Hybrid technology and expanding opportunity at Toyota

Posted: Sep 15, 2003 12:00 AM

A lot of people believe economic growth comes at the expense of the environment. Quite the contrary, the economic growth imperative drives investment in technology, which continuously improves our products and protects the environment. Critics of free markets, both those who oppose markets for ideological reasons and those who simply do not comprehend how markets work, frequently assert that without the "benevolent" guiding hand of government, firms will maximize their profits at the expense of the public welfare. The fact is, markets are the best discoverers of the public interest, and it is through the operation of free markets that self-interested individuals and profit-maximizing firms serve the public interest.

In the spirit of full disclosure and truth in advertising, I serve on Toyota's Diversity Advisory Board. From that vantage point, I can attest that from its very inception, Toyota has understood that automobile consumers are not atomized individuals adrift on the world's highways but rather people who live within a complex social and political matrix that helps define their preferences. Therefore, while Toyota has a passion for technological excellence and economy in the motor vehicles it manufactures, it also has a profound understanding that a firm's ability to adapt to the cultures and customs of local markets ultimately determines its commercial success.

Toyota recognizes that a continuously growing auto market creates new challenges and opportunities for the auto industry. As Toyota Chairman Hiroshi Okuda recently told the U.S. Chamber of Commerce, "Protecting the environment, improving safety and applying information technology are the three avenues of innovation we must travel in order to keep up with change and seize the opportunities it presents." Far from having to be bludgeoned into meeting these challenges by government, market forces are compelling a "fiercely competitive" (Okuda's words) Toyota to step up to them on its own.

Two examples illustrate this fact. In 1997, Toyota launched the world's first mass-produced hybrid vehicle, its gas-electric Prius. This year, Toyota introduced its second-generation Prius, which extends the frontier on hybrid vehicles. When I visited Toyota City in Nagoya, Japan, in mid-April, I drove one, and believe me, the Prius is for real. The new Prius will achieve 55 miles per gallon and accelerate faster than its predecessor. By the beginning of 2005, Toyota will debut a new Hybrid Synergy Drive SUV, introducing a powerful sport-utility vehicle that achieves outstanding fuel efficiency while emitting fewer pollutants. In about two years, Toyota will introduce its hybrid-powered Lexus RX 330 sport utility vehicle that will offer the power and torque of a V8, the mileage of a compact car and fewer emissions than any standard SUV.

Right now, Toyota claims 90 percent of the hybrid vehicle market worldwide because this kind of technological innovation is part and parcel of Toyota's deeply ingrained culture of "continuous improvement." Okuda hit the nail on the head when he said, "Without technical innovations related to the environment, safety and the application of information technology, it will be impossible to sustain the growth of the market and of our industry." This is no starry-eyed, radical environmentalist talking; these are the words of a steely eyed, fiercely competitive capitalist.

Toyota also illustrates the way affirmative opportunity programs strengthen the corporation. When I was asked to serve on Toyota's board, along with six other prominent and experienced outsiders - what Toyota likes to call its "outside eyes" - including our very able chair, former Clinton Labor Secretary Alexis Herman, I was glad to accept the offer because the program was not a quota scheme but rather a sincere attempt to open opportunities within the Toyota family for African-Americans, Latinos, Hispanics and Asians. Not only was the program the right thing to do morally, it also made good business sense.

For example, when we reviewed the corporate advertising strategy, we discovered that a lack of African-Americans and Asians participating in Toyota's advertising campaigns was limiting the firm's penetration into these markets. Toyota has now begun to remedy this problem by hiring two new minority advertising firms to target African-American and Asian audiences. More diversity translates into more sales and more opportunity for minority individuals.

Part of my strategy as a member of the Diversity Board is to harness this culture of continuous improvement to create continuous growth of opportunity for minorities. That's why I believe that the goal of expanding diversity within the Toyota family must extend all the way down to all of Toyota's suppliers, distributors and other subcontractors, just as we require that our goal of manufacturing excellence filter all the way down the supply chain. When this approach is implemented, Toyota's suppliers, distributors and subcontractors all will discover, just as corporate headquarters discovered with advertising, that expanded opportunity for minorities means larger markets and more loyal customers.