After two weeks, I am still in shock, Wosny!
What a way to change the world!
What a way to involve the next generations!
The Toyoda Way!
I really want to dig into this entrepreneurial story of “not promising results, …disappointments…and…sense of insecurity about his designs……step aside…do a reset…studying… detailed comparison of Western technology…” to finally be “relieved by the apparent technical superiority of his machines. The power of benchmarks, my friends!” (Read here Wosny’s full article)
As it is starting to be a tradition, after the Joker-view-of-the-world, comes the Robot-view-of-the-world.
Ladies and Gentlemen, please fasten your seatbelts, and enjoy the Toyoda Family Survival trip. Sing together with Sister Sledge, because THEY ARE FAMILY!
If you want a chance, just join your hands with us…
…we've just begun
To gain our share of this world's delights (high)
Our high hopes we had for the future
And our goal's in sight
Toyota Headquarters in Aichi, Japan
Brothers and sisters!!! This is
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Why? Why? Why? Why? Why?
I really liked how Wosny has connected the Toyoda Survival story with the social dynamics of elites and mainstream, the benefits in the long term and being empathic, the power of the leverage effect and the thriving effect of starting from scratch. All those dynamics, combined contributed to the Lollapalooza Effect of the Toyoda Family success.
The Toyoda Saga starts in 1867 with Sakichi Toyoda breaking a family tradition of farmers and carpenters. Thanks to being an avid reader in his youth -have we talked before about the benefits of being a lifelong learner, folks?- he established the Toyoda Automatic Loom Works in 1926.
This, would be the beginning of an epic journey that Kiichiro Toyoda, Eiji Toyoda, Shoichiro Toyoda, Tatsuro Toyoda, and Akio Toyoda will continue. Generation after generation, they not just made Toyota survive, they managed to thrive as one of the Industry leaders for more than 50 years. In our fast changing world, you can read statistics in the US where only one third of private companies created in 2013 were still in business 10 years later. Or the famous quote that states that 80% of the businesses created before 1980 no longer exist. You will agree with me (and why not, with Wosny) that this is a true survival story.
Sakichi Toyoda’s signature invention was the automatic power loom. The key here is the word automatic. Indeed, the automatic power loom will change the world.
Why? Because of the Jidoka principle.
Why? Because the machine can stop itself when a problem occurs.
Why? Because once the machine was stopped, Sakichi could start figuring out the root cause of the failure.
Why? Because this helped Sakichi to land the 5 WHY framework for problem solving.
Why? Because the Jidoka and 5 WHY framework would be central to Taiichi Ohno and Eiji Toyoda management system developed in Toyota since 1948, the Toyota Production System.
For all these reasons, Sakichi is known as the father of the Japanese Industrial Revolution. To celebrate the 100th birthday of Sakichi Toyoda, the company introduced in 1967 the luxury vehicle Toyota Century.
On 1973, the Japan Patent Office selected Sakichi Toyoda as one of Ten Japanese Great Inventors.
Toyota Century, 1967
Kiichiro Toyoda persuaded his father, who was responsible as head of the family business, to invest in the expansion of Toyoda Loom Works into a concept automobiles division, which was considered a risk to the family business at the time. To be honest, Kiichiro was just following the family tradition of breaking with family tradition…
Shortly before Sakichi Toyoda died, he encouraged his son to follow his dream and pursue automobile manufacturing.
The patent for the automatic loom was sold to the British company Platt Brothers, generating the starting capital for automobile development.
With the blessing of his father, Kiichiro started the process in 1933 by creating an automobile manufacturing department inside Toyota Industries Corporation. A prototype Toyota Type A Engine was completed in 1934, with the company's first prototype sedan, the A1, delivered the next year.
In April 1936, Toyoda's first passenger car, the Model AA, was completed. The sales price was ¥3,350, ¥400 cheaper than Ford or GM cars.
Toyota Model AA, the first “baby” of Kiichiro
The 1936 Toyota AA, the first vehicles produced by the company while it was still a Vehicles department of Toyota Industries were originally sold under the name "Toyoda" (トヨダ), from the family name of the company's founder, Kiichirō Toyoda.
The same year, the company ran a public competition to design a new logo. Of 27,000 entries, the winning entry was the three Japanese katakana letters for "Toyoda" in a circle. However, Rizaburo Toyoda, who had married into the family and was not born with that name, preferred "Toyota" -The poor guy just wanted to fit into the family, you know…just breaking the family traditions…-. By the way, I personally do not see a big difference between Toyoda and Toyota, but I have found some companies that definitely need a re-branding, do not skip the notes at the end of this article.
This was the seed for Toyota Motor Corporation, where in 1937 Kiichirō became the vice president of the company (the president was Rizaburo Toyoda).
