Last year, Toyota Motor Corp. posted profits that exceeded the combined earnings of its three largest competitors. In today’s world of hypercompetition, how did Toyota accomplish this? In searching for the answer, many business gurus and researchers have overlooked — or have not fully understood — the importance of knowledge-sharing networks. Certainly, knowledge management has become a hot topic. But how exactly do firms learn, and why do some companies learn faster than others? Furthermore, does learning go beyond the boundaries of the organization?
Many companies keep their suppliers and partners at arm’s length, zealously guarding their internal knowledge. In sharp contrast, Toyota embraces its suppliers and encourages knowledge sharing with them by establishing networks that facilitate the exchange of information. By doing so, Toyota has helped those companies retool and fine-tune their operations, and the results have been stunning: 14% higher output per worker, 25% lower inventories and 50% fewer defects compared with their operations that supply Toyota’s rivals. Such improvements have provided Toyota with a significant competitive advantage, enabling the company to charge substantial price premiums for the enhanced quality of its products. As Koichiro Noguchi, a Toyota director and former purchasing head, puts it, “Our suppliers are critical to our success. We must help them to be the best.”
Toyota is not alone. More and more, companies are recognizing the competitive advantage that... To read the complete article, login or sign-up using the form below.
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