Submitted by: GROUP 5

Soumya Barman (348)

Sourabh Kumar (349)
Ravi Teja (310)
Arjit Gupta (307)
Ajit Maharana (303)

Motivating the members:

Shared purpose: Toyota created the shared network identity by developing network-level knowledge acquisition, storage

and diffusion processes by promoting the philosophy of Kyoson Kyoei

In 1989, Toyota initiated knowledge sharing in the supplier network which was virtually non-existent, by establishing
the supplier association(kyohokai). By 1996 Toyotas Kyohokai had three purposes: 1) information exchange between
members, 2) mutual development and training among members and 3) socializing members. To achieve associations
objectives Toyota created three separate regional association to keep suppliers in close geographical proximity.
Operations Management Consulting Division(OMCD) and Toyota Suppliers Support Centre (TSSC) was established in

mid 1960s and 1992 respectively to provide free of cost, direct on-site assistance to suppliers by sending a consulting
team to the suppliers for a given period of time.
Tacit knowledge was acquired through Jishukenkyu-kai (Japan) and PDA (USA) core groups which were formed

based on geographic proximity, competition and experience with Toyota where each supplier acted as consultant in
four phases i.e. 1) preliminary inspection, 2) diagnosis and experimentation, 3) presentation,4) evaluation. This
helped in improving productivity and quality.
Interfirm employee transfers: Toyotas employees were transferred temporarily or permanently to the suppliers to

share the technical knowledge as well as the knowledge of Toyotas personnel, systems and technology.
Knowledge protection: Toyota established some rules to prevent members from both 1) protecting and hiding valuable

knowledge and 2) free riding. Toyota eliminated the concept of proprietary knowledge within certain knowledge domains.
To remove free riding Toyota had made it a rule that suppliers visiting Toyota facilities should open their plants for the other
members of the association as well.
Maximizing the efficiency: Toyota established bilateral and multilateral processes each designed to facilitate the sharing

of both explicit and tacit knowledge within the network. Sub-networks were formed within the full networks which helped
to develop embedded ties with other members that had relevant knowledge both tacit and explicit.
Toyota heavily subsidized the network in two forms, 1) financial and 2) valuable knowledge.

Advantages of Toyotas approach:

Toyotas network has solved three fundamental dilemmas with regard to knowledge sharing by finding ways to: 1) motivate

members to participate and share knowledge, 2) prevent members from free riding, and 3) efficiently transfer both explicit
and tacit knowledge.
These dilemmas were solved with the evolution of sharing network in three phases: 1) Developing weak ties, 2) Developing

strong ties with Toyota, and 3) Developing strong ties among suppliers
Bluegrass Automotive Manufacturers Association (BAMA) became the catalyst for creating weak ties that built

relationships among suppliers at senior level and created a comfort zone. This also led to calling each other for
information or even visiting of each others plants.
Suppliers felt indebted towards Toyota and viewed them as special customers as the suppliers believed that Toyota

sincerely wanted to help them in implementing Toyota Production System (TPS) concepts in a new plant.
A highly interconnected, strong tie network is well suited for the exploitation of existing knowledge than the

exploration of new knowledge.

Suppliers started feeling committed to helping each other as they knew each other well enough due to participation in

the PDA core groups. Informal ties led to helpful visits to each others plants to learn about different processes and
systems like Kanban systems in Tower.
Suppliers awareness quotient grew higher as they were able to know if the rent-creating potential of their past

productivity improvements were declining fast or not.

Suppliers know that they are in a learning race with other Toyota supplier(s) that produce similar parts and hence they

need to be the fastest learning suppliers to be able to get the business for new models.

Potential pit-falls of Toyotas approach:

There is a eminent risk of that there will be a eventual diminishing in the diversity of knowledge that exists in a network. As

companies belong to a similar group, it is generally believed that firms will eventually become alike through imitation
leaving the network less effective due to the stagnation and lack of generation of new ideas and new knowledge.
There is a possibility that the network becomes very inwardly focused that it becomes very difficult for it to adapt to and

aptly respond to major technological and intellectual innovations that occur in the firms with similar or different domain
outside the network. In a many a ways it seems convincing that the present highly interconnected network structure seems
a tailor made for diffusion of existing knowledge rather than investing on generating new knowledge in a very fast growing
and technologically dynamic industry.
Toyotas approach is a in many cases is culture dependant, very time consuming and demands tremendous commitment to

implement. The implementation requires tremendous commitment and in most of the cases it requires complete
organizational and cultural shift. Every organization has its own working culture. Understanding culture is vital in
understanding organisations. Without knowing what an organisations culture is, one cannot get to its heart and bring a
radical change.

Toyotas remedy to the issues:

Knowledge diversity is the main driving force behind the Toyotas approach for knowledge sharing network and in order to

maintain the knowledge diversity, it has initiated several mechanisms like rotating jishuken membership, updating itself
with the industry best practices and it even the interactions between firms also generates new applications of the new
ideas if not generation of new ideas and knowledge.
Toyota provides assistance to companies and suppliers through its consultants who provide valuable inputs into bringing

up the structure for knowledge sharing. These projects being resource intensive and time consuming, in many a cases
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the consultant needed to be at suppliers plant for more than a year.

Feasibility of Toyotas approach:

Toyotas approach is not feasible for all the companies as the know-how transfers with regard to Toyota production system

are found to be extremely difficult and time consuming because the knowledge is mostly tacit.
The implementation requires tremendous commitment and in most of the cases it requires complete organizational and

cultural shift. Every organization has its own working culture. Understanding culture is vital in understanding organisations.
Without knowing what an organisations culture is, one cannot get to its heart and bring a radical change.
The problem with most of the companies adopting the Toyota Production System is that they try to adopt a piece-meal

approach, which gives them sub-optimal results. The implementation of TPS requires the use of the bottoms-up approach,
where employees are free to identify and implement processes to improve processes, resulting in more streamlined steps
and greater quality. This is different from the top-down bureaucracy that is still pervasive in large organizations.
There are plenty of literature on how other companies often struggle to put this into practice, due to a lack of trust and true

two-way communication.
Lack of intrinsic knowledge of the processes in front-line workers can lead to incompetency in improvement making and

their inabilities to change their habits according to the organizational needs. On another level, their managers struggle to
have knowledge of the process as they fail to go down to the floor to observe work, and problems by themselves.
Two often ignored reasons for why this approach works in Toyota are that:

1) The presence of guaranteed employment in Toyota

2) The ability to make mistakes.
Companies like General Motors, First Automobile Works (a state-owned large-sized enterprise) failed to successfully

implement the Toyota Production System due to their inability to internalize new business rules into an existing conceptual
schema and then to effect process changes.
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