The Toyota Way: Raise the Bar to Unreachable Heights

In the sixth chapter of his book “How Toyota Became #1”, David Magee explains another important ingredient in Toyota’s success story, that of kaizen, or continuous improvement.    Toyota had a established its reputation in the United States with its small, affordable efficient cars.    This chapter tells the story of how they made the quantum leap to establishing a luxury division called Lexus.

1.  The Quality Lexicon of Lexus

In the 1980s, Toyota engineers were working on a project to set an entirely new standard for luxury vehicles.  Code-named F1, the project was about giving Toyota’s customers a luxury car to “graduate” into.   At that time they were not planning a new brand, but rather on building the best luxury vehicle in the world.    Toyota engineers visited the United States in 1985 to look at the preferences of American luxury-car buyers.   They learned from the mistakes that other automakers made when entering the luxury-car market.   The result of their efforts was the LS400, which made its debut at the 1989 North American International Auto Show in Detroit.

2.  The Brand

It’s one thing to build a luxury car, but how do you sell it?    Here Toyota relied on the expertise of Robert McCurry, one of Toyota’s earliest and most respected American employees.    Among his successes were the creation of a highly loyal and interactive partnership with dealers, which led in 1986 to Toyota becoming the first non-domestic automaker to sell more than 100,000 units.   He pushed for Toyota to create its first full-size American truck in 1993.

McCurry felt strongly that introducing the LS400 luxury car into the existing vehicle lineup would confuse buyers, and minimize the company’s profitability by shortchanging the phenomenal vehicle’s potential.   A luxury vehicle needed its very own brand with unique dealers and service.   Yukiyasu Togo, Toyota’s chief U.S. sales executive at the time, who spearheaded the luxury car project, agreed with McCurry.    The “Lexus” brand was launched in the United States in late 1989 with two models.   It is now the largest luxury brand in the United States, and receives more awards for quality and customer satisfaction from J.D. Power & Associates than any other automotive brand in the world.

Here’s how Lexus beat better-established competitors like BMW, Mercedes-Benz, and Jaguar:

  • Unprecedented quiet ride while maintaining stability and control
  • Elegant interior and exterior styling with highly functional controls
  • Powerful, smooth-running engine yielding better gas mileage

Despite the successful launch of the Lexus brand, Toyota executives realized that the venture had been more costly than it needed to be, and that better planning, a more streamlined development process, and better cross-communication would all be needed in future product development.

2.  Redefine Classes with Standard-Setting Products (or Service)



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