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What do Piano's, Amps, Golf Clubs and Outboard Marine Engines have in common?

At first glance, these products seem unrelated, but they highlight the incredible diversification and adaptability of companies like Yamaha and Toyota. These companies have not only survived, but have thrived over the decades by continuously re-evaluating and evolving their business strategies in response to market dynamics, economic changes, and shifting customer preferences. Their ability to successfully pivot and expand into new product lines and industries is a testament to their innovative and nimble business practices. Both businesses have grown and innovated in very different ways, Yamaha through expansion into adjacencies and Toyota through continuous innovation of its core. This article compares and contrasts both companies growth journeys through the lens of Growth Terrains. 



Maintaining relevance amongst evolving consumer preferences

Many of us will have attended innovation conferences and talks where a presenter flashes up a slide with the Forbes top 10 largest companies globally, and then, through a magical slide animation, transitions to the present-day list where most of the former top 10 have disappeared into oblivion, replaced by new businesses celebrated for their innovative and adaptive practices. The lesson we often walk away with is the impermanence of success and the need to maintain innovation and customer centricity to sustain and grow relevance in an ever-changing market. What does this mean for us? In a world where we must juggle the realities of a global economic crisis, rising costs, and a constantly evolving consumer landscape, it means that failing to stay current, can quickly render a business obsolete.


Well, in true elder millennial fashion I’m going to start with the meme that inspired this article:

 



Yamaha is a fascinating business founded in 1887 when its founder repaired a broken reed organ, which led to the company’s foray into piano production. In the 1950s, Yamaha expanded into motorcycle production, then marine outboard engines in the 1960s, and even into golf clubs in the 1980s. It is a business that has evolved and maintained relevance by continuously diversifying its product offerings. Yamaha is not the only Japanese company to have done so; Suzuki, Honda, Sony and Panasonic also have diverse business models. Perhaps some of this diversification is driven by the Japanese business philosophy of Keiretsu and not necessarily on their overt innovation strategy. While not an expert in Japanese corporate evolution, what I do know is that although each of these businesses feature in the Forbes 2000 list, none of them are in the top 10 or even 20. However, the largest Japanese company, and the mainstay on the Forbes top 10 list is Toyota. Unlike these other Japanese companies, Toyota has a model of repeatedly focusing on and expanding its core business.



You’d be foolish to think innovation doesn’t happen in the core business

Toyota is a business which has grown their core and relentlessly attacked adjacencies for 90 years. Many don’t realise that Toyota started off as a company which manufactured weaving looms, and they still do! However, it was Kiichiro Toyoda who convinced his family to pivot to automotive manufacturing. 


In 1920 Toyoda visited the United States and Europe where he saw more and more consumers purchasing and using cars. Encouraged by his observations he convinced his father to allow him to prototype a mass-market affordable car. Although initial success was had, it was not long lived. In the 1940s following WW2 Toyota was facing significant financial troubles and possible bankruptcy. 


Up until the late 1940s, Toyota had been following Ford’s method of mass production: producing large batches of inventory and creating standardised, repeatable tasks for staff with minimal opportunity to stop production to fix defects. Unlike Ford, Toyota could not benefit from economies of scale, and blindly following this technique was single-handedly destroying the company.


Toyoda had to rethink how he could gain efficiency and production effectiveness in a completely different way, and that way was ‘The Toyota Way’:

  • Just-in-time inventory production meant that parts would be made when needed so excess and waste was reduced

  • Employees would monitor parts on the production line through a Kanban system, prompting additional parts production only when needed. 

  • Toyota pioneered the Jidoka system of automation with a human touch, allowing machines to stop when a problem was detected.

  • Toyota created Kaizen empowering workers to identify continuous improvement opportunities and pioneer better ways to do things in every part of the business

  • Toyota Dojo was established so that employees could have space for immersive learning, reducing time-in-motion related inefficiencies. 


Many of the manufacturing techniques pioneered by Toyota, became cornerstones of mass production globally. These methods have now been applied beyond manufacturing across various industries and applications. While efficient manufacturing helped Toyota overcome its financial woes, many other companies adopted these practices as well, so it wasn’t a permanent solution for securing competitive advantage.


So, how has Toyota sustained its dominance and relevance without diversifying into pianos, motorbikes, and outboard engines like some of its competitors?


Let’s frame up our thinking using the Where and How dimensions of the Growth Map which is the natural starting point for many Growth Orienteering journeys.

