o executive needs convincing that Toyota Motor Corporation has become one of the world’s greatest companies because of the Toyota Production System (TPS). The unorthodox manufacturing system enables the Japanese giant to make the planet’s best automobiles at the lowest cost and to develop new products quickly. Not only have Toyota’s rivals such as Chrysler, Daimler, Ford, Honda, and General Motors developed TPS-like systems, organizations such as hospitals and postal services also have adopted its underlying rules, tools, and conventions to become more efficient. An industry of lean-manufacturing experts have extolled the virtues of TPS so often and with so much conviction that managers believe its role in Toyota’s success to be one of the few enduring truths in an otherwise murky world.
Like many beliefs about Toyota, however, this doesn’t serve executives well. It’s a half-truth, and half-truths are dangerous. We studied Toyota for six years, during which time we visited facilities in 11 countries, attended numerous company meetings and events, and analyzed internal documents. We also conducted 220 interviews with former and existing Toyota employees, ranging from shop-floor workers to Toyota’s president, Katsuaki Watanabe. Our research shows that TPS is necessary but is by no means sufficient to account for 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 efficiency 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.