The Drucker difference and Toyota’s success
By Ira Jackson, the dean of the Peter F. Drucker Graduate School of Management, the business school of the Claremont Colleges.

It happened in early 2007.
Toyota outpaced General Motors and became the largest automaker in the United States. More Toyotas are sold in this country than any other type of car. It was an extraordinary feat.
And then, soon after this great milestone, Toyota went through a rough patch with the loss of key U.S. executives, problems with quality and calls from environmentalists for a greater commitment to ending global warming.
These may well be growing pains.
After all, the lean Toyota Production System (TPS) is still the envy of the business world and emulated by hospitals and postal systems as well as by other major auto companies. Toyota today is now worth more than such global powerhouses as Wal-Mart and Procter and Gamble. From humble origins, Toyota now has a market value that exceeds the worth of all the other major auto companies combined.
Toyota is still on track to open three new plants next year in order to secure 15 percent of the worldwide auto market by 2010.
The Wall Street Journal has also reported that Toyota is cutting back the production of the Scion, a brand leader aimed toward the youth market, as a way to keep the brand unique. Why? Because part of Toyota’s success is that it recognizes the value of brand.
Even with its growing pains, Toyota offers us an insight into how to be successful in new ways. Rick Wartzman, the director of The Drucker Institute, the research arm and think-tank affiliate of the Drucker School, wrote in Business Week last year that Peter Drucker’s ideas had a great influence on the development of Toyota.
As Rick wrote, “As much as any company anywhere, Toyota Motor eagerly embraced many of the key principles that Peter Drucker first laid out in the 1940s and ‘50s: that corporations must move away from a “command and control” structure and cultivate a true spirit of teamwork at all levels; that line workers must adopt a managerial outlook and take responsibility for the quality of what they produce; that the enterprise must be steered by a clear set of objectives while giving each employee the autonomy to decide how to reach those results.”
American companies found many of Drucker’s ideas radical, even outlandish. Well, in the end, his ideas worked because, as he often said, while others were interested in the behavior of commodities, he was interested in the behavior of people. That difference makes all the difference. In fact, I call it the “Drucker Difference.”
A new book on Toyota by three highly respected Japanese business professors, Hirotake Takeuchi, Emi Osono and Norihiko Shimizu, will be out soon: “Extreme Toyota: Radical Contradictions That Drive Success at the World’s Best Manufacturer.”
After studying Toyota for six years they came to the conclusion that the company’s success is based on its contradictions and that, yes, as Drucker realized, it’s about people or as the authors call it, the “soft” innovation that creates a corporate culture.
Interestingly, the authors were inspired by professor Jiro Nonaka, who was the first Drucker scholar in residence here at the Drucker School last fall. Nonaka is an expert on what he calls “phronetic leadership” - a style that combines the skill of a craftsman with the insight of wisdom - a style that is frequently found in Drucker-like companies such as Toyota and Honda and P&G, but which is solely lacking in so many other firms that seem to be driven primarily by financial wizards and merger and acquisition experts.
As the authors write in the June issue of the Harvard Business Review in a preview of their forthcoming book, “Toyota views employees not just as pairs of hands but as knowledge workers (the term that Drucker coined in 1959) who accumulate chie - the wisdom of experience - on the company front lines.”
Because of this core belief in the power of people, Toyota invests in people. And at the same time, the company has come to realize that when people grapple with opposing views - as in the famous saying that an intelligent person has the ability to hold two opposing ideas at the same time - they arrive at useful solutions.
This culture of contradictions that is intentionally fostered by Toyota has allowed it to move ahead of its competitors. The authors go into great depth about how this culture leads to manufacturing and marketing success.
But we can boil it down to three steps that any company or organization needs to take in order to learn from Toyota’s success:
• Embrace contradictions as a way of life. Sticking to old practices can lead to rigidity. Be fluid.
• Develop routines to resolve contradictions. As the authors note, “Unless companies teach employees how to deal with problems rigorously and systematically, they won’t be able to harness the power of contradictions.” Toyota has a number of tools including the well-known ask-why-five-times practice and the Plan-Do-Check-Act model.
• Encourage employees to voice their opinions even if they are contrary. The people in top management must be open to hearing critical comments from employees and listening to opposing views if they want to engender new ideas and new ways of doing things.
All of this is instructive not only for other companies but also for us as a nation. In fact, the sheer technical prowess of Toyota, its bold, even audacious corporate objectives, and its investment in transformational technologies, remind me of NASA and President Kennedy’s commitment to land a man on the moon by the end of the 1960s.
It’s time for us as a nation and as business and civic leaders to think boldly once again and reach for new frontiers by tapping our technological strengths, the human creativity of our knowledge workers, and the elevating spirit of caring about something beyond just profits.
The point is that success doesn’t come down to one thing or one great practice. It’s about creating a culture. As the authors note, that takes time plus resources, and it’s hard work.
Placing people first rather than machines first creates imperfections, but Toyota’s model, which took so much from Peter Drucker’s vision of human-oriented management, is about human creativity.
And that is the road to success in the world of 21st century organizations.