Kaizen vs the Automotive Revolution. Which is Better? Continuous Improvement, or Disruption?
In a recent newsletter article in “The Electric,” written by Steve LeVine (part of The Information subscription), the challenges facing Tesla in scaling its business have come to the forefront, especially in comparison to China’s BYD. BYD is now selling EVs at a pace that surpasses Tesla. The company’s strategy is reminiscent of what Tesla pioneered in the automotive sector. However, BYD is now executing that strategy better than Tesla.
LeVine also suggested that legacy car companies need to “reconsider their assumptions” regarding their own business strategies given the rapid rise of both BYD and Tesla. This reminded me of what I wrote last year in TaaSMaster - the idea that “incrementalism is killing legacy automakers.” Today, however, my perspective on the detrimental effects of incrementalism is evolving.
The best auto company over the past 30 years is Toyota - the company that introduced the concept of continuous improvement to the automotive sector. Continuous improvement is essentially the same as incremental improvement, the Japanese term for which is, Kaizen. As a core business principle for Toyota, Kaizen is a key factor in the company’s success. While it’s undeniable that companies like Tesla and BYD are revolutionizing the market through aggressive scaling in EV production and sales, it’s crucial to acknowledge that EVs are central to their business models. This is not the case for an automaker like Toyota, which has been diversifying its portfolio, successfully marketing a mix of EVs, hybrids, and ICE vehicles globally.
Advocates urging Toyota to replicate the rapid EV transition exemplified by BYD or Tesla overlook the ingrained philosophy of Kaizen. This principle, emphasizing gradual but consistent progress, remains a cornerstone of Toyota’s strategy and is likely to continue steering the company towards sustained success in a dynamically evolving automotive landscape.
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