Creative Class

In every single speech I make, I say Toyota, not Google or Apple, is the single best example of the creative company.  Nearly 15 years ago, I wrote a book on this with Martin Kenney. James Surowiecki makes the case ever more succinctly in his latest New Yorker column:

But if Toyota doesn’t look like an innovative
company it’s only because our definition of innovation—cool new
products and technological breakthroughs, by Steve Jobs-like
visionaries—is far too narrow. Toyota’s innovations, by contrast, have
focussed on process rather than on product, on the factory floor rather
than on the showroom. That has made those innovations hard to see. But
it hasn’t made them any less powerful.

At the core of the company’s success is the Toyota Production
System, which took shape in the years after the Second World War, when
Japan was literally rebuilding itself, and capital and equipment were
hard to come by. A Toyota engineer named Taiichi Ohno turned necessity
into virtue, coming up with a system to get as much as possible out of
every part, every machine, and every worker. The principles were
simple, even obvious—do away with waste, have parts arrive precisely
when workers need them, fix problems as soon as they arise. And they
weren’t even entirely new—Ohno himself cited Henry Ford and American
supermarkets as inspirations. But what Toyota has done, better than any
other manufacturing company, is turn principle into practice. In some
cases, it has done so with inventions, like the andon cord, which any worker can pull to stop the assembly line if he notices a problem, or kanban,
a card system that allows workers to signal when new parts are needed.
In other cases, it has done so by reorganizing factory floors and
workspaces in order to allow for a freer and easier flow of parts and
products. Most innovation focusses on what gets made. Toyota reinvented
how things got made, which enabled it to build cars faster and with
less labor than American companies.

But there’s an enigma to the Toyota Production System: although the
system has been widely copied, Toyota has kept its edge over its
competitors. Toyota opens its facilities to tours, and even embarked on
a joint venture with G.M. designed, in part, to help G.M. improve its
own production system. Over the years, more than three thousand books
and articles have analyzed how the company works, and things like andon
systems are now common sights on factory floors. The diffusion of
Toyota’s concepts has had a real effect; the auto industry as a whole
is far more productive than it used to be. So how has Toyota stayed
ahead of the pack?

The answer has a lot to do with another distinctive element of
Toyota’s approach: defining innovation as an incremental process, in
which the goal is not to make huge, sudden leaps but, rather, to make
things better on a daily basis. (The principle is often known by its
Japanese name, kaizen—continuous improvement.) Instead of
trying to throw long touchdown passes, as it were, Toyota moves down
the field by means of short and steady gains. And so it rejects the
idea that innovation is the province of an elect few; instead, it’s
taken to be an everyday task for which everyone is responsible.
According to Matthew E. May, the author of a book about the company
called “The Elegant Solution,” Toyota implements a million new ideas a
year, and most of them come from ordinary workers. (Japanese companies
get a hundred times as many suggestions from their workers as U.S.
companies do.) Most of these ideas are small—making parts on a shelf
easier to reach, say—and not all of them work. But cumulatively, every
day, Toyota knows a little more, and does things a little

They’re also phenomenally difficult to duplicate. In
part, this is because most companies are still organized in a very
top-down manner, and have a hard time handing responsibility to
front-line workers. But it’s also because the fundamental ethos of kaizen—slow
and steady improvement—runs counter to the way that most companies
think about change. Corporations hope that the right concept will turn
things around overnight. This is what you might call the crash-diet
approach: starve yourself for a few days and you’ll be thin for life.
The Toyota approach is more like a regular, sustained diet—less
immediately dramatic but, as everyone knows, much harder to sustain. In
the nineteen-nineties, a McKinsey study of companies that had put
quality-improvement programs in place found that two-thirds abandoned
them as failures. Toyota’s innovative methods may seem mundane, but
their sheer relentlessness defeats many companies. That’s why Toyota
can afford to hide in plain sight: it knows the system is easy to
understand but hard to follow.