In 1941, Kiichiro took office as president. What perfect timing for Kiichiro! The ones reading this post with basic knowledge on history know what I mean. As Howard Marks would say, a sea change was about to transform the world as Kiichiro knew it.
The new venture started by Kiichiro was going to be full of trouble. Why? First, Toyota Motor Corporation had restricted its activities due to the Sino-Japanese War. Second, World War II was around the corner. Toyota Motor Corporation was designated as a munitions company in 1944, not being permitted to make passenger cars. Kiichiro’s Vision was dead.
What a start!! Kiichiro faced difficult problems. However, he did not lose in this hard situation. He truly acted as the frontman of the Japanese automotive industry. He became the chairman of an umbrella organization for the automotive industry and negotiated with General Headquarters, Supreme Commander for the Allied Powers -It sounds so creepy- reaching beneficial terms compared with the wartime.
Kiichiro also gave speeches about policy changes at Toyota Motor Corporation and proceeded with talks for the recovery of the automobile industry.These actions show how much he was passionate about the car and the automobile industry and justified him acting on the behalf of the automobile industry. The payback for this passion was a big chunk of the independent dealerships restarted as Toyota dealerships after the war, showing the trust in Kiichiro by the dealership Owners.
Kiichiro got another victory lap in 1947, when General Headquarters, Supreme Commander for the Allied Powers approved the production of up to 300 passenger cars. The first Japanese passenger car after the war, the SA model with an S engine, the “Toyopet” was released.
This a Toyopet guys, not a Beetle
But the next red flag was around the corner. In 1949, two years after “Toyopet” was released, The Bank of Japan bailed out the Toyota Motor Corporation. There are millions of examples of companies being too early in an industry. Like Apple in the 90s, or Amazon in the 2000s.
The Bank of Japan demanded reforms, therefore Kiichiro started paving out his succesion.
In 1950, company executives, including Kiichiro's cousin Eiji Toyoda, took a trip to the United States where they trained at the Ford Motor Company and observed the operations of dozens of U.S. manufacturers. The knowledge they gained during the trip, along with what the company learned making looms, gave rise to The Toyota Way (a management philosophy) and the Toyota Production System (a lean manufacturing practice) that transformed the company into a leader in the manufacturing industry.
Sakichi and Kiichiro left the bar really high. If you are impressed…wait for the next generation.
Kiichiro Toyoda would never know the success that would come to him as he resigned from the company he developed in 1950 in reaction to bail out. He died two years later and his contemporaries remembered him as "Japan's Thomas Edison".
So, again, you may think that “The Father of Japanese Industrial Revolution” and “Japan’s Thomas Edison” are hard to top…right?. Do not jump to hasty conclusions. We have mentioned that some company executives went for training at Ford Motor Company -in the times the Ford Motor Company was still making money, good old times…- . This is important.
When you think about the Toyoda’s succession strategy, it has nothing to do with the fictional story of the Roy family in the serie “Succession” : The long-term vision of the Toyodas vs the short-term focus of the Roys; or The Interest of the company first vs Personal ambitions first; As our beloved Charlie Munger would say : “Invert, always invert”.
Until now the main characters of the story have been Sakichi and Kiichiro but there are more Toyodas in the mix. We will continue with Eiji Toyoda
In 1957, Eiji Toyoda, was named head of Toyota Motor Corporation.In 1958, Toyota established a production facility in Brazil, the company's first outside of Japan. -The “world” expansion of Toyota coincides in Brazil the rise of a 17 year old Pele taking the soccer scene by storm and leading Brazil to the World Cup victory. Also in 1958 João Gilberto’s ‘Chega de Saudade’ gave rise to what would become Brazil’s most famous and long lasting musical export, the Bossanova-.
Eiji Toyoda led the company for the next two decades. Eiji helped establish the company's first plant independent from the Loom Works plant. He made one of the most iconic Business partnerships with Taiichi Ohno.
As a result, the duo led Toyota at the start of the 1960s, where the Japanese economy was booming. Mix the income increase of everyday people with improving road infrastructure, and Toyota offering affordable economy cars like the Toyota Corolla -which became the world's all-time best-selling automobile- and you can start understanding why the tide was turning.
The energy crisis of the 1970s accelerated the change -Black Swan anyone? Please, don’t be the turkey- as large and heavy vehicles with powerful but inefficient engines were common, but consumers started demanding high-quality and fuel-efficient small cars.
Toyota Corolla, 1974
You may fall into the survivor bias territory just by looking at the Toyoda family. Is not as easy as pass the baton to the next on the line. Think about The Strohs :
“Before Anheuser-Busch had an empire, everyone around the Great Lakes knew Stroh's beer. The family beer company founder, Bernhard Stroh, came to Detroit from Germany in 1850 with $150 and a family recipe for beer in his pocket, according to Forbes. He named his operation Lion’s Head Brewery, but when he died, his son took over and changed the company name a few times.
