|Book Review: Extreme Toyota|
Extreme Toyota: Radical Contradictions that Drive Success at the World's Best Manufacturer
Written by: Emi Osono, Norihiko Shimizu, and Hirotaka Takeuchi. New York: Wiley, 2008. 320+xiv pages.
Extreme Toyota is the latest attempt to explain the inner workings at Toyota, who passed General Motors in 2007 to take the top position in worldwide market share for the automotive industry. The authors claim that Toyota has become adept at navigating contradictions and transcending paradoxes to develop breakthrough products like the Prius and the Lexus while the engine of continuous improvement keeps the core businesses as efficient as possible.
Most books about Toyota center on the legendary Toyota Production System, which has become the gold standard for efficient manufacturing practices through its influence on lean manufacturing. Authors have also dug into Toyota's product development process, problem-solving methods, and management structures.
This book takes a different tack. It focuses much less on the operational details of how Toyota does business. Instead, the authors attempt to capture and distill the core cultural elements that enable Toyota to achieve dramatic success in ways that run counter to conventional wisdom about how to achieve lasting success. Product developers will find that this book helps put Toyota's product development practices in the context of Toyota's organizational system.
The three Japanese authors developed their theories about Toyota through extensive interviews during a tumultuous period in Toyota's history. On the one hand, books like The Toyota Way (Liker, 2004) had generated intense interest in the company's practices, while their investments in hybrid technology seemed prescient when gas prices rose over $4.00 per gallon in the United States. On the other, rapid global expansion and unexpected quality problems led to an internal crisis within the company about how to preserve Toyota's core values in a time of rapid change.
Their hypothesis is that Toyota's founders laid the groundwork for greatness through their willingness to embrace paradoxes and create an environment where learning happens every day. Although the Toyota family owns less than 4% of the company's stock, they exert a large influence over the company's direction. A long-term, stable work force embodies a reservoir of history to draw upon, and the company's insistence on treating every person with respect encourages loyalty to the company's core values.
The authors define six core forces that drive the company. Three of them drive the company to look outside, and the other three ask the company to look inside. The external forces bring new information into the company about its customers, markets, and technologies. The internal forces integrate the new knowledge into the company and ensure that the core principles can survive the most vigorous challenges.
For example, Toyota's culture encourages constant experimentation and problem solving. Every individual from the shop floor to the executive suite walks in every day with the determination to change something for the better by the end of the day (p. 93). This forces people to seek new ideas from outside the company, bringing upstream and downstream partners into solution development. At the same time, company norms such as genchi genbutsu (“go-and-see”) ensure that everyone follows the same process for solving problems, and human resources policies that guarantee long-term employment create a stable base of accumulated knowledge to draw from.
The authors hypothesize that these core forces lead to contradictions that drive creative tension, keeping everyone in the organization constantly learning. They also claim that the drive to resolve the apparent paradoxes help create innovative solutions. For example, long-term employment could lead to a complacent workforce that lacks initiative. The forces of constant experimentation and the founders' values counteract that by constantly raising the bar on performance. As a result, innovation flourishes in places that most companies ignore.
Toyota is not necessarily recognized for being the most innovative car company, especially when compared with luxury car makers like BMW. However, the authors make the compelling argument that Toyota has rightly focused on innovations that drive operational excellence, lowering costs all along the value chain. The end product may lack the cachet of a European sports sedan, but the vast majority of the market is much more concerned with Toyota's reliability and value.
One key paradox is the emphasis on continuous, incremental improvement paired with the company's tendency to make large strategic gambles, most notably the Lexus and the Prius. Both of these development programs required the company to spend large amounts of cash on unproven technology and to completely rethink their marketing strategies. The authors argue that the continuous improvements generate cash flow that the company invests in these new ventures and that the company feels confident that they will learn enough to make the investment worthwhile even if they fail.
This book's main strength is the picture it paints of Toyota's inner workings at the system level. The authors show how the six forces interact with each other to generate outstanding performance. Although they may appear contradictory on the surface, Toyota has found that they work together to strengthen the company's competitiveness.
The main problem with this book is a common problem among books about Toyota. They offer a lot of data and insight about what happens inside of Toyota but almost no information about how to transfer their ideas into a reader's organization. If anything, this book has the potential to discourage people who have begun making progress with some of Toyota's tools, because it makes such a strong case for the whole system's contribution to the organization's success.
However, the authors were clearly more concerned with documenting the results of their investigations rather than drawing roadmaps for other companies to follow. Toyota is a widely emulated company, yet merely copying Toyota's practices does not lead to Toyota's performance. This book describes the environment that gave birth to the practices, helping to explain why they often fail when transferred into companies that lack Toyota's culture. That may lead to better decisions about whether and how to adopt Toyota's practices to improve another company's performance.
In general, this is a great addition to the literature about Toyota. The authors' unique ability to describe how Toyota operates at a system level helps to provide a broader context for understanding the principles and practices that others describe in more detail. For product developers who want to leverage the Toyota Product Development System, this book will help place the product development process in the context of the entire organization, which will help people understand how their organizations differ from Toyota and, therefore, how the Toyota Product Development System will need to be adapted to fit.