5 Secrets to Toyota's Success

How the world's biggest automaker achieves "continuous improvement."

New Toyota Prius hybrid cars are displayed at City Toyota in San Francisco, Calif., April 23, 2008.
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Ford and Chevy dominated the market when Toyota, a virtually unknown importer, opened its first American car dealership in California in 1957. More than 50 years later, Toyota is now the world's biggest carmaker, earning top marks from experts and customers alike for quality and innovation. U.S. News asked David Magee, author of How Toyota Became # 1, to highlight some of the reasons for Toyota's success:

Long-term planning. Instead of responding to trends, fads, and quarterly numbers, Toyota looks far down the road and tries to develop products that will resonate for a long time. The best example is the Prius hybrid—which debuted eight years ago, when a gallon of gas in the United States cost a mere $1.50, and the average car buyer cared more about cup holders than gas mileage. The iconic hybrid, of course, turned out to be a breakthrough vehicle, and Toyota sold its 1 millionth Prius this month. With gas prices and fuel economy now a top concern, the Prius has helped Toyota take a commanding lead in hybrid technology.

Studious speediness. Suppliers sometimes complain that Toyota takes forever to make a decision. But that's usually because the company exhaustively researches all its options, then makes sure all the major stakeholders agree on a course of action. Once Toyota decides to build a car, however, the turbocharger kicks in: Toyota can move a product to market faster than almost all of its competitors.

An open mind. Toyota learned many of its early lessons from Americans, studying Ford Motor Co.'s production lines and the theories of management guru W. Edwards Deming. That helped Toyota gain a foothold in the United States, the world's biggest car market, even though the company was an outsider whose home market of Japan was vastly different. Decades later, Toyota still shows a knack for figuring out what customers want, sometimes predicting American tastes better than the Detroit automakers that supposedly have home-field advantage.

Obsession with waste. Toyota's "continuous improvement" ethos is legendary throughout industry, but Magee believes the real secret is a profound disdain for inefficiency—whether it's wasted time, excess material, or a scrap of trash on a factory floor. "At a lot of companies, if something's going well and it's profitable, they'll move on to something else," Magee says. "But if Toyota can attach a hood in eight minutes, they'll find a way to whittle that down to four minutes, then two minutes, then who knows..."

Humility. Quick, name a famous Toyota executive. Can't? Well, here's why: Toyota's company culture emphasizes teamwork over individual stars. "Toyota executives don't see themselves as bigger than the company or the customer or the product," Magee says. "It's the most humble company I've been in." At Toyota factories, the plant manager doesn't even get a reserved parking space, a perk that is practically universal among manufacturing companies.

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  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.