[In the words of Akio] #05: "Sustainable growth"

2021.05.31

In June 2010, at the first general shareholders’ meeting held under his presidency, Akio Toyoda made a comment on his thinking about how to steer Toyota moving forward:

“I believe that growth is about being able to continuously change ourselves in response to ever-changing needs of customers and society. ‘We want to be an ever-growing company, we want to achieve sustainable growth’that is our desire.”

In the 2000s, Toyota had enjoyed a rapid expansion. As the “size” of the business became larger and larger every year, people across the company started to pursue “quantitative growth” more than anything. Challenging an ambitious numerical target was the primary driver at Toyota.

Toyota finished the fiscal year that ended in March 2008 with a record high operating income. However, due to the 2008 global financial crisis that hit the world right after, the company sharply fell down to the red in the next fiscal year. Vehicle production volume rapidly dropped. Toyota and many of its suppliers faced massive fixed costs that resulted from having invested in new plants and facility expansion for the preceding rapid growth.

The baton of steering the company was passed down to Akio during such a period. Based on the reflection that “qualitative growth”, such as nurturing people and strengthening corporate composition to drive the company’s growth, had not been prioritized over pursuing “volumes”, he put an end to the management primarily led by numerical targets, and set “making ever-better cars” as an unwavering principle at Toyota.

The aforementioned comment by Akio was made during such stormy start of his presidency. People at the time may have regarded his management policy as something naive.

But Toyota has proven it since then. It’s not only about improvement in its profitability. Under the banner of “making ever-better cars”, the company has made steady efforts in making people and genba (workplace or where things are happening) of Toyota stronger so they can respond to changes and make decisions quickly.

In responding to various crises that the automotive industry faced, such as the Great East Japan Earthquake and severe business conditions including the ultra-strong Japanese yen, Toyota has continuously shown its strength and flexibility. Looking back, people at the company have grown in their ability to respond to fast-changing situations over the past 10 years.

In June 2020, at the shareholders’ meeting under the COVID-19 pandemic, Akio expressed his thoughts on the change of Toyota:

“I have often been asked: ‘Are you succeeding in strengthening your corporate composition?’ To which, I have replied: ‘I will only be able to answer that question when we face another crisis similar in scale to that of the global financial crisis.’ Now, in response to the question, I am able to confidently say: ‘I firmly believe Toyota has grown stronger. It is my wish to use this strength to help those outside the company.’”

Changes are brought to by people, and it requires time for people and a company culture to really change. The shift to “sustainable growth” represents Akio’s resolution to transform the company to one that can achieve steady growth, no matter what the situation is and no matter how much time it takes. And it may have also meant that Toyota’s management is no more driven primarily by numerical goals, but by people who share the mission.

When the world rapidly changes, the key in running the company and in growing sustainably is people who are driven by missions and can respond to changes.

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