Developing Things In-house

Q: Toyota learned a lot, technologically, from General Motors and from Ford, but your company has also worked hard from the beginning on creating original technology. An excellent example is the Crown, which debuted as a full-fledged passenger car in 1955. The Crown was an impressive achievement of original development. Other Japanese automakers have relied heavily on technological tie-ups with foreign automakers. Why has Toyota focused continuously on developing things in-house?

Toyoda: We at Toyota have the principle expressed by [Toyota Group founder] Sakichi Toyoda like this: “You can only master technology by working through the technology yourself.” People at Toyota have always believed that technology accumulates through hands- on effort. You try things yourself. If you fail, you learn why you failed. If you succeed, you learn how you succeeded. That [learning] only happens if you do things yourself. In the old days, someone once stole some diagrams of our automatic looms. I thought that would be a big deal, but the people in charge didn’t seem very worried. I asked why they weren’t more concerned, and they answered me like this: “Competition is intense in our industry. So creating new products is just part of the story. You’ve got to keep refining them, or you won’t survive. Someone can make a loom just like the ones we’re producing today by building it in accordance with our diagrams. But fixing the problems and improving the design are all but impossible for someone who hasn’t been through the trial and error of creating and evaluating the original. By the time someone makes a loom based on the stolen diagrams, we’ll be making a better one, so this isn’t anything to worry about.”

The theft, therefore, didn’t become much of a problem for our company. But it was a valuable lesson for me about the importance of doing development in-house.

Q: [Toyota was basically a truck manufacturer in the prewar years.] Did you not even consider an alliance with a foreign automaker when you started making passenger cars [after the war]?

Toyoda: Some of Japan’s vehicle manufacturers were making preparations to make passenger cars, and some weren’t. The [U.S. occupation authorities] prohibited the production of passenger cars in the early postwar years. For whatever reason, an opportunity arose for us at Toyota to ask about preliminary development work. They said that doing basic research and making prototypes would be all right.

So we got a little bit of a jump on the other Japanese vehicle manufacturers. That gave us the momentum to develop [passenger cars] independently while the others were rushing off

to find foreign partners. 4. Breakthroughs

Q: Let’s turn now to the subject of manufacturing. The consultancy Arthur D. Little recently published a book called Breakthroughs. That book discusses 13 commercial and industrial breakthroughs of the past 20 years. And the authors chose the Toyota Production System as one of those breakthroughs. The Toyota Production System is now famous around the world. But I’d like to hear what you thought about Kiichiro Toyoda’s just-in-time concepts and methods when the company was just starting out. I’d also like to hear about your role in developing the Toyota Production System.

Toyoda: The Toyota Production System began with Kiichiro. He really devoted himself to getting things right. He put down his ideas in writing, and they filled up this much paper (holds his hands up to show a thickness of about four inches). Kiichiro was always teaching those ideas to the section managers and to the assistant managers and the supervisors. He was calling for a switch from batch production to flow-based production, and the supervisors out on the plant floor required some convincing. We moved [in 1938] from [the Toyoda Automatic Loom Works plant in] Kariya to the new plant [now known as the Honsha (Headquarters) Plant in what is now Toyota City]. Kiichiro laid out the plant to accommodate the new production system. That took some conviction.

With our new system, making too much of anything was against the rules, and so was making too little of anything. But it was a flexible system. If you had done everything you were supposed to do, you could go home. We put the new system into operation in autumn 1938 and used it for about two years. But Japan was shifting to a war footing, and government planners took control of the economy. That put an end to our system for the time being. We resurrected the system after the war. Then, it was Taiichi Ohno and his group that did the trial and error that went into refining the system. Q: Later, you built the Motomachi Plant, which opened in 1959. Wasn’t that a huge decision to make? Toyoda: We had been making everything at the Honsha (Headquarters) Plant, and we needed to add capacity somehow. An incremental increase in capacity at the Honsha Plant was an option, but we decided that building a new plant was the best way to go.

Vehicle production at Toyota’s Koromo Plant (now the Honsha [Headquarters] Plant) in the late 1930s

Q: What was your outlook [for Japan’s automobile market] at that time?

Toyoda: First of all, we figured that demand for passenger cars would take off sooner or later. Second, we figured that we’d find ourselves competing someday with overseas automakers. And if we were going to compete, we wanted to compete to win. So scale would be important. That weighed in favor of building a new plant. But we had no idea how many cars we could actually sell, and we were naturally worried about the danger of overinvestment. President [Taizo] Ishida had a great feel for business, and he called for us to be bold. In the end, the project turned out successful.