The Toyota Way: Favor Long-Term Strategies over Short-Term Fixes

In this seventh chapter of his book “How Toyota Became Number #1”, David Magee talks about a key element of Toyota’s success, that of favoring long-term strategies over short-term fixes.   The pursuit of short-term goals is hardwired into management when their bonuses are tied to increased stock prices and quarterly profits.

1.  A Tale of Two Strategies

Now, you can say “well, it’s easy for a company like Toyota to eschew short-term fixes when they’re sitting on a mountain of cash.”   My answer to that is, “well, how do you think Toyota got that mountain of cash.  By favoring long-term strategies, that’s why!”

GM pursued unprecedented dealer incentives to meet short-term sales goals; Ford flooded heavily discounted products into unprofitable fleet sales.   And Chrysler?   I can say from my experience at Mitsubishi Motors, where I worked from 1990-2004, that they decided to follow Chrysler rather than Toyota and Honda in going towards the profitable SUV market rather than the less profitable market of hybrid vehicles.    The result?    Mitsubishi launched its new version of the SUV at a historical turning point, right before the invasion of Iraq.   When oil prices soared as a result, the market shifted away from gas-guzzlers towards more economic cars, and Mitsubishi lost the bet it had made.    There were waves of layoffs, and I ended up losing my job in the 3rd wave.    Mitsubishi bet on the wrong horse, the SUV, but the larger mistake was following the Big 3 in their pursuit of short-term profits.

Toyota has favored long-term strategies, which is not just part of their company, but is a trait of Japanese business.  For Toyota, however, this is part of the company’s cultural foundation.   Their stability comes from a long-term approach.

2.  Make Daily Decisions That Benefit Long-Term Plans



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