New Takeuchi Paper on Toyota

The Contradictions That Drive Toyota’s Success
by Hirotaka Takeuchi, Emi Osono, and Norihiko Shimizu
Harvard Business Review, June 2008 (free online during June)

The Toyota Production System (TPS) is a necessary but not sufficient condition for Toyota's success. TPS is a radical innovation that has disrupted a huge market. However, without the "soft" factors that drive Toyota, they would still be just another auto company.

This is also true of Scrum where the Scrum framework is a necessary condition for hyperproductivity but that alone will never get you there. The team must rise to the occasion, engineering practices must be extraordinary, and management must provide an environment that removes all impediments that stand in the way. You can only get high quality by going fast in the right way and you can only go fast in the right way by working less, not more. Failure of managers to understand these paradoxes will cause Scrum to fail and often the company along with it. This is natural in a free market economy where bad companies deserve to fail and the sooner the better as then improved companies, products, and services can emerge more quickly.

Takeuchi wrote "The New New Product Development Game" which launched the first Scrum team and his work continues to be of high interest to the Scrum community. He and his colleagues have struggled to understand Toyota for decades and done many studies to try to get to the bottom of Toyota's success.

Quite simply, TPS is a “hard” innovation that allows the company to keep improving the way it manufactures vehicles; in addition, Toyota has mastered a “soft” innovation that relates to corporate culture. The company succeeds, we believe, because it creates contradictions and paradoxes in many aspects of organizational life. Employees have to operate in a culture where they constantly grapple with challenges and problems and must come up with fresh ideas. That’s why Toyota constantly gets better. The hard and the soft innovations work in tandem. Like two wheels on a shaft that bear equal weight, together they move the company forward.

Toyota’s culture of contradictions plays as important a role in its success as TPS does, but rivals and experts have so far overlooked it. Toyota believes that ef?ciency alone cannot guarantee success. Make no mistake: No company practices Taylorism better than Toyota does. What’s different is that the company views employees not just as pairs of hands but as knowledge workers who accumulate chie—the wisdom of experience—on the company’s front lines. Toyota therefore invests heavily in people and organizational capabilities, and it garners ideas from everyone and everywhere: the shop floor, the office, the field.

Perhaps the biggest contradiction has always been Toyota's mission - to make the world a better place. Therefore they do things no other auto company with do even if there is not an immediate financial return.

Toyota Value, the document that outlines the company’s beliefs, says it best: “We are always optimizing to enhance the happiness of every customer as well as to build a better future for people, society, and the planet we share. This is our duty. This is Toyota.”

This focus captures the hearts of the people and their spirit of innovation. To execute it well requires great leadership and great leadership is servant leadership that listens to the people and changes their behavior to help the people.

Senior executives constantly hammer home messages such as “Never be satisfied” and “There’s got to be a better way.” A favorite saying of former chairperson Hiroshi Okuda is “Reform business when business is good,” and Watanabe is fond of pointing out that “No change is bad.”... Toyota has a strict hierarchy, but it gives employees freedom to push back. Voicing contrarian opinions, exposing problems, not blindly following bosses’ orders—these are all permissible employee behaviors. Watanabe, who recounts how he fought with his bosses as he rose through the ranks, often says, “Pick a friendly fight.”