Case 2- Toyota: an elegant search for innovative ideas

Many hold Toyota in high regard for its culture that stresses the importance of innovation. Sakichi Toyoda founded the company as a handloom company in the last decade of the nineteenth century. In 1898, Toyoda created Japan's first steam-powered loom and in 1924 the company invented an automatic loom. Four years later it developed a small petrol engine and in 1935 the company produced a prototype car. In 1937 the Toyoda family founded the Toyota Motor Companyand, having set up afactory, adopted the concept of 'Just In Time' logistics in 1938.

The Toyota familyhas been continuously driven to cut costs byscrutinizing the production, operational and logistical costs of the processes that supported the company. From its earliest days Toyota Motor Company has invested heavily in R&D to support innovation and now claims to implement a million new creative ideas every year. According to Matthew May, a senior University of Toyota advisor, and the author of Elegant Solution: Toyota's Formula for Mastering Innovation (2007), this success results from an embedded culture of guiding principles and practice.

There are three guiding principles at Toyota and they create both the policy and the framework for innovation:

1Ingenuity - a creative innovative mindset.

2Pursuit of perfection - determination to innovate to achieve optimal solutions, for example Lexus carsepitomize perfection.

3Rhythm of fit - application of solutions to anticipated contextual and use problems, for example, the development of hybrid technology.

Toyota operates a model known as the Idea Factory that isenergized by the three guiding principles and a blend of closed and open innovation practice. Production activity is rigidly controlled by the company's Total Production System to meet its goal of producing the highest quality level, at the lowest cost and with the shortest lead-time. Since 1951 Toyota has operated its Creative Idea and Suggestion System (TCISS) to empower every employee to participate in improving product quality by inviting them to make informed suggestions on ways to improve the production process. Previously it had only been the privilege of upper management to make suggestions in that respect, but was now opened up to include employees at the sharp end of production arguably the ones most likely to highlight potential issues. Additional motivation was incorporated into the system with the presentation of an Individual Annual Award to honour excellent suggestions.

Training programmes were developed to sharpen employees' skills at generating product ideas and key performance drivers such as quality, productivity and safety. These programmes came to be known as activators, as they were developed to give employees a deeper understanding of their work. Key Toyota activators include:

?Poka-yoke or error proofing: this is a simple technique that is designed to help employees to avoid making repetitive mistakes. It is an empowering and easy to learn method that helps people generate many ideas.

?5S or rigorous housekeeping: these programmes help employees to become more productive. The five S's are: