The Secrets to Toyota's Success

Toyota’s set an ambitious sales target (planning to trump GM’s 1978 record of 9.55 million vehicles sold) but according to analysts, the goal is attainable. What’s the secret to Toyota’s success? Some people say long-termism. The Prius wasn’t immediately profitable for Toyota, but the company saw down the road to an increased demand for fuel efficiency. One blogger at intentBlog summarized where the competition fell short:

Nobody was thinking the same thing at GM and Ford. Both companies consciously declined to trade certain short-term costs, like redesigning and retooling, for possible long-term gains. Not unusual for large, risk-averse corporations. They’d rather be safe than sorry. Let tomorrow take care of itself, is their mindset. You won’t hear them talk that way in public. But despite what American automakers’ TV commercials would have you believe, they got left in the dust, buried in confusion over what the public is clamoring for today. Bill Ford, Ford’s CEO, seemed to want to take some risks but shareholder pressure caused him to back down rather than stick to his guns. Toyota’s visioning and long-term view proved out.

Many analysts will cite the adaptable Toyota Production System as a key factor in the company’s success, but Industry Week took the assessment one step further, looking at the Toyota Product Development System:

Toyota’s time-to-market metrics are one measure of its lean product development accomplishments. For example, only 22 months were required to bring Toyota’s U.S.-developed Tundra pickup truck from styling freeze to start of production, says Yuichiro Obu, executive chief engineer at Toyota’s Technical Center in Ann Arbor, Mich. That contrasts with the 30 to 40 months that were commonplace in the U.S. during the late 1980s. Toyota averages 24 months, regularly reaches 15 months and has had instances as low as 10 months.

According to CNNMoney, Toyota’s succeeds by being ”better than Detroit at reading the American car psyche.” Instead of trying to make iconic vehicles, the company focuses on creating trouble-free products that work well.

One way Toyota reads the public mind is the think tank at Toyota Motor Sales in Torrance, Calif., where a research department staffed by 116 people monitors the industry and keeps tabs on demographic and economic developments. Its mission: to predict consumer trends and create a lineup of cars and trucks to capitalize on them. Each professional is expected to spend time out in the field talking to car buyers. The Japanese have a name for it: genchi genbutsu - go to the scene and confirm the actual happenings.

Most big companies have something like it; what distinguishes Toyota is that its executives actually listen and have turned those insights into profits. When researchers found in the mid-1990s that Toyota was losing young buyers to hipper brands like VW, its marketers dreamed up the hugely successful Scion.

True, the weakened yen helped Toyota’s bottom line this year, but clearly the company’s done a lot of things right.

(Toyota Prius Image by lorentey)