By 1980, the brewery had grown from a family business to the third largest brewery in the country, worth as much as $700 million in 1988 ($9 billion today).
They acquired various breweries, ... The acquisitions left the Strohs with debt…they had too many brands and not enough of a marketing budget to sell the beer, while competing with Miller, Anheuser-Busch and Coors.
...some of the family members spent the money on antiques, guns, cars, and shopping, and had no future plans for the company and the family fortune. The company was sold to Pabst for $350 million, while Miller bought some of their brands. Most of that money went into repaying debt and employee pensions; the rest went into a family fund that gave out checks until it ran out in 2008”
If we follow Charlie Munger’s advice and invert, families need to avoid :
a) Conflict between relatives - a.k.a. the Gucci legacy-
b) Nepotism and lack of competent leadership
c) Lack of a proper succession planning
The common threads are the propensity for family dynamics, emotions and nepotism to disrupt operations, decision-making and leadership transitions in ways that can negatively impact the business. Proper governance, conflict resolution and succession planning are cited as critical to mitigating these downsides inherent to family ownership structures.
On the other hand, as you are reading with the Toyodas, long-term vision and strong company culture and values can make the difference.
In 1981, Eiji Toyoda stepped down as president and assumed the title of chairman. He was succeeded as president by Shoichiro Toyoda, the son of the company's founder (Kiichiro). Shoichiro started to merge Toyota's sales and production organizations, and in 1982 the combined companies became the Toyota Motor Corporation. It took years of leadership from Shoichiro to successfully combine them into one organization.
Efforts to open a Toyota assembly plant in the United States started in 1980, with the company proposing a joint-venture with the Ford Motor Company. In 1984, the company struck a deal with General Motors (GM) to establish a joint-venture vehicle manufacturing plant called NUMMI (New United Motor Manufacturing, Inc.) in Fremont, California. GM saw the joint venture as a way to get access to a quality small car and an opportunity to learn about The Toyota Way and the Toyota Production System. -I have had Toyota Production System and Lean Manufacturing for Breakfast and Lunch at University, so excuse me for not going deeper in this article. Wosny has already touched this point, so we may go through it again in our Dialog @ the Utopia Kèrt-.
For Toyota, the factory gave the company its first manufacturing base in North America allowing it to avoid any future tariffs on imported vehicles and saw GM as a partner who could show them how to navigate the American labor environment. The plant would be led by Tatsuro Toyoda, the younger brother of company president Shoichiro Toyoda. The Plant closed in 2010, and was later purchased by Tesla for US$42M.
Between 2009 and 2011, Toyota conducted recalls of millions of vehicles after reports that several drivers experienced unintended acceleration. At least 37 were killed in crashes allegedly related to unintended acceleration. Toyota was sued for personal injuries and wrongful deaths and paid US$1B to settle a class action lawsuit to compensate owners and paid US$1.2B criminal penalty to the United States government.
Amid the unintended acceleration scandal, Katsuaki Watanabe -Not a Toyoda- stepped down as company president. He was replaced by Akio Toyoda, grandson of company founder Kiichiro Toyoda, in 2009. Akio had been with Toyota since 1984, working jobs in production, marketing and product development, and took a seat on the board of directors in 2000. Akio's promotion by the board marked the return of a member of the Toyoda family to the top leadership role for the first time since 1999.
By 2020, Toyota reclaimed its position as the largest automaker in the world, surpassing Volkswagen. BOOOOMSHAKALAKA!!! It sold 9.528 million vehicles globally.
We have talked about sea changes and black swans, and since Tesla showed up, it is disrupting the Automobile Industry. We will see how everything plays out - As always, time will tell. Who the hell am I to make predictions?-
The playbook for Toyota has been a joint venture with BYD called BYD Toyota EV Technology Co., Ltd., with the aim of "developing BEVs (Battery Electric Vehicles) that appeal to customers."; acquiring Lyft's self-driving technology unit for US$550M to merge it with its Woven Planet Holdings automation division. With this, Toyota plans by 2030, to launch 30 EV models worldwide with a sales target of 3.5 million electric vehicles.
By 2022, Toyota managed to maintain its position as the world's best-selling automaker for the third year in a row.And in 2023, Toyota CEO and President Akio Toyoda announced that he was stepping down and passing the position on to Koji Toyoda. No, wait. Koji Sato. -WTF! Anyone else think this guy should change his family name?-.
