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.
Swinging and missing
Failure is part and parcel of taking on new challenges. Toyota’s history of new ventures is littered with projects that were scrapped as quickly as they were set up.
At the same time, cars are machines entrusted with carrying human lives. In much of what Toyota does, failure is not an option.
So, how does the company confront failure in the realm of new business ventures?
One of the great things about Toyota is a culture of superiors warmly encouraging employees to give something new a try if there is a sound rationale behind it. This is a crucial factor, especially for ventures that seek to take on or carve out new domains. The most important thing is accepting and embracing diversity. Failure also provides experience and is part of that diversity. Toyota is a company that values and encourages a willingness to tackle challenges. As such, I think it’s vital for us to share failures and embrace them together.
Touching on his own failures, Chief Officer Nakanishi emphasized the importance of “taking a swing.”
Chief Officer Nakanishi
I launched two energy-related businesses. One became a model case that continues to this day, more than a decade later, while the other folded after two years. The latter business involved running our own renewable energy power plant, but as the project proceeded, we faced a major hurdle, and it became clear that the reputational risk was too great for Toyota to take on. But we didn’t know that until we tried. I believe that showing our mistakes fosters a culture of tolerance. There are things you can’t know until you step up to the plate, and sometimes you need to swing and miss.
“Toyota must not be a company that shuns failure.” This sentiment is strong among the company’s leadership and is an urgent topic at annual labor-management discussions.
In January 2023, when President Koji Sato received the baton from Chairman Akio Toyoda, he shared the following words:
“President Toyoda reassures us that ‘it’s okay to make mistakes.’ For engineers, failure is by nature, something to be avoided. We develop technologies to avoid making mistakes. However, if our technological development doesn’t lead to failure, we aren’t pushing the boundaries. Going to the limit means running the risk of failure. But without challenging the limits, nothing new can be created. In such an environment, I think it is a tremendous asset that over these 13 years, Toyota has been watched over by a person who says, ‘It’s okay to make mistakes.’ I hope to carry on those guiding principles and mindset as I take on new challenges.”
Mutual gratitude
The startup spirit is part of Toyota’s DNA. However, management is only able to permit failure thanks to the automotive business that underpins the company’s foundations.
Chief Officer Nakanishi explains how he envisions the relationship with the core business.
“I always remind our members that the automotive business is the reason we are able to pursue new ventures. In return, we want to ensure that the seeds we sow also contribute to Toyota’s core business.”
Naturally, not all ideas reach the commercialization stage. Even so, “We gain a great deal from trying,” says President Inoue.
“Although some ventures don’t work out, when the people who gave it their best return to the workplace, they have a positive impact on their environment. We often hear that they are a good influence, inspiring their colleagues. That is part of the value that new projects bring—even if we don’t reach our goals, the benefits to everyday operations make it worthwhile. They also add strongly to personnel development.”
Employees at Toyota fulfill many different roles. Chairman Toyoda’s message to them includes the following words:
“I consider corporate management in terms of the past, present, and future. The present exists because of the past. Likewise, the world of the future is shaped by what we do now. It’s the same at work: you have teams dealing with past issues and those focused on generating income in the present. And still, others are conducting R&D for the future. The crucial thing is to create relationships of mutual gratitude between them. When everyone feels they are helping each other, the company becomes an incredibly strong entity.”
Building relationships of mutual gratitude creates a virtuous cycle. This is Toyota’s vision for its core business and new ventures.
A multi-pathway approach to business
To close out the interview, we asked both men what they wanted to achieve through new businesses.
President Inoue
Japan is said to lack vitality. Though we may have lost some of our confidence, I think the country has much to offer. We have cars that draw on Japan’s unique spirit of hospitality and world-renowned creativity in Japanese animation and cuisine. I hope we can harness these diverse strengths to build a bright future.
Chief Officer Nakanishi
A new venture with sales of some 200 billion yen would still only account for around 0.5% of Toyota’s total. Although we’re told not to chase numbers, we’re certainly keen to contribute more. While retaining Mobility for All as our central mission, in the future, we hope to pursue a multi-pathway approach to business as well that will see new ventures comprise a one-third share. To that end, we are sowing seeds in various places and connecting to next-generation industries. We want to nurture enterprises that will earn the gratitude of Toyota’s core business and bring happiness to many.”
Future articles in this series will showcase the new businesses that have emerged from Toyota.
▽Hirofumi Inoue, President, Advanced R&D and Engineering Company
Profile
Joined Toyota Motor Corporation in 1996. Working on chassis control, Inoue handled everything from advanced development to product development for components, including suspensions and brake controls. He went on to roles in product planning and formulating mid- to long-term strategy before moving to the Advanced R&D and Engineering Company in 2019. Inoue has pursued projects and developments that tackle social issues, formulated new concepts for future cars, and worked to turn them into reality by steering advances in vehicle development technologies, control technologies, and AI. He assumed his current role in January 2022.
▽Isao Nakanishi, Chief Officer, Business Development Group
Profile
Joined Toyota Motor Corporation in 1992 as an engineer. Involved in ergonomic development for the Celica, Corona, and MR-S. Moved to the Business Development Group in 2000, overseeing new ventures in various fields, including the renewal of Laguna Gamagori and external sales of FC units. From 2013, Nakanishi led the F-Grid Ohira, Miyagi LLP, involved in energy management for the industrial zone that is home to Toyota Motor East Japan. In 2020, he established Toyota Green Energy LLP before assuming his current role in April 2022.