The Elegant Solution: Toyota's Formula for Mastering Innovation

"Toyota is becoming a double threat: the world's finest manufacturer and a truly great innovator . . . that formula, a combination of production prowess and technical innovation, is an unbeatable recipe for success."

-- Fortune, February 2006

For the first time, an insider reveals the formula behind Toyota's unceasing quest to innovate and do more with less, a philosophy that has made it one of the ten most profitable companies in the world (and worth more than GM, Ford, DaimlerChrysler, and Honda combined). In a rare look into Toyota's ability to consistently achieve breakthroughs that outperform the competition, The Elegant Solution explains what Toyota associates have known all along: it's not about the cars. Rather, Toyota's astounding success is just the visible result of a hidden creative process that begins with a seven-digit number.

One million. That's how many new ideas the Toyota organization implements every year. These ideas come from every level of the organization -- from the factory floors to the corporate suites. And organizations all over the world want to learn how it's done. Now senior University of Toyota advisor Matthew May shows how any company can achieve an environment of everyday innovation and discover the kinds of elegant solutions that hold the power to change the game forever. World-class benchmarks like Lexus, Prius, Scion -- even Toyota's vaunted production system -- are simply shining examples of elegant solutions.

A tactical playbook for team-based innovation, The Elegant Solution delivers powerful lessons in breakthrough thinking in a provocative yet practical guide to the three core principles and ten key practices that shape successful business innovation. Innovation isn't just about technology -- it's about value, opportunity, and impact. When a company embeds a real discipline around tapping ingenuity in the pursuit of perfection, the sky is the limit. Dozens of case studies (from Toyota and other companies) illustrate the universal power and applicability of these concepts. A unique "clamshell strategy" prepares managers to successfully lead and sustain the innovation effort.

At once a thought-starter and a taskmaster, The Elegant Solution is a vital prescription for anyone wanting to truly master business innovation.

INTRODUCTION

In Search of Elegance

I would not give a fig for the simplicity this side of complexity, but I would give my life

for the simplicity on the other side of complexity.

Oliver Wendell Holmes

It's Not About the Gizmo

Scene:

Kosai, Shizuoka Prefecture, Japan. Circa 1888. Japan has opened its doors to the world -- two decades into the Meiji Reformation, two years into the Japan Patent Law.

A young man watches his mother slave all day in the rafters of their humble home to weave clothing on a manual spinning loom, a primitive tool unchanged for centuries. It pains him to see her scrap a hard day's work because of a single broken thread in the finished garment. Barely 20, inventive, energetic, and eager to change the world -- carpentry is his trade, but not his calling. Ignoring elder disapproval, he challenges himself to build a better loom, sketching prototypes, building test models, and applying his woodworking skills in creative ways that others view as eccentric. He receives a patent for a handloom that improves quality and productivity dramatically. He's not satisfied. He turns his attention to developing a power loom.

By 1898, he perfects Japan's first steam-powered loom, which allows textile mills to quadruple productivity and halve costs. His looms are the highest quality, lowest cost, and easiest to use -- putting the finest German and French looms to shame. Business booms, and his star rises quickly in Japan. His quest to perfect drives him ever forward, creating a string of tiny innovations in rapid succession. Three decades into his search, he designs a mechanism to automatically halt the loom whenever a thread breaks. It changes the world. It takes five more years to perfect. And so from small but steady improvements with radical results and a strong desire to help people is born Toyoda Automatic Loom Works, the precursor to Toyota Motor Company.

Nearly a lifetime in the offing, Sakichi Toyoda finds the elegant solution.

The story of Sakichi Toyoda is not about invention, or about the technological development of the automatic loom in Japan. It's about one man's nearly spiritual quest to solve a very real problem facing the world around him.

If you read closely, three underlying principles come into clear view:

? Ingenuity in craft

? Pursuit of perfection

? Fit with society

These are the very principles that to this day fuel the engine of innovation at Toyota. They form the basis for everything Toyota does. In fact, they are the deeper principles behind nearly every great innovation the world has ever seen.

But how easily we forget! Mention innovation, and people immediately think, technology.

