Digital Innovation at Toyota

Motor North America:

Revamping the role of IT
Agenda:
• Problem
• Porter’s Forces
• Business Problems
• SWOT Analysis
• Value Chain Analysis
Problem
Customer wanted latest and greatest in-car technology
Customers wanted better online to in-person sales experience

Business Model

Product Physical Digital

Channel
Physical
Digital
Porter’s Forces
Customer expectations: Agile new
entrants
Demand for latest in-car
technology & experience
Existing competition: First
mover advantage for adopting Supplier
Adoption of
new Demand
technology for new
digital technology forces by features
incumbents
New entrants: Highly agile, no
burden of legacy infrastructure
Substitute
Inability to act will lead to forces

technological obsolescence
Business Problems
Unable to react to Rapid changes in
disruptive technologies customer expectations

IS in a
leadership
role in digital
innovation
Trigger point:
IS leadership
Unprecedented Unable to keep up handled the
vehicle recalls with problem situation
effectively
SWOT Analysis
1. Robust Supply chain 1. Bottom-up innovation approach
2. Customer base 2. Slow improvement process
3. Vehicle technology 3. Lack of digital innovation
S 4.
5.
Centralized IS team
Innovation mindset
4. Decentralized customer database
W
O 1. Digital economy
2. Emerging technology of
1.
2.
Agile new entrants
First mover advantage to rivals
T
autonomous driving, telematics 3. Changing customer expectations
3. ISMAC 4. Obsolescence of existing technology

• Using Strength and Opportunity to address the weakness

• Digital Opportunity + Strength => Mitigating Weakness
• ISMAC + Innovation Mindset => Digital Innovation and Agility
Governance & Proposed Solutions
DFM Methods IS Strategy- Leveraging
IS Strategy- the external
Standardization of innovation ideas
process

Digital Disruptions Digital Disruptions

Business Strategy – Business Strategy –

Enhancing customer Enhancing customer
experience and experience and
digital innovation digital innovation
Proposed Solutions
• Digital innovation to differentiate its products

• Leadership role of IS Division

• Strategic Open Innovation

• From physical channel to Digical channel

• Leverage ISMAC for engineering, services, marketing & service

excellence
Value Chain Analysis

( Use of ISMAC for digital

innovations)

Newer Seamless Use of IoT

approaches and Use of customer and apps to
greater sensors in experience provide
flexibility in cars for IoT ,digital marketing better
terms of vendor strategies, better driving
relationship dealer experience.
management
Use of ISMAC

• Analytics and Social Media – Development of a customer sentiment platform using social
media profiles identified through Endeca. Predicting driving patterns and map routes to avoid
traffic
• IoT – Introduction of Safety Connect (2009), Entune (2011), Sensors for Connected Vehicle
platform. Research partnership with MIT and Stanford
• Mobile – Emailing customers pictures of themselves with vehicles they’re interested in.
• Cloud – Use of Microsoft Cloud services and Amazon Web Services. Adoption of Workday.
Implications
1. Capability of top-down innovation
2. Agile, efficient IS division (SaaS)
Product Physical Digital
3. Digital DNA: Connect & Develop Channel

4. Data: Development to Marketing Physical

Digital
5. Embracement of ISMAC
6. Products captured Voice of Customer
7. Future Ready
Implementation

Technology

Standardization

Data

Process

People
Control
Fully Partially Decentralized
Centralized Centralized
Initial and final state comparison
Initial Final
Organizational Structure Centralized IS 4 IS divisions
Net Income Loss of US$4.448 b Profit of US$10.230 b
Customer Experience In-person dealership Digical
Role of IT Hybrid of Cost and Service Investment Centre
Centre
IT Technology adoption Rigid Agile
Marketing campaign Traditional Data driven
Company structure 3 divisions under TMA All 3 divisions combined
Vendor Relationships More flexibility and newer Traditional long-term
approach in their relationships with big
relationships with start-ups vendors
Key Takeaways
• Upgrade or perish

• Rapid pace of digital economy

• Effectiveness of Open-innovation

• Need of IS leadership even in non IT

industries
THANK YOU
Timelines & Milestones
Upto 2000
• Telematics’ industry debut (1996), 2013 2014
Toyota enters telematics (1999)
• Need for cultural changes to • Horizontal Integration
drive digital innovation realized
• Innovation Fair in TM EU
2006 • 80% of IS employees outsourced
• Toyota Motor Sales IS division
joins Telematics project 2015
2012
• TEMA is formed • Partnership with Stanford and
• Record high sales MIT for AI, Robotics and
• Innovation Fair debut
• R&D group formed to explore Autonomous Driving
disruptive tech • Senior Management moves to
2008 Plano offices
• Toyota becomes world’s largest 2011
automobile manufacturer 2016
• Debut of Entune
• CEO presents Innovation award
2009
2010
• Recall Crisis
• Formation of ARB
• First Operating Loss
• Telematics based Safety
Connect debuts
Initial and final state comparison

Forces Initial Final

Threat from existing High Risk Mitigated
competition

Threat from new entrants High Risk Mitigated (By becoming an agile
organization)

Threat Buyer’s Power High Risk mitigated since the primary

problem is solved

Threat from substitute Low Low

products

Threat from supplier’s power Low Low

 Company Structure

TMC
(Toyota Motor Corp.)

TMA
(Toyota Motor North America)

TEMA TFSC TMS

(Toyota Motor Engineering & (Toyota Financial Services (Toyota Motor Sales)
Manufacturing North America) Corporation)
Toyota
Pepsi America
WestJet

Schneider Electric
Technology

Standardization
Data

Process

People
Control
Fully Partially Decentralized
Centralized Centralized
Toyota