 Looking through these dimensions we can see:


 Dimension 1 – Where to grow

  • We can derive growth from the Core business

  • We can unlock growth from Adjacent areas to the core business

  • We can explore completely New areas outside of the current focus


Dimension 2 – How to grow

  • We can Build it ourselves

  • We can Partner with others (think ‘colabs’ and building ‘ecosystems’)

  • We can Buy or invest in others (think ‘M&A’ or ‘corporate venturing’)


For example; Yamaha’s core business was Piano’s, then they Built-New in motorcycle engines. However, knowing that motorcycle engines share a very similar architecture to outboard boat engines we could argue that their later foray into the boating world is a Build-Adjacent.


For Honda; They recently inked a deal with Nissan to focus on electric and autonomous vehicles, an example of Partner-Adjacent


And perhaps the most diverse of the lot is Sony, who’s diversity reaches from consumer electronics, gaming, through to movie production and insurance. For Sony we would need to colour in the entire Growth Map! 


Toyota’s history in product development has been distinct. Taking this lens, let's examine how Toyota overcame early challenges to fortify its core products and segments while expanding its business. Toyota’s journey exemplifies how a company can innovate within its core business.


Here’s a brief snapshot of Toyota’s milestones:

 

  • 1922: Invented the automatic power loom

  • 1935: Created its AA passenger car, followed by the Crown passenger car (still made today)

  • 1951: First truck

  • 1955: First luxury car

  • 1960: Toyota Corolla (also still made today)

  • 1978: First pickup truck

  • 1982: Launched Lexus

  • 1997: Prius, the world’s first mass-produced hybrid car

  • 2001: Established Toyota Material Handling (acquiring BT industries)

  • 2015: Mirai, the world’s first mass-produced hydrogen car

  • 2017: Entered the boat market with Lexus-branded boats

 

This timeline highlights Toyota’s consistent focus on its core vehicle manufacturing while systematically entering new vehicle categories and adjacent markets. However, doubling or tripling down on its core business doesn’t mean Toyota is closed off to innovation or disruptive thinking. In fact, Toyota has relentlessly innovated not only in how it manufactures cars but also in the technology and types of vehicles it produces.


When Toyota launched the Prius, the world's first mass-produced hybrid vehicle, it initially faced lukewarm market reception. However, Toyota strategically incorporated consumer feedback for its second-generation model, launched in 2003. The company de-emphasised the hybrid nature and instead highlighted improved fuel efficiency and the car's distinctive styling. This approach transformed the Prius into a symbol of environmental consciousness, with 57% of buyers in 2007 citing that it "makes a statement about me" as their reason for purchase.


Simultaneously, Toyota expanded its hybrid drivetrain to popular models like the Camry, RAV4, and Corolla, bringing scale and broad appeal to the technology. This strategy not only helped Toyota meet and exceed emissions requirements but also established its leadership in the hybrid market. By 2023, Toyota's electrified vehicles, primarily hybrids, accounted for 36% of its total sales, with hybrid models representing over 60% of Toyota and Lexus sales in Europe for fiscal year 2023. Today, Toyota continues to lead in hybrid technology, offering hybrid variants across much of its popular model line up.


Looking at Toyota’s luxury brand Lexus, we see a strategic use of premiumisation through alternative branding to enhance margins and capture market share. For instance, the Toyota Land Cruiser, renowned globally for its off-road capabilities, shares a significant chassis and core build with the Lexus LX, the company's flagship SUV. The intriguing aspect emerges when comparing their pricing in Australia: the Land Cruiser ranges from $80,000 to $160,000, whereas the LX starts at $175,000 and can easily reach $245,000. This price disparity reflects differences in materials, standards, finishes and brand equity between the two models. Despite these variations, it underscores Toyota’s adeptness in leveraging customer insights to evolve core propositions across its brands and offerings.


These examples highlight Toyota’s unwavering commitment to driving business growth and innovation by continually refining its core strategies. Central to Toyota’s success is its adoption of Kaizen (Kai = Change, Zen = Good), which champions the philosophy that small, incremental improvements can yield significant long-term advancements. This approach empowers employees to actively participate in the innovation process and ingrains a culture of continuous improvement within the organisation. Innovation, as Toyota exemplifies, doesn’t solely derive from flashy new concepts or ambitious ventures; it thrives when nurtured from within the core operations with dedicated investment and attention.


As business leaders and innovators, it is crucial to embrace the lessons from Toyota’s journey. Re-evaluate your core strengths, encourage a culture of continuous improvement, and remain open to both incremental and transformative changes. By doing so, you can build a resilient and adaptable organisation ready to navigate the uncertainties of the future. Start today—identify one area where a small change could lead to significant improvement, and inspire your team to embark on a path of relentless innovation and growth.



 

Sources: Investopedia; What is Keiretsu? by Daniel Liberto. The Toyota Way by Jeffrey K. Liker.

 

Selin Lanzafame

A Strategist, Designer and Board Member, creating out of the box solutions for entrenched problems.

 

New perspectives on Growth and Innovation. Delivered every Full Moon.


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