The truth is that business innovation is about satisfaction and value, not new gadgetry. The pace of technological progress sweeps us off our feet and we get all caught up in the gizmo, losing sight of the why behind the what. Customers don't want products and services, they want solutions to problems. Nobody raised a hand to ask for an automatic loom. Perhaps that's why looms hadn't changed much over the years until Sakichi came on the scene.

And when it comes to solutions, simple is better. Elegant is better still. Elegance is the simplicity found on the far side of complexity.

DEFINING ELEGANCE

Great innovation is nearly impossible without understanding and appreciating the concept of elegance as it relates to solving important problems.

Elegance isn't about being hoity-toity. It's not about lofty concepts and grand designs. It's not about beauty or grace, or anything to do with aesthetics -- ugly is okay. Elegance is about something much more profound. It's about finding the aha solution to a problem with the greatest parsimony of effort and expense. Creativity plays a part. Simplicity plays a part. Intelligence plays a part. Add in subtlety, economy, and quality, and you get elegance.

The effects of elegant solutions are significant, ranging from understated intellectual appreciation to truly seismic change. Elegant solutions relieve creative tension by solving the problem in finito as it's been defined, in a way that avoids creating other problems that then need to be solved. Elegant solutions render only new possibilities to chase and exploit.

Finally, elegant solutions aren't obvious, except, of course, in retrospect.

DEFINING INNOVATION

A lot has been written about innovation. How it's distinct from creativity. How it goes beyond improvement. How it entails seeking and taking big risks. How it's all about big ideas and radical departures from convention. How it means completely scrapping the old system. How it's limited to the right-brainers, and suits need not apply. How you need deep pockets just to play the game.

Those biases are limiting at best, and only serve to exclude the everyman from innovating. The best definition of innovation on the planet is the one given by David Neeleman, founder and CEO of JetBlue: "Innovation is trying to figure out a way to do something better than it's ever been done before." Thomas Edison would agree.

The definition is an elegant solution in itself, because it wrestles to the ground a complex, hotly contested concept and makes it accessible to everyone, at every level. It renders irrelevant all the silly distinctions between different theoretical classes of innovation -- with a single stroke, the conceptual difference between constant improvement and breakthrough innovation becomes useless. It removes the prevailing mystique, and begs no further explanation. And it would be wrong to think it doesn't include things that have never been done before. Because everything has a precursor at some level, somewhere. It's just that it hasn't quite been pinpointed correctly.

So from here on, when we refer to innovation, we mean solving the problem of how to do something better than ever.

THE TEMPTATIONS

Elegant solutions are all around us, waiting to be discovered. But they're no easy challenge. Elegant solutions require a working knowledge of the forces at play, and obstacles in the way. Aside from what is invariably mislabeled and sloppily defined as culture -- and more on that later -- a few big traps can stop elegant innovation cold. They are three in number, easy to fall into, and most appropriately termed temptations:

1. Swinging for fences. This is the "home run or bust" trap, which invariably destroys a strong batting average over time. It carries with it huge risk, usually accompanied by high cost.

2. Getting too clever. This is the "bells and whistles" trap, which can easily get out of control in an effort to outdo competitors. It carries with it the danger of complexity and customer alienation.

3. Solving problems frivolously. This is the "brainstorm" trap, which is misguided creativity far afield from company direction. It's a symptom of poorly defined work, and fraught with waste.

History has shown that sustainable business innovation isn't as much about throwing the Hail Mary pass as about running a solid ground game. Companies that have truly mastered innovation know that it can be "derisked" by making a number of small bets across a portfolio of ideas, rather than one big bet-the-farm gamble on a would-be killer app. To win consistently over the long haul takes strong disciplines and solid routines for solving problems and chasing opportunities.

But how do you know if you're heading in the right direction? One answer is to start with the little stuff that helps in the daily work, like Sakichi Toyoda did. Adopt his three principles, take them as your own, and make them yours. Because principles go a long way toward overcoming the temptations by offering the necessary guidance to the problem-solving effort.

THE ART OF INGENUITY

The pressure to innovate in a fiercely competitive marketplace falls on the individual: we're asked for higher commitment, more adaptability, quicker progress, better execution, stronger decision making, and freer thinking. At the same time, we're told to manage risk, meet short-term objectives, and only bet on sure things. All within the confines of environments that are often anything but free: powerful systems, rigid structures, conflicting agendas, privileged information, political posturing, and limiting rules.

