19 February 2007

How a Corporation Succeeds

Here is a great article from the New York Times Sunday Magazine about the remarkable trajectory of Toyota, especially compared to its American competitors. It's a long article but well worth the read if you have any interest in matters of economics, corporate governance, or group decision making in general.

In my opinion, the fact that is most telling of Toyota's method of success comes on the final page:

Toyota began developing the Prius at a time, 1991, when gas was plentiful and cheap.
There aren't many words there, but it says a lot about the perspective of the company and how it goes about making it's decisions.

A longer quote says essentially the same thing:
Toyota expects to be in business 100 years from now, one person in the company’s West Coast office told me, long after oil has been depleted or rendered unusable because of its carbon content, and for that reason it has placed all its bets on hybrid technologies. Indeed, Toyota created its hybrid systems not so much with the current era in mind, but because it views hybrids as more practical and energy-efficient. Whether the future is in biodiesel, ethanol or hydrogen doesn’t seem to matter; the hybrid system could be adapted to any of those fuels, says Bill Reinert, Toyota’s U.S. engineer in charge of advanced vehicle planning. Reinert also told me that the current Toyota system already has the ability to accommodate the larger battery capacity of a plug-in hybrid, which would use electric power for local trips and fuel only for longer excursions. But those large batteries don’t yet exist. Was that extra capacity put there on purpose? “Hell, yes,” he says. “This company is not stupid.”

Of course, this is just about product decisions, not the processes that have also been key to Toyota's success. That you can read about in the article. It's long, but I guarantee you that it's worth it.

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