Friday, June 25, 2004

Innovation, Adaptation, and Recovery: Part 1

Duncan Watts covers a lot of ground in his book Six Degrees, including bits of graph theory, computer science, physics, sociology, and epidemiology just for starters. Today I want to mention one section of his book that is particularly relevant to business and organizational effectiveness.

The Toyota-Aisin Crisis

Although it appears to be one large company, Toyota actually consists of many small companies knit together in a tight but informal collective. These separate companies rely on each other to bring together all that is required to build the cars and trucks of Toyota, and they do so without a central authority telling each one of them what to do.

For those of us raised to think of big companies as monolithic hierarchicies, the mere existence of Toyota is an eye-opener. Toyota demonstrates (very successfully!) that there are more ways to organize a business than the command and control pyramid of the traditional org chart.

For others more attuned to business trends, challenging the reign of the corporate hierarchy is old news by now. Pyramids have been flattened and command chains diversified far and wide, as corporate standards of responsiveness rise ever higher.

Toyota is a particularly valuable case study not only because of its non-heirarchical structure, but also because it faced a much more severe challenge to its responsiveness than most companies have ever experienced. One of the companies in the Toyota group lost its manufacturing plant to a fire. The company, Aisin, was reponsible for making a particular piece required in all Toyota vehicles. For Aisin to rebuild its manufacturing capacity would take months, but for Toyota to wait that long was completely out of the question. The entire Toyota production would shut down in just a few days without an alternative to Aisin.

Remarkably, Toyota recovered. Within three days, the collective companies of Toyota had arranged alternative means to produce the required part. Even more remarkable was how the recovery happened. With no one in charge and no contingency plan, Toyota employees relied on what they did have -- longstanding relationships across a complex network of different companies. As soon as news of the catastrophe hit, each employee took action as best he or she knew, and from those efforts across that network emerged a plan to keep Toyota in business.

How did these people know what to do? Simply put, they just did the same thing they'd always been doing. These employees regularly faced the challenges of negotiating roles and responsibilities while simultaneously solving complex problems. The Aisin fire was a more urgent problem than normal, but one that called on exactly the same skills and resources as developing a new car. This catastrophe was almost business as usual.

Next time I'll continue this thread and discuss Watts' analysis of the relationship of innovation, adaptation, and recovery.

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