the contradictions that drive toyota's success

CASE STUDY – THE CONTRADICTIONSTHAT DRIVE TOYOTA’S SUCCESS

By,ARKA NANDY,SRAVYA BHARANI,REEMA JAIN,RAJAT GOYEL,KISHORE KUMAR,TUSHAR BATRA ANDNEETHU MOHAMMAD

INTRODUCTION – A FEW THINGS ABOUT TOYOTAMISSION AND VISION – A VIDEO….TPS

THE STORY UNTOLD

CULTURE OF CONTRADICTIONS – DIFFICULTIES..FORCES OF EXPANSION – A PRESSURE BUILT UP..FORCES OF INTEGRATION – A RUBBER BAND..COMMUNICATION – EMPOWERED.ANALYSIS - McKinsey 7S, SWOT CONCLUSION – EMULATING TOYOTA

1937 - Kiichiro Toyoda, started Toyota Motor Co. Ltd. 1947 - 100,000 vehicles was produced domestically. 1957 - Toyota Motor Sales, U.S.A. Inc. was established.1962 - 1 millionth Toyota vehicle was produced domestically. 1981 - merged with Toyota motor sales to become Toyota Motor

Corporation officially. 1966 - Toyota Corolla was announced. 1997 - Toyota Prius was announced. 2001 - Toyota enters Formula One racing 2012 - Becomes the largest automobile manufacturer

ahead of VW Group. Prius and Corolla being most popular. CEO - Akio Toyoda, HQ - Toyota, Aichi, Japan Production output - 9,909,440 units, Employees - 338,875 11th largest company in terms of Revenue Generation. Tagline – Moving Forward – Lets go places

A FEW THINGS ABOUT TOYOTA

Toyota Production System

Taiichi Ohno – 1948 – 1975 Also called lean manufacturing, organizes manufacturing and

logistics for the automobile manufacturer. Mostly described by Just In Time production and the Toyota Way. The publicly renowned “TPS” is considered to be the USP for Toyota,

However…. The Real Deal Quite simply, TPS is a hard innovation that empowers Toyota towards

Kaizen, one side of a coin. Flipside is a Soft innovation which is to create a culture of contradictions

and paradoxes in aspects of organizational life. Toyota challenges employees to find solutions by transcending differences,

rather than resorting to compromises.This generates innovative ideas, which helps Toyota to move ahead of

competitors, both incrementally and radically.

CULTURE OF CONTRADICTIONS

Toyota moves slowly, yet it takes big leaps• The company started production in USA in 1984: joint venture

with GM• Opened its first plant in Kentucky 4 years later!• Launch of the Prius in Japan in 1997 was a huge leap

Toyota grows steadily, yet it is a paranoid company• The company faced near bankruptcy in the early 1950s• Over that past 40 years, the company has shown steady sales

and market share growth• “Never be satisfied”, “There’s got to be a better way”, “No

change is bad”, “Reform business when business is good”

Toyota’s operations are efficient, but it uses employees’ time in seemingly wasteful ways• Presence of all employees in all meetings• The company assigns many more employees to offices in the

field• Senior executives spend a lot of time visiting dealers• Large number of multilingual coordinators

Toyota is frugal, but it splurges on key areas• Reputation for penny pinching• The company turns off office lights during lunch time• High cost of office space in Japan• It has invested $22 billion in production centers and support

facilities• For the past six years, it has spent $170 million annually

competing in the Formula One circuit

Toyota insists internal communications be simple, yet it build complex social networks• Communication language is simple• Toyota wants “Everybody to know everything”• Horizontal links between employees across functional and

geographic boundaries• Vertical relationships across hierarchies • Toyota fosters informal ties by inviting employees to join clubs

Toyota has a strict hierarchy, but it gives employees freedom to

push back.• Permissible employee behaviors – not following boss’ orders,

exposing problems, voicing contrarian opinions• “Pick a friendly fight.” (Watanabe)

FORCES OF EXPANSION

Impossible Goals

• Dared to adopt foreign technology• “Full line in every market”• Vagueness of goals

Local customization• Customize as per level of Customer Sophistication in each country• International Multipurpose Vehicle (IMV) platform in India

necessitated expansion• Made in Japan replaced by Made by Toyota

Experimentation

• Prius -100% improvement in fuel efficiency achieved• Redefined the continuous improvement process into TBP process

FORCES OF INTEGRATION

Values from the founders• Tomorrow will be better than today

Naïve optimism; employees see obstacles as challenges that energize them to do better; never satisfied with status quo; conducting experiments all the time.

