The Toyota innovation model

Strategy & Leadership

ISSN: 1087-8572

Article publication date: 10 July 2007

2911

Citation

Barabba, V.P. (2007), "The Toyota innovation model", Strategy & Leadership, Vol. 35 No. 4. https://doi.org/10.1108/sl.2007.26135dae.002

Publisher

:

Emerald Group Publishing Limited

Copyright © 2007, Emerald Group Publishing Limited


The Toyota innovation model

The Toyota innovation model

The Elegant Solution: The Toyota Innovation ModelMatthew E. MayFree Press

The Elegant Solution: The Toyota Innovation Model by Matthew E. May provides an insightful guide to the three principles and ten practices that have contributed to Toyota’s success as an innovator in the automotive industry. May, senior advisor to The University of Toyota, speaks from the experiences of having worked with the company as both an insider and outsider for more than eight years. At Toyota’s request, he tested the application of what he learned at other companies.

The three principles are:

  1. 1.

    Ingenuity in craft, which has two key parts:

  2. 2.
    • Engagement. This tells you where to dig; it helps managers focus on how they personally connect with their work.

    • Exploration. This tells you how to dig; it helps managers avoiding the ordinary way of doing things by seeking new, better, and different practices and processes. This point of differentiation adds perspective to Peter Drucker’s observation, There is a big difference between doing things right (efficiency) and doing the right things (effectiveness).

  3. 3.

    Pursuit of perfection requires mangers to disregard the old adage, “You can have quality, cost, or speed – take two,” and instead discover a way to provide all three. Toyota’s approach to this is not accomplished with big proclamations and major new efforts. Instead the firm’s mantra is, “A million smaller ideas trump a single big breakthrough any day of the week.”

  4. 4.

    Fit with society is about implementing new ideas that have meaning to the setting in which they are being introduced. The author emphasizes that this works best when the enterprise thinks in a systemic manner. That is, “to think through all the conditions and connections required to allow a solution to fit seamlessly into the everyday beat of those who will use it.” As Russ Ackoff, the eminent systems thinker, said, “Management should be directed at the interaction of the parts and not the actions of the parts taken separately.”

The ten practices are:

  1. 1.

    Let learning lead. This axiom not about special learning – it is about “integrating it into the daily work as the one true way to innovate.” The author points out that Toyota has, as do many other enterprises, learning mechanisms – including a university, training centers, and knowledge management centers. What distinguishes Toyota is that learning is ingrained into the DNA code of the firm and is best exemplified through approaches like the Ohno Circle, which at Toyota at involves asking “why” over and over while observing the process. When this is done, eventually valuable improvements become apparent. It is a process designed to encourage deep thinking by the individual.

  2. 2.

    Learn to see means to go beyond traditional market research techniques and observe consumers in the context and environment in which your product or service idea will ultimately be used. Matthew May lists three ways to grasp the end use situation, each of which provides a unique dimension of understanding:

  3. 3.
    • Observe – watch the customers as they go about their daily lives; focus on observing them performing the actions that could be altered by product innovation.

    • Infiltrate – become the customer by walking in the customer’s shoes. Go shopping as they would, get in conversations with them and their friends, and learn from the experience.

    • Collaborate – involve the customer in the design process by allowing them to see and use prototypes.

  4. 4.

    Design for today is the ability to understand the market, society, and the customer so well that you know where they are headed. It is important not to get too far ahead with ideas that customers cannot use, or be too far behind so that you developing innovations that the customer doesn’t want. The author identifies five steps to make sure you’re working on real problems with tomorrow’s solutions:

  5. 5.
    • Identify the critical issues or decision. Example: Should we develop hybrid technology?

    • List the uncontrollable forces – the market, societal and demographic shifts – under way. Provide factual evidence.

    • Number and “map” the factors according to relevance using two characteristics: potential impact and certainty. Create a simple four-square matrix to plot impact versus certainty.

    • Develop at least three scenarios, preferably four. With four you won’t fall into the natural tendency to take the middle choice by default.

    • Decide a course of action based on the three principles of innovation (ingenuity in craft, pursuit of perfection, and fit with society).

  6. 6.

    Think in pictures is the ability to create a mental image of a compelling idea that causes others to want to participate in its development. The author cautions that, although pictures and images connect people to thoughts and goals and help turn valuable ideas into action, there is no step-by-step process or one best way for thinking in pictures.

  7. 7.

