For several decades now, Toyota has been the benchmark in manufacturing. For automobiles as well as for all other types of manufacturing, "the Toyota way" has been seen as a path to success.
Toyota's attention to details, unrelenting expectations regarding perfect quality, the selling of "self-assurance" to the buyer that their car will be trouble-free - and building an organizational culture that delivered on these promises over and over again - are all areas in which Toyota did better than almost any other company on the planet.
Now, with the revelation that many Toyota automobiles are neither as well-built or as safe as we had all taken for granted, the image is tarnished. Perhaps, Toyota is like most other organizations in promising things that it can't deliver on and selling a brand that has little substance behind it?
But if we reflect for a few minutes, it becomes clear that Toyota remains the benchmark when looked at in the context of the sorry state the world's automobile industry has got into. Despite the recall of millions of vehicles - apparently the largest such recall in history - Toyota still stands-out within the automobile industry for making cars that work and for innovating in ways that are likely to shape our future.
However, Toyota failed in that while pursuing growth, it neglected to pay attention to things that it already knew as an organization.
One of the things that Toyota knew and yet forgot, according to Paul Ingrassia, the author of a new book on the auto industry entitled Crash Course, was to "never build... a new product in a new factory with a new workforce."
These "three nevers" offer a useful insight into how organizations must combine "knowing" with their "growing" if they are to succeed in a global marketplace. As we move into a knowledge-intensive era, it is not surprising that "knowing things" will become as important, if not more so, than "making things."
Knowing what to make, how to make it, who to make it for, will be the keys to success. It will increasingly be about organizations that know more than other organizations and which have figured out how to know more. In other words, smarter organizations.
Toyota has always been among the "smartest" organizations, yet here in their pursuit of ever-greater global growth is an instance where they weren't very smart, after all.
The Toyota situation has been described rather neatly by two IMD Professors, Bala Chakravarthy and Peter Lorange, in their book Profit or Growth; Why You Don't Have to Choose. They argue that firms that are intent on growing - as opposed to protecting and defending market positions - can expand by either opening new markets or offering new competencies, but not by doing both at the same time! This is another way of stating Toyota's "three nevers".
Another way to say that global growth is based on what you know, and selectively learning new things. Abandoning everything that you know, be it about markets, technology, customers, offerings, etc. all at once, is to proceed forward knowing very little!
One of the key reasons for the wisdom of Toyota's "three nevers", and why it was so costly to forget them, is the power of "tacit knowledge."
According to Professor Ikujiro Nonaka, one of the founders of the field of knowledge management, knowledge can exist in either a hard or formal form, such as in documents, books or memorandums; or in a "tacit" form such as "know-how" in the heads of people familiar with particular work arrangements.
While it is relatively easy to transfer knowledge in formal formats and over great distances – via email, faxes, even physical transfer - it requires personal interaction to transmit "tacit" knowledge from one individual to another. In fact, we might not even realize that we possess such tacit knowledge until a conversation with a colleague crystallizes the thought and we recognize what it is, in fact, that we know.
The problem with violating the "three nevers" is that we abandon all hope of tacit knowledge transfer. By moving into new product areas, in new geographic markets with new factory settings, there is no hope for a "head-start" or fast-advantage based on exploiting existing knowledge. Nor, given the physical and cultural distances that the "three nevers" present, is there much hope for easy tacit knowledge transfer, either.
Successful globalization is much too difficult a journey without the assurance of having some knowledge that gives your organization a basis for advantage. Perhaps it is relying upon existing product offerings in new markets; or else it is making new products in existing factories with experienced workforces; or maybe it is using a seasoned team of veteran managers and workers to tackle a new problem in an existing market.
The key is always keeping some of the familiar while embarking on something new. To do otherwise is to risk following on the wrong Toyota path to success.