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The Contradictions That Drive Toyota’s Success

Hirotaka Takeuchi,
Norihiko Shimizu

Stable and paranoid, systematic and experimental, formal and frank: The success of Toyota, a pathbreaking six-year study reveals, is due as much to its ability to embrace contradictions like these as to its manufacturing prowess.

Reprint: R0806F

Toyota has become one of the world’s greatest companies only because it developed the Toyota Production System, right? Wrong, say Takeuchi, Osono, and Shimizu of Hitotsubashi University in Tokyo. Another factor, overlooked until now, is just as important to the company’s success: Toyota’s culture of contradictions.

TPS is a “hard” innovation that allows the company to continuously improve the way it manufactures vehicles. Toyota has also mastered a “soft” innovation that relates to human resource practices and corporate culture. The company succeeds, say the authors, because it deliberately fosters contradictory viewpoints within the organization and challenges employees to find solutions by transcending differences rather than resorting to compromises. This culture generates innovative ideas that Toyota implements to pull ahead of competitors, both incrementally and radically.

The authors’ research reveals six forces that cause contradictions inside Toyota. Three forces of expansion lead the company to change and improve: impossible goals, local customization, and experimentation. Not surprisingly, these forces make the organization more diverse, complicate decision making, and threaten Toyota’s control systems. To prevent the winds of change from blowing down the organization, the company also harnesses three forces of integration: the founders’ values, “up-and-in” people management, and open communication. These forces stabilize the company, help employees make sense of the environment in which they operate, and perpetuate Toyota’s values and culture.

Emulating Toyota isn’t about copying any one practice; it’s about creating a culture. And because the company’s culture of contradictions is centered on humans, who are imperfect, there will always be room for improvement.

No 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.

Hirotaka Takeuchi is a professor in the strategy unit of Harvard Business School.
EO Emi Osono ( [email protected] ) is an associate professor;
NS and Norihiko Shimizu ( [email protected] ) is a visiting professor at Hitotsubashi University’s Graduate School of International Corporate Strategy in Tokyo. This article is adapted from their book Extreme Toyota: Radical Contradictions That Drive Success at the World’s Best Manufacturer , forthcoming from John Wiley & Sons.