    Capture the intangible is the ability to “move well beyond the transaction, the product, the service, the process.” It requires discovering “the intangibles that people truly prize, and you’ll find the most compelling elements of value.” In this chapter the author reinforces what companies that are serious about understanding customers have come to accept: “people buy for individual reasons linked to their personal values.” This requires a company to look at multiple ways of attempting to understand how product or service attributes relate to these personal values.

  8. 8.

    Leverage the limits is the ability to enable improvements within the restraining forces rather than seeing them as constraints to innovation. The basic thesis of this chapter is that “Innovation demands exploiting limits, not ignoring them.” The author provides several examples of innovations that emerged when limits were not treated as barriers.

  9. 9.

    Master the tension is addressed by making certain you “frame” the problem you are addressing correctly. It is in some way similar to the old adage “a problem well defined is half solved.” The Elegant Solution’s approach is to ensure that during the framing process that tension is maintained by making sure conflicting goals are fully understood and addressed rather than finding the simple, and often less valuable, compromise solution.The Elegant Solution’s contribution to framing is “Dynamic Tension.” In this method the problem is framed by “the setting of opposing forces in direct competition or conflict with each other, purposefully creating a Dynamic Tension that demands harmonious resolution.” The key is to find elements of the problem that appear to be in conflict and pair them. Then insist that both are addressed in finding the solution. As an example, the book lists ten “stretch” goals that Toyota management established. The Dynamic Tension approach paired those goals that were in conflict:

  10. 10.
    • 50% Inventory Reduction versus 50% Back Order Reduction.

    • 50% Packaging Expense Reduction versus 50% Damage Reduction.

    • 25% Throughput Increase versus 50% Errors and Safety Reduction.

    • 25% Space Utilization Increase versus 25% Landfill Use Reduction.

    • 25% Freight Costs Reduction versus 40% Lead Time Reduction.In this approach, the teams working to reach the goals are forced to consider alternatives that do not solve one aspect of the paired goals at the expense of the other. The value of the approach according to a Toyota executive is: “What appears to be the problem, isn’t. What appears to be the solution, isn’t. What appears to be impossible, isn’t.”

  11. 11.

    Run the numbers addresses an issue not often dealt with in a balanced way in most text books – synthesizing data and analysis with imagination and intuition. The author makes it clear that this is not about one approach or the other, but about using the advantages of both approaches as a complement to each other. Again he provides several examples from both inside and outside of Toyota.

  12. 12.

    Make Kaizen mandatory means following three critical steps: First, create a standard of quality. Second, follow it. Third, find a better way. The author highlights the importance of the first step by pointing out that “Trying to improve and innovate without a standard as reference is like a journey with no starting point.” Many managers contend that the setting of arbitrary quality standards from the top down discourages innovation. But the author sheds light on this debate by distinguishing between standards as an edict versus standards as the current best known practice. To ensure the latter is followed at Toyota, and other companies that adopt Kaizen, the following practice applies:

  13. 13.
    • Standards are created by the individuals performing the work.

    • Standards are dynamic, and not everything gets standardized.Following this approach standards are to be followed until a better way is discovered, tested, and accepted.

  14. 14.

    Keep it lean starts with “thinking” lean. Thinking lean in the author’s terms is to “Build your solution from the customer back, and drive out anything connected to complexity. Because there is nothing elegant in excess.”

In this book the author has provided an excellent description of the Toyota management system. It is a concise, comprehensive, and compelling overview of the principles and practices that have contributed to Toyota’s success. Throughout the book he also attempts to make the case that Toyota’s comparative success over its competitors is directly attributable to this approach. There is some truth to this, but the reality is not that simple. If a reader assumes that “If I just follow this process I’ll be as successful as Toyota,” he or she will likely be disappointed. The book ignores several competitive advantages that have also, and to a great extent, contributed to Toyota’s success. These include current labor cost and benefit advantages, the advantage of not having to pay pensions and healthcare costs for legions of retirees and many other costs of incumbency shouldered by GM. The true test of Toyota’s “elegant solution” will come at some time in the future when the advantages of being unencumbered by mountains of overhead and being able to build factories in green fields are less likely to exist.

Vincent P. BarabbaGM’s General Manager of Corporate Strategy and Knowledge Development (vbarabba@sbcglobal.net). He is the author of Surviving Transformation: Lessons Learned from GM’s Surprising Turnaround (Oxford University Press, 2004).

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