Lessons from Toyota’s Long Drive

Reprint: R0707E

Last December the Toyota Motor Corporation officially forecast that it would sell 9.34 million cars in 2007—which could make it the world’s largest automaker. However, rapid growth and globalization have created many pressures for the company, and the strain of success is already beginning to show. Two HBR editors interviewed Toyota’s president, Katsuaki Watanabe, and several top executives to learn about the strategies they’re developing to cope in the future.

For well over a decade, J.D. Power and other research firms have consistently rated Toyotas among the top automobiles for quality, reliability, and durability. But in 2006 a series of problems with its cars threatened to sully the company’s reputation. What’s more, speedy expansion to meet demand and the struggle to keep pace with technological change have combined to challenge Toyota’s grand ambitions and its famed “Toyota Way.”

For Watanabe, being number one means “being the best in the world in terms of quality.” If Toyota’s quality continues to improve, he says, volume and revenues will follow. If problems arise from overstretching, he wants them made visible, because then his people will “rack their brains” to solve them—and if that means postponing growth, so be it.

Toyota’s long-term strategy involves developing both global and regional car models in order to compete worldwide with a full line of products. Watanabe aims to achieve his goals through a combination of kaizen (“continuous improvement”) and kakushin (“radical innovation”). One of his visions for the future is a “dream car”: a vehicle that cleans the air, prevents accidents, promotes health, evokes excitement, and can drive around the world on a single tank of gas.