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Innovate Your Business – Not Just Your Product

By Shlomo Maital

business-innovation

   Psychologists sometimes use a ‘word association’ approach. Say a word. What comes to your mind first?

   Say, “innovation”. Do you picture a gadget? A product?   Most of us do.

   But what about all the other areas, where fresh ideas are needed? What about the way you make things, the way you sell and market them, the way you motivate your workers – and in general, the way you design and run your business.

   Business design and operations are, for many innovators, a dark corner. No light shines there.

     Among experts, there is controversy.   Guy Kawasaki, the marketing guru of Apple’s Macintosh, founder of garage.com, and author of Art of the Start, claims that creativity is vital for innovative products but when it comes to designing the business to implement them, stick to conventional white-sliced-bread methods.  

   We disagree.   Business design innovation can bring bigger dividends that product innovations, which often fail.   If you can build a unique innovative business design around an existing product, you can win big.

     Here are four examples.

*   Mobileye is a Jerusalem-based global company selling warning systems for vehicles, founded in 1999. Founders Amnon Shashua and Ziv Aviram raised money innovatively, unconventionally, by avoiding venture capital and appealing to a list of wealthy people interested in high-tech. Those investors proved far more patient than VC’s and enabled Mobileye to take nearly 8 years to develop its product, ready in 2007. Mobileye now has annual global sales of $350 m., and a profit margin of some 60 per cent.

* Netscape provided the world with one of the first browsers and its IPO in 1995 led off an enormous dot.com boom.   Netscape’s business design was ‘give it away’ – charge zero for the browser.   This innovation has since been widely imitated. Netscape’s browser was a powerful marketing device, used by millions, to advance sales of its software products.  

* El-Op: this wholly owned subsidiary of Elbit, a market leader in electro-optics, uses a unique approach to innovation – bottom-up.   Workers are encouraged to submit ideas to a website, and they are quickly passed on to mid-level managers and the head of operations. In many organizations, innovation is confined to product innovation emerging from R&D departments. This often leads to a false assumption, that ONLY the R&D department has innovation in its job description. At El-Op   innovation is part of the job description of every worker. Moreover, research has shown that process innovation – innovation in operating procedures – is far more profitable and pays a far higher ROI, return on investment, than product innovation, because new products often fail when introduced to the market. At El-Op, many hundreds of ideas emerging from line workers have saved the company millions of dollars over the years.

* Toyota: This leading automobile company introduced just-in-time in its manufacturing process. Until then manufacturers stockpiled mountains of components in advance. Toyota asked, why? Why not have the components delivered just in time to use them in production? Why not eliminate costly component warehouses?   The cost saving and efficiency gains were enormous. This innovation was based on challenging a conventional assumption.

     What we learn from this is simple.   Innovate everywhere, everything, all the time. Make fresh new ideas part of the job description of every worker.   Listen carefully especially to workers who are “at the coal face” (where the coal is mined), because they are the ones who really know what is going on and what needs to be changed. Make sure that each fresh idea is acknowledged, read, studied, tested and either implemented or shelved for some future date, and that the person who proposed the idea is updated at every stage. And create an award ceremony for innovators. Just recognizing the creativity is often enough to stimulate it tenfold.

 Toyota’s Innovation Process:

What We Can Learn from the Prius

By Shlomo  Maital  

            Prius

Prius 2014

  How did Toyota develop and build the Prius  in record time?  How has Toyota developed and sold 40 million Corollas? (We have one, it has over 300,000 kms. or 180,000 miles and is going strong). 

   I learned a lot from an advertisement, perhaps the first time an ad in TIME was more interesting than the editorial copy.  The ad was an article by Mitsuhisa Kato, Toyota’s VP for R&D.  Here is a summary of what he said:

   * Get your R&D people out into the world and out of their darn labs:   “Seeing people drive so fast on rough roads where I would have slowed to a crawl [front-wheel drive Corollas in nations with unpaved roads] was eye-opening.  It highlighted for me the importance of venturing out into the marketplace to see things firsthand.”

  * Organize around technologies, not features:  “We launched the first-generation Prius in 1997. That was only two years after we formally initiated the development process! (Project head) Takeshi Uchiyamada (now Chair of Toyota) got inspiration from NASA’s Apollo program.  Its managers identified the technologies they needed, and assigned a development team to each technology, enduring each team met its target and deadline. We adopted a similar tack. 

Get your engineers to talk across disciplines:  “We moved the mechanical engineers and the electrical engineers onto the same office floor.  Their face-to-face interchange raised our technical discourse to a new dimension and brought important progress.”

Innovation is not rigidly bound by tradition but driven by it: “A renowned Japanese potter quote Auguste Rodin to me —  Tradition is not inheriting the skeletons of the past, it is inheriting the SPIRIT of the past.  We at Toyota honor the spirit of the joy of mobility. 

Blog entries written by Prof. Shlomo Maital

Shlomo Maital

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