The Toyota name inevitably brings to mind cars. Yet within the company's DNA dwells an entrepreneurial spirit that constantly seeks new challenges. We spoke with two key figures to find out how Toyota approaches business development today.
Toyota as a startup
Most people would regard Toyota Motor Corporation as a big company.
And yet, the carmaker started out as a venture business spun off from Toyota Industries Corporation by Kiichiro Toyoda.
In fact, many Toyota Group companies* were originally corporate ventures started by Kiichiro as he sought to establish an automobile industry in Japan.
*Aichi Steel was formed from the Toyota Industries Corporation steelmaking division, JTEKT from the Toyota Motor Co. machine tools division, Toyoda Gosei from its rubber division, and Denso from its electrical components division. Various other group companies can also trace their roots to Kiichiro’s commitment to domestic car production.
Building upon this auto industry base, Toyota has a history of launching and developing new businesses, from forklifts and other industrial vehicles to car rental, housing, marine, energy, agritech, and healthcare.
Although most of Toyota’s sales and earnings come from the auto industry, employees throughout the company carry on the startup spirit by continuing to pursue new projects.
This series will showcase new businesses born out of in-house expertise and the ideas of Toyota employees. Indeed, Toyota Times has already featured many such efforts, including Mechacomi, Welwalk, Toyota Upcycle, TM9 turf, TOTONE, The company’s marine business, Support for domestic soybean producers, and a system that uses drive recorder footage to assist emergency services.
For this first article, we spoke with Business Development Group Chief Officer Isao Nakanishi and President Hirofumi Inoue of the Advanced R&D and Engineering Company about Toyota’s vision for business development in today’s world.
Why Toyota pursues new businesses
“When Sakichi Toyoda (who laid the Toyota Group’s foundations) invented the automatic loom, he did so because he wanted to make life easier for his mother, who would toil into the night weaving cloth. His own son, Kiichiro, took on the task of creating an automobile industry for Japan. Our businesses today have inherited that DNA of working for the country, for someone other than ourselves.”
As Business Development Group Chief Officer Nakanishi explains, the philosophy that lies at the root of the Toyota Group and Toyota Motor Corporation forms the DNA of its new ventures.
This is an era of uncertainty with no clear right answers. As President Inoue points out, “We live in an age when a product alone will no longer satisfy customers.”
Hirofumi Inoue, President, Advanced R&D and Engineering Company
Until now, we’ve focused on making cars, but I believe that to meet today’s needs—from carbon neutrality to a circular economy—we must work across industry lines for the benefit of the world and other people.
In such times, what role should new businesses play?
Amid the shift to electric, intelligent, and information-driven cars, we must continue venturing into new areas or otherwise risk falling behind the times. Without a map to guide us, we are working hard to chart our own path, exploring new opportunities, and trying to determine the way forward.
Business development, the Toyota way
Toyota first set up a unit focused on business development in 1989. It also launched an entrepreneurial program targeting non-automotive fields, giving rise to a range of enterprises.
However, given weak coordination with the company’s core operations, these ventures struggled to take full advantage of Toyota’s underlying strengths.
What’s more, even if individual divisions managed to launch a business harnessing their unique capabilities, they lacked the know-how to make it grow.
As a result, they would prioritize the projects they wanted to pursue, relying on untested assumptions and instructions from above to make major investment decisions, at times with no way of turning back.
Based on these experiences, the Business Development Group and the Advanced R&D and Engineering Company—which respectively look after the business and technical aspects—teamed up to launch BE creation, a system for generating new ventures.
Chief Officer Nakanishi is pleased with the progress, noting, “In the past two or three years, we have established a system that enables us to tackle new challenges on both the technical and business fronts.”
To boost a venture’s chances of success and curb wasteful investment, BE creation has broken down the process into seven stages, from idea generation to eventual commercialization.
At each stage, internal and external experts determine whether to invest or withdraw from the proposed business, providing feedback on the proof of concept.
In addition, the system also provides wide-ranging assistance toward business implementation, including mechanisms to accelerate development and support risk management (E-biz).
Chief Officer Nakanishi
The stage and gate process embodies the very essence of TPS (Toyota Production System): using set resources to achieve a goal within a set period (Just-in-Time); ensuring that defective products are not passed onto the next step (Jidoka); determining quality requirements and lead times, and not seeking many answers along the way. All these TPS concepts can be found in our system.
BE creation also incorporates other ideas unique to Toyota, including internal guides known as “sherpas” who track project progress, andon* that can be pulled to pause progress, and input from outside experts to ensure fair screening.
*Devices used to notify others about irregularities on the production line.
What’s expected of in-house entrepreneurs
Another aspect of BE creation is B-pro, an internal submission system that draws 200 to 300 business proposals each year.
Importantly, rather than merely seeking ideas, BE creation also offers expert support, funding, and learning materials to help share know-how in new business development.
As they draw on this assistance to set up their businesses, how are Toyota’s in-house entrepreneurs received by external partners?
President Inoue
People outside the company tell us that the ideas are well thought out, with sound planning. I think this stems from our culture of genchi-genbutsu and always questioning, the habit of heading out to the genba and being prepared to visit a customer one hundred times if necessary.
On the other hand, Nakanishi points to something even more important than having these skills and systems for creating new businesses.
“It begins with an individual’s will, the genuine desire to help the world and other people. As we move through the higher stages, we discuss the strategic rationale for Toyota to pursue a given idea, but ultimately, what matters is the project owner’s strength of will.”