Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer

2.4. Resource Base

Constant change in any organization is time consuming and expensive. This is difficult to manage, especially in a mature industry where standardization and scale are the key drivers of profitability. By definition, a mature industry is one that has stable earnings yet low potential for growth, and the auto industry, with a compounded annual growth rate of just 3 percent from 1999 to 2006, is a typical example. Yet Toyota does not view the auto business as mature and doesn't hesitate to spend without restraint on endeavors deemed critical by top management toward enhancing company growth. This brings us to the issue of resources, both capital and human, and how they can catalyze or amplify the effects of the expansive and integrative forces on Toyota (Figure 2.3). The resource base is crucial to influencing the forces for optimal interaction.

Toyota keeps a significant amount of disposable capital. Its research and development spending grew from $4.4 billion in 2000 to $6.9 billion in 2006, outpacing growth in research spending for the entire industry during the same period by a factor of two. However, while available resources are important, equally critical is how they are allocated to achieve the goal. All companies facing a shortage of resources will carefully and creatively allocate them to maximize returns. The danger lies in an overabundance of resources. Then "careful" falls to the wayside and "creative" allocation dominates the picture. In this respect, ...