The Toyota Way – Long-term philosophy

Section I: Long-Term Philosophy

Principle 1. Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

■ Have a philosophical sense of purpose that supersedes any short-term decision making. Work, grow, and align the whole organization toward a common purpose that is bigger than making money. Understand your place in the history of the company and work to bring the company to
the next level. Your philosophical mission is the foundation for all the other principles.
■ Generate value for the customer, society, and the economy—it is your starting point. Evaluate every function in the company in terms of its ability to achieve this.
■ Be responsible. Strive to decide your own fate. Act with self-reliance and trust in your own abilities. Accept responsibility for your conduct and maintain and improve the skills that enable you to produce added value.

I have always been fascinated by companies who have discovered what they stand for, beyond making money. I have been fortunate enough to work for one (ThoughtWorks). I tried creating another with some friends (CambrianHouse). And I look forward to getting up every day and continuing my search for others.

My current fascination is with Toyota. Toyota seems to know whom they serve, why they exist, why they are here.

Here is a quote from Jeffrey Liker’s interview with Jim Press, Executive Vice President and C.O.O. of Toyota Sales North America.

The purpose of the money we make is not for us as a company to gain, and it’s not for us as associates to see our stock portfolio grow or anything like that. The purpose is so we can reinvest in the future, so we can continue to do this. That’s the purpose of our investment. And to help society and to help the community , and to contribute back to the community that we’re fortunate enough to do business in. I’ve got a trillion examples of that.

How can that be? How does Toyota stay in business (and become the 2nd largest car maker in the world) if it isn’t focused on making money?

To see another way in which Toyota distinguishes itself, compare Toyota and Ford missions statements:

Ford Motor Company

1. Ford is a worldwide leader in automotive and automotive related products and services as well as in newer industries such as aerospace, communications, and financial services.

2. Our mission is to improve continually our products and services to meet our customer’s needs, allowing us to prosper as a business and to provide a reasonable return to our stockholders, the owners of our business.

Ford’s seems reasonable. It wants to continuously improve products, to prosper as a business, and ultimately provide a return for the owners of the business.

Compare this now with Toyota’s.

Toyota Motor Manufacturing (North America)

1. As an American company, contribute to the economic growth of the community and the United States.

2. As an independent company, contribute to the stability and well-being of team members.

3. As a Toyota group company, contribute to the overall growth of Toyota by adding value to our customers.

No mention of shareholder value. No mention of quality products. Nor the pursuit of excellence (all things Toyota is passionate about).

Toyota doesn’t see it’s purpose as making quality products that sell and make money. That is only in support of the mission. The true mission is:

1. Contribute to economic growth of the country in which it is located (external stakeholders).
2. Contribute to the stability and well being of team members (internal stakeholders).
3. Contribute to the overall growth of Toyota.

In other words, in order to contribute to external or internal stakeholders, it must enhance the growth of society. This is the reason for making excellent products. This seems so backwards to how most companies operate. Toyota wants its employee’s to grow, continuously improve, build high quality products, and learn, to create dedicated repeat customers that will last a life time.

Their reason for being is to keep doing what they do – enhance society.

The Toyota Way is made of 14 principles. We have only scratched the surface here with Principle #1.

In the future I hope to look more closely at each. In the mean time, if you have other examples of companies, that have found meaning beyond making money, I would love to hear about them.

To learn more about Toyota, and how it does what it does, I recommend picking up a copy of the Toyota Way by Jeffrey Liker.

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10 Responses to “The Toyota Way – Long-term philosophy”

  1. AC Dealers | Local Car Dealers, PA Pennsylvania Dealerships, NJ New Jersey, DE Delaware Car Sales, Service, and Financing Says:

    […] You probably know that Toyota is one of the leaders in the automotive industry. But do you know how the automaker got there? The company’s philosophy is unique. Unlike other major companies, Toyota seems to stand for more than just making a huge profit. And the company philosophy is proof of that. According to the Toyota Way, the company stands by 14 different principles. We’ll discuss those principles in the upcoming weeks, but today we’ll start with the first one. […]

  2. Dr.Asim Khamrai Says:

    I am not able to differentiate the basic philosophy of the two company based on only one principle and what is wrong if one(Ford) is interested to develop shareholder value reflecating nations wealth.
    In a way both is correct based on one principles as you mentioned .

  3. JR Says:

    Hi Dr. Khamrai,

    The difference is subtle, and hard to see sometimes. But the implication is an important one as it affects how the company views itself, and it’s culture.

    In my view, the main difference between the two statements is one of intent and spirit.

    Ford’s clearly spells out that it’s goal is to serve customers, make great products, and give shareholders a decent return.

    This is overwhelmingly how most companies operate.

    Toyota’s mission statement focus’s on something different. Instead of shareholder return, it’s enhancing society. Instead of quality products its team members.

    In other words, Toyota does everything Ford describes in it’s mission statement, but they are only means to a different end (and not the mission itself).

  4. Jason Yip Says:

    Minor correction, Toyota is currently the #1 largest car manufacturer in the world by any measure and would have been for a long while if that measure was profitability.

  5. JR Says:

    Great point. Thx Jason.

  6. Bob Says:

    Hi,

    Just a query im doing an assigment on Toyota and im having trouble finding information. Il type out the question and just if you can help in anyway or give advice would be greatly appreciaited.

    I have to state what Toyota’s mission statment is and critically evaluate it, but i cant find their mission statment anywhere. Also take into account Toyota’s philosophy, vission and goals and objectives and critically evaluate them. Im jus finding it hard to criticise Toyota.

    If you can give me any advice or point me in the right direction at all would be very greatful.

    Thanks, Bob

  7. JR Says:

    Hi Bob,

    The Toyota Way by Jeffrey Liker is an excellent resource for learning more about the Toyota mission statement.

    See my links at the end of the blog for more information.

    Cheers – Jonathan

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  9. Avoiding Firefighting… | ThinkTroops Says:

    […] As I discovered more on Toyota, this principle has many underlying philosophies built into it and the above diagram merely touch the surface of Toyota’s principle. You can read more about this principle of the Toyota Way here. […]

  10. How To Avoid Fire fighting… | ThinkTroops Says:

    […] As I discovered more on Toyota, this principle has many underlying philosophies built into it and the above diagram merely touch the surface of Toyota’s principle. You can read more about this principle of the Toyota Way here. […]

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