 5 - People Development
Toyota invests in developing its best people. Their system nurtures technical and functional excellence. In contrast, typical mass production favors unskilled or semiskilled workers that produce standard designs for as long as possible.
Capability Number 6 - Culture
Toyota’s culture encourages changes for the better within the company. In combination with people development, institutional learning, extended enterprise, Toyota’s culture is fundamental to their approach to competitive advantage.
Toyota’s core values include continuous improvement and collaboration. A core principle of the Toyota system is Kaizen - the Japanese term meaning, “change for the better.” Contrast this with the “if it is not broken” or “good enough” approach in use by too many development teams.
Dehoff and Loehr reported, “It has taken Toyota 60 years to perfect their product development process.” Congratulations to Toyota. Through sustained innovation in new product development and launch they have become number one.
What is your strategy for attaining the top spot in your sector? If you already are a recognized market leader, what will perpetuate your prominent position? What steps will you take to ensure a better, faster, and more efficient path to launch success?