I do not know what you will think about this, kèrters, but when I think about Toyota, I am not just thinking about cars. I can see Gabriel Omar Batistuta scoring golazos for ACF Fiorentina. Why? I guess Marketing is the answer. Leveraging major sports platforms for brand exposure was the strategy behind seeing Batistuta and Rui Costa with the Fiorentina jersey, partnering with Toyota from 1999 until 2010.
Gabriel Omar Batistuta, one of the most prolific forwards in the history of the Serie A
Same happened with Valencia CF, from 2003 until 2008, when Toyota’s name got associated with the genius of David Silva and David Villa. One of the funniest stories about Toyota sponsoring Valencia CF was the moment they were about to sign Cristiano Ronaldo for 35M€, according to The Sun’s article you read below.
Of course, Toyota was also leveraging major events and broadcast integrations, specially in the motor sports niche, competing in Le Mans and in F1, two of the most iconic motor sports competitions.
Jarno Trulli driving a Toyota F1
Marketing can serve as a crucial survival tool for businesses, especially during challenging economic times or intense competition. Adapting to changing market conditions and consumer preferences. Throughout its history, Toyota has consistently adapted its marketing strategies to address challenges, seize opportunities, and remain competitive in an ever-changing automotive industry, demonstrating the vital role of marketing as a survival tool for businesses.
Good examples of this are Toyota's "Oh What a Feeling" Campaign from the 80s, that helped establish Toyota as a reliable and affordable brand in the American market, contributing to its growth and survival during a challenging period for Japanese automakers. Also Toyota's "Moving Forward" Campaign from 2010. In the aftermath of the 2009 recall crisis, Toyota launched the "Moving Forward" campaign to rebuild trust and transparency with customers, highlighting its commitment to safety and quality.
Another strategy for survival is giving back to others. Here is where the Toyoda Family shows their philanthropist and arty side. Mind that the Toyota Municipal Museum of Art in Aichi, is sponsored by the manufacturer. The museum features works by Gustav Klimt, Egon Schiele, Edvard Munch, and others. The museum building was constructed by Yoshio Taniguchi, who also renovated the Museum of Modern Art (MoMA) in New York City.
The Toyota Municipal Museum of Art aims to create a collection that provides an overview of art after modernism, both from Japan and other countries, where each visitor can experience and share the creativity of the artists. Focuses on the movement of the Wiener Moderne which headed towards a total work of art connecting the arts and design. Along with portraits by Gustav Krimt and Egon Shiele, the museum holds self portraits by Oskar Kokoschka, which accompanied by their drawings, create a unique collection.
Often seen as the beginning of contemporary art, works of Dada and Surrealism are also an important core of the museum collection. The museum holds work by Rene Magritte, Max Ernst, Jean Arp, Salvador Dali, and also offers a view of work by artists of the era who largely influenced contemporary art, such as Constantine Brâncuşi and Alberto Giacometti.
Toyota Municipal Museum of Art in Aichi
Wrap up
What do you think about it? It was an effort based success story or rather an environment based one?
This, and some other concepts will be discussed between Wosny and me in our Dialog. You do not want to miss it.
Which ideas are you missing and would like to hear from? Let us know in the comments below.
You would like to check…
01 About business survival rates.
02 Company survival statistics by Harvard Business Review.
03 Sakichi Toyoda Wikipedia Page.
04 Toyota Industries Corporation about the history of Sakichi Toyoda.
05 Jidoka (Autonomation) definition in Wikipedia.
06 5 Whys Wikipedia definition.
07 Toyota Production System Wikipedia definition.
08 This is bizarre…in this link and this other you will find companies with really weird names…Who the hell is naming his company KUM & GO????
09 Sea Change (idiom) : a complete transformation, a radical change of direction in attitude, goals . . . (Grammarist).
10 Howard Marks memo Sea Change.
11 The Toyota Way Wikipedia page.
12 The Toyota Way, good summary in 14 principles.
13 Eiji Toyoda Wikipedia page.
14 Brazil in 1958, here you can deep dive into what was going on in Brazil the year Toyota opened its first Factory out of Japan.
15 The downside of family-owned Business, great piece by Lynette Gil.
16 Obituary of Soichiro Toyoda.
17 News of Soichiro Toyoda passing at 97yo.
19 Article on Autonews about Aiko Toyoda.
20 Batistuta scores 0-1 in UCL 1999 game Arsenal-Fiorentina
21 David Silva’s banger vs Chelsea in UCL Quarterfinals 2007
22 The time Cristiano Ronaldo was about to land in Valencia thanks to Toyota sponsorship, according to The Sun.
23 Toyota Motorsport Wikipedia page.
24 Toyota “Oh What A Feeling” Campaign.
25 Toyota “Moving Forward” Campaign
26 Toyota City official travel site.
27 Official Website of the Museum Toyota Aichi.