The truth is that uncertainty, risk, and failure are all part of innovation, and the ability to meet business objectives doesn't always square with the personal capabilities needed to innovate as required. Solution: Work like an artist. Work like a scientist.

How? By exploiting your expertise; by pursuing possibility; courageously rejecting the status quo; viewing opposition as an inventive challenge; refusing to let bureaucracy and hierarchy stifle your creativity; using cutbacks and resource constraints to drive new ideas and methods. By pursuing the simple question that drives the kind of "new-school" thinking found at the heart of every breakthrough, big or small: Is there a better way?

THE PURSUIT OF PERFECTION

Let's drop the conventional distinction between "incremental" and "breakthrough" innovation. Perhaps valuable in theory, it simply isn't useful in any practical way.

While a handful of game-changing innovations can be traced to a stroke of genius, the vast majority of effective innovations in industry result from a rigorous search for the optimal solution. Furthermore, unexpected thunderbolt breakthroughs have little place in the strategic scheme of things, because they're very often one-offs or happy accidents, and not repeatable. You can't build a business on serendipity. It's romantic, but it's not predictable or reliable.

The systematic pursuit of perfection is. It's the discipline of increments, and just plain hard work. Like it or not, the pursuit of perfection is everyone's job. It can't be departmentalized or outsourced. It's not limited to the Product Design or the R&D group. That kind of thinking only works to contain human creativity and squelch the spirit of innovation.

Chasing perfection transforms today into tomorrow by creating new processes, products, and services. The beauty of organized improvement lies in its ability to consistently yield low-cost, low-risk, high-impact breakthroughs. It prepares you to capitalize on the bigger opportunities when they come, so you won't miss out. Ultimately, the small steps catalyze something altogether new and novel. Innovation isn't an either-or proposition forcing a choice between small steps and big leaps.

It's how to achieve big leaps through small steps.

THE RHYTHM OF FIT

What distinguishes great innovation is its ability to serve the great needs of society with a valuable, meaningful contribution. Simply put, a successful mousetrap needs a serious rodent infestation, and a delivery system that places the mousetrap in the hands of those who can make the most use and best sense of it in today's terms.

And that requires a keen insight into the prevailing systems surrounding your business. You can fight for your marvelously bright idea, but chances are you'll lose in the long run to a competitor who figures out how to either leverage the current system to make the idea work with what's out there now, or offers a new system to deliver the idea. Either way, it takes systems thinking, defined as the ability to think well through cause and effect. And that entails understanding context. Because there's a certain rhythm to great innovation.

A great innovation fits -- fits the innovator, fits the times, and fits within a larger system. A great innovation shapes the attitudes and behaviors of people. A great innovation, big or small, changes how people think and work. A great innovation allows others to see in it their own opportunity for a new and better life. A great innovation, like great leadership, aims to create change that matters.

Great innovation is elegant simplicity imbued with the power to move the world.

POINTS OF DEPARTURE

We face hundreds of problems and opportunities each day. We need some way to weed out the important ones, the right ones, the ones we should be working on -- because those are the ones that demand elegant solutions.

The three principles of ingenuity in craft, pursuit of perfection, and fit with society guide the pathway to elegant solutions. Treated as policy, they lend the proper framework for the practice of innovation. They let us know if we're doing the right work. They inform our efforts by providing a solid focus, so actions and decisions become clearer. They put us in a better position to adapt to the rapidly changing landscape. They promote personal responsibility by requiring us to think through the immediate issues and summon our best judgment. Adhered to religiously, they prevent ideas for ideas' sake.

They're the raison d'être at Toyota, and nonnegotiable. But you'd be hard-pressed to locate any significant innovation anywhere or by anyone that can't be traced to some combination of these cornerstones.

So it's worth a closer look at each.

REFLECTION

What role does innovation play in your organization?

What guides the innovation efforts?

What was the focus of your most successful innovation?

What were the conditions of your last innovation?

How widespread is the spirit of innovation?

Copyright © 2007 by Matthew E. May