Extreme Toyota identified six contradictory forces Toyota on the move. It relentlessly pits these forces against each other to realize continuous innovation and constant renewal:
1. Moving gradually but also taking big leaps.
2. Cultivating frugality while spending huge sums.
3. Operating efficiently as well as redundantly.
4. Cultivating stability and a paranoid mindset.
5. Respecting bureaucratic hierarchy and allowing freedom to dissent.
6. Maintaining simplified and complex communication.
Moving Gradually but Also Taking Big Leaps
From the outside, Toyota progresses more like a tortoise than a rabbit in day-to-day operations. It moves step by step, experiments, deliberates and takes time to get things done. The Lexus LS400 underwent eight design reviews and 50 wind-tunnel tests before the first model was approved. In fact, it took six years to get the first Lexus out of the factory. When Scion, a new brand targeting the American youth market, was launched in the United States, Toyota rolled it out gradually, starting in California in June 2003. It took eight months - until February 2004 - to achieve the second launch, in the South and on the East Coast. The third launch, in the Midwest, wasnt until June 2004. In
between, Toyota conducted experiments and made adjustments to improve each subsequent launch. However, in each case Toyota was making a big leap forward. The leap for Lexus was the creation of a brand-new dealer organization in the U.S. that the company, in the Lexus Covenant, describes as the finest dealer
network in the industry because it treats each customer as though they were a guest in our home. Scions big jump, in addition to opening the youth market for Toyota, was setting up a pure pricing scheme that let customers know the retail price in advance and eliminated price negotiation. Although first introduced by Saturn, this was an innovative practice for the company and was well received by young customers.
The 1997 launch of the Prius, an energy-saving hybrid car that combined the high-speed power of an internal combustion engine with the clean efficiency and low-speed torque of an electric motor, was a technological leap in a company better known for its culture of continuous improvement, or kaizen. The practice of kaizen typifies Toyotas gradualism, whereas Prius is a symbol of its ability to leap forward.
A Frugal Big Spender
Toyota is known for its frugality, although for the past two decades it has held an average of over $15 billion in cash and short-term assets. At the same time, and despite holding such a high level of liquid assets, the company has maintained a very low dividend payout of under $3 billion per year. For a company often referred to as the Toyota Bank, its reputation for penny-pinching is matched only by Wal-Mart in the United States. This behavior is evident in the companys humble-looking headquarters in Toyota City and its custom of turning all lights off during lunchtime. Office staff work in crowded conditions, usually all together in one large room with no partitions between desks. If a piece of equipment breaks down, Toyota employees try to fix it themselves and try to reuse it. Toyota is also frugal when it comes to executive compensation. Its top executives are at the low end of the pay scale, especially compared with smaller rivals like Nissan, Hyundai-Kia or Renault, where senior managers are paid more than double the amounts at Toyota. However, Toyota isnt timid about investing huge sums of money in research and development, manufacturing facilities, brand equity, dealer networks and human resources development.
Operational Efficiency and Redundancy
Probably no one would deny that Toyota is the epitome of operational efficiency as an automaker. The famous Toyota Production System turns out high-quality, reliable cars at lower production costs, and makes Toyota nimble in response to changes in market demand. But if its operationally efficient on the hard side of manufacturing, it starts to look downright redundant with some of its soft-side practices. Toyota, for example, holds a lot of meetings attended by a lot of people, many of whom dont participate in the discussion. It employs numerous co-ordinators, multilingual employees who
break down cultural and language barriers between its Japan-based headquarters and its international operations - a functional role.
During the Toyota World Conventions in 2003 and 2007, an astonishing number of Toyota employees served as attendants to guests and their spouses. In fact, there were as many Toyota staff members as there were guests, apparently to ensure the meetings took place just in time and to serve as a buffer just in case something happened. Toyota assigns more employees to regional sales offices in the United States than other carmakers, to build deeper communication links with dealers. Redundancy is also apparent among the ranks of senior executives, who spend an inordinate amount of time visiting dealers.
Stability and Paranoia
By most measures, Toyota is a stable company. Except for a short period leading up to 1950, when the company faced near-bankruptcy and over 1,500 employees were laid off, it has recorded stable sales and net income growth. At the same time, Toyotas top executives seem to thrive on paranoia. They constantly hammer out messages like, Never be satisfied, or, Theres got to be a better way. When Katsuaki Watanabe became president in 2005, he instilled paranoia across the company by announcing his dream list of expectations during his term.
They included a car that can make the air cleaner as it runs, a car that wont hurt drivers or pedestrians and never gets into an accident, a car that can make drivers healthier the longer they drive it, and a fuel-efficient car that can go from one coast of the United States to the other on one tank or gas, and eventually around the world.
Hierarchy and Freedom to Dissent
Watanabe remembers how he came up the ranks fighting with his bosses and is fond of saying, Pick a friendly fight. The voicing of opinions contrary to those of top management or headquarters is an everyday occurrence at Toyota. Dissenting with bosses, not blindly following their orders, bringing bad news to them and generally not taking them too seriously are all permissible behaviors at Toyota.
This is despite the fact that from an outsiders perspective, the organizational structure appears very hierarchical, with traditional silos up to the executive vice-presidential level.
Simplified and Complex Communication
Its an unwritten rule at Toyota that you simplify your words when communicating with others. A common practice is the use of A3 as a simplified format for presentation, with subheadings for background information and clear statements of objectives, analysis, action plan and expected results. These sheets, which include process flow charts and histograms, are then posted on the walls for everyone to see in a practice known as mieruka, to broaden communication throughout the company. At the same time, Toyota maintains a complex web of communication networks that aim to connect everyone in the company. The lofty objective is to reach a state where everybody knows everything.
Toyota strives to remain extreme, a state of disequilibrium where radical contradictions coexist, pushing it away from the comfort zone to create healthy tension and instability within the organization. This tension becomes the catalyst for moving forward.
From - Extreme Toyota - Radical Contradictions That Drive Success at the World's Best Manufacturer
By Emi Osono, Norihiko Shimizu and Hirotaka Takeuchi, with John Kyle Dorton