Toyota’s Approach to Innovation

Before good and useful ideas can be brought to market, companies need a way to generate novel and innovative ideas. Toyota’s chief innovations officer decided to create a company-wide innovation fair, inviting all employees to share their ideas for innovations that could be important to Toyota. Over the years, this innovation fair developed into many different models whereby new ideas could be explored and funded within the organization. Like Toyota, your company can be transformed through business design and strategy inspired by technology. 

Learn more with Jeanne Ross, Faculty Director in the Organizational Design for Digital Transformation online short course from the MIT Sloan School of Management.

Transcript

The real challenge is learning whether customers will actually pay for your good ideas. But you might be asking, “Wait a minute, where do these good ideas come from?” So let’s take a look at how companies have developed a set of good ideas of things that technology could do for them.

Let me start with the example of Toyota. Years ago, the CIO said, “You know, we’re good at incremental innovation, but I feel like we have innovative thinkers all over this company, and we’re not taking advantage of their ideas.”

So he encouraged everyone in his organization to imagine an innovation that could be important to Toyota. They could show anything they wanted; it would be kind of like a science fair. They would exhibit this on Innovation Fair Day. Now to generate excitement in the company, he called it a big event, the Technology Innovation Fair – everybody come. And to make sure people really showed up, he promised ice cream at the end of the Innovation Fair. 

What happened is a number of people found this a very exciting idea and did indeed display innovative ideas, and even more people thought it would be fun to go see what the possibilities were. And, in fact, they had so many people show up that as they all got to the ice cream room, it got way too crowded and hot, all the ice cream melted and that part of the Innovation Fair was, in fact, not a success. But the Innovation Fair itself was a rousing success. In fact, not only did they have some ideas that people with money wanted to fund – I’m talking about people within Toyota wanted to fund, and indeed they started to fund experiments that would test ideas – but, on top of that, people who are not in IT started saying, “Wait a minute. What about us? We have innovative ideas too.” So the Innovation Fair concept started to grow; it was an annual event, not just for IT, but for the entire organization. 

What grew out of that was more and more ideas that seemed worth testing. Initially, they only funded the winners. But then they realized there were actually a lot of good ideas out there. So they started to invest in more ways to identify and test ideas. They created a Shark Tank idea. A Shark Tank being the television program where innovators or entrepreneurs get up and say, “I have this really cool idea. Do you want to fund it?” And there would be people with budget, in Toyota, listening to these ideas, challenging them, and in some cases funding them. They also created a little venture fund, where the CIO could identify some good ideas worth testing. 

Understand, you do not want to start where Toyota is today, with multiple innovation labs doing many experiments and, as many as 600 people. You want to start like Toyota started, with an innovation fair that grows into more and more sharing of ideas, testing, experimenting and then you too will grow into a bigger model – perhaps like Toyota’s, perhaps quite different. 

The idea is to learn how to generate ideas, enrich those ideas, and test them with customers so you learn what it is they love.