• Everybody should winEmphasis on team work; each member of a team is accountable and has authority and responsibility to find a solution.

• Seeing things first hand “Genchi Genbutsu” The implication is that if you have not seen something first hand, your knowledge about it is suspect.

• Customers first, dealers second- manufacturers lastSuccess depends on maintaining the trust of customers, and dealers; go extraordinary lengths to forge lasting relationships with them.

Up-and-in people management • Cut all costs, but don’t touch any people.• Freedom to employees.• Respect employees’ perspectives.• Every single person is the main actor on stage in Toyota.

Open communication• Despite its huge size and reach, Toyota works like a small

town company.• Free flow of information.• Working together with no partitions.• Freedom of voicing contrary opinions.• Willingness to listen.

TOYOTA COMMUNICATION SYSTEM

Follows an Open Communication System:

• Disseminate know-how laterally – “Let’s yokoten”• Give people the freedom to voice contrary opinions• Have frequent face-to-face interactions• Make tacit knowledge explicit• Create support mechanisms

ANALYSIS

Hard Elements• Strategy • Structure• Systems

Soft Elements• Shared Values• Skills• Staff• Style

McKinsey's 7S

• Gives freedom to employees to push back.

• Sets near unattainable goals.

• Customizes both products and operations in each country.

• Promotes experimentation.

• Open communication.

• Give highest priority to customers.

STRATEGY

STRUCTURE• Hierarchical structure –

• Power of taking decisions majorly belongs to TOYODA family.

• Bureaucratic, with fixed functions and instructions but it evolves with employee feedback and innovation.

• RECENT CHANGES – TMC organizational structure has undergone a major change on April 1, ‘13. It kind of took its turn to Business Unit or Multinational Structure, with its own hierarchy and networks in between – i.e. –

Lexus International, Toyota no 1, Toyota no 2, Unit Center.

Toyota Production System (TPS)

• Built on the approach created by founders – Sakichi Toyoda and Kiichiro Toyoda

• Integrated Socio Technical System• Organizes manufacturing and logistics• Interaction with suppliers and customers• Design out inconsistency, overburden and eliminate waste

TOYOTA SYSTEM – The Toyota Way

Principles:

• Continuous Improvement• Respect for people• Long term philosophy• Right process will produce right results• Add value to organization by developing people and partners• Continuous solving of root problems drives organization learning

TOYOTA SYSTEM – The Toyota Way

• Communication

• Respect

• Customer first

• Integrity

• Kaizen

• Social Involvement

Shared Values

• Employee posses high creativity.

• Effective Problem Solving

• Ability to Influence

• Works well in teams

• Toyota look for the right attitude rather than skill level.

Skills

• Employees constantly grapple with challenges• Find solutions by transcending differences rather than

compromise• Top management encourages employees to challenge decisions• Employees experiment and learn from mistakes

Staff at Toyota

• When a problem arises, each member of the team is accountable and has the authority and responsibility to find a solution

• Employees are given the freedom to make judgment calls

• Employees cultivate the skill of listening intently to opinions in an open environment.

• Lean management

• Genchi genbutsu – management by walking around

• Team work

• High levels of autonomy/empowerment

• Mentoring

Style

Strengths• Innovative organisational culture• Toyota offers a wide range of models, satisfying all types of

consumer segments.• Toyota has a strong brand image.• Toyota incorporates cost cutting to the maximum level but

splurges on key areas.• Toyota strongly believe in Employee freedom can deliver better

business• Characteristics of Toyota executives.

SWOT

Weakness• The company pays executives very little and managers also rise

through the hierarchy slowly.• Toyoda Family wields with 2% market share. • Employee resource allocation should be efficient.• Operational Complexity

Opportunities• Use foreign technology for faster achievement of their goals.• Increase their presence in emergence markets.

Threats• Intense competition.• Low dividends payment.• Customer expectations varies in different country.

Emulating Toyota

• Places human at the centre of the company• Long term planning• Traditional Japanese style of management• Ethnocentric • Lack of opportunities for international talent• Lack of cultural diversity• Slow decision making by consensus