Group At Docusign

Toyota in Silicon Valley: Lessons in Supply Chain and Corporate Innovation

When executives from Toyota Material Handling joined us for a custom tour of Silicon Valley focused on corporate innovation and startups working with the latest technologies, we did our best to take them deep into the tech hub. It was certainly uncharted territory for many of them and while there were a few turbulent moments along the way, their reactions told us it was a journey they were glad to have made.

The three-day tour we designed for the company was months in the planning so if the executives felt a little overwhelmed at times that meant they were learning, which was exactly the point.

Not that there was anything atypical about such lengthy preparations. As with all our tours we engaged Toyota in a thorough consultation process in order to zoom in on the major “pain points” of its business. Then we built a program to provide introductions to the kind of high-technology solutions Silicon Valley is famous for.

This particular trip was for Toyota Material Handling (TMH), a division of the company entirely separate from – though not unrelated to – the Japanese manufacturer’s more well-known carmaking business. Where the latter builds the Prius’, Corollas and Camrys which have become staples of world motoring, the former is concerned with the manufacture and supply of the forklifts and pallet trucks which help get the parts for those vehicles to the production line.  

For us at Silicon Valley Innovation Center (SVIC) that meant putting together a tour program with an emphasis on finding novel solutions to the typical problems faced by enterprises in the manufacturing sector, namely, cost and time inefficiencies in areas like warehousing and supply chain.

Answers, we knew, would come from technologies like internet of things and blockchain. But apart from visiting companies breaking new ground in these areas we also made sure to mix in sessions on corporate innovation at Google, Amazon and Microsoft. After all, getting access to new technology is the relatively easy part. Actually knowing how to get an organization to embrace that technology and get the most out of it is where the real work begins.

But that, among other things, is what Silicon Valley tech firms are for; to act as the forward guard for other companies to follow along the path toward the new and unknown. They fail, so the rest of us don’t have to.

And so, with the schedule finalized and the hotel rooms booked, the Toyota Material Handling team touched down in Silicon Valley.

We had just 72 hours to take them as deep as we could into the world of disruptive innovation.

Internet of Things

The technology which today presents the most threats and opportunities to a manufacturer like Toyota Material Handling is Internet of Things, or IoT.  We dedicated a large part of the Japanese enterprise’s time in Silicon Valley to meetings with companies currently using the technology in their operations, knowing that this would be of especial interest.

One of the biggest and most advanced users of IoT anywhere in the world today is contract manufacturer Jabil. Touring its production facilities, the Toyota team saw something they could emulate: sensors and data collectors on everything from pallets to machines and a huge control room to go with them where all the collected information is processed. The practical application of all this technology use was made clear through the huge gains in efficiency it has generated for Jabil throughout the manufacturing process.

At Verizon, meanwhile, the emphasis was placed on a parallel aspect of the IoT revolution with a focus on connectivity and 5G mobile broadband. The communications company opened Toyota’s eyes to the huge realm of possibilities 5G will open for IoT and the changes this could bring in everything from supply chain to smart cities. What’s more, the Toyota execs learned how Verizon stays abreast of the latest technology developments by actively buying up and partnering with a range of startups.

That knowledge on the startup scene in the IoT space was expanded further with a visit to Wearable World, an IoT accelerator. CEO Redg Snodgrass laid out the current state of the industry, with angel investor Karim Nurani then giving a presentation detailing for Toyota Material Handling how the company might make the most of IoT’s potential through investment in startups.

Those learnings came to the fore on day three of the tour during a startup showcase, when Toyota met several early stage companies. Roambee, which offers real-time location and condition monitoring for shipments, further deepened the forklift manufacturer’s understanding of IoT’s capabilities.

Corporate Innovation

After IoT, corporate innovation was the next biggest area of exploration for Toyota Material Handling. On this front there is no better place to be than Silicon Valley, where the idea of “disruption” is built-in to most companies’ DNA.

Presentations at Google, Microsoft and Amazon taught Toyota that with the right strategy, even a big organization such as itself can innovate. The three tech giants all touched upon a similar theme: when it comes to not just staying current but even getting ahead of the curve, it is imperative to make a large number of small bets. In fact, as Toyota found out, Amazon, directly or indirectly, has a stake in some 80,000 early-stage companies. For the Toyota executives is was a real revelation; never had they expected “corporate innovation” to require such an active and far-reaching approach.

Further lessons were learned on day three with a trip to non-profit research group Institute of the Future. The presentation here made a strong impact, as Director of Business Development Sean Ness challenged the Toyota team to think about how their positions as executives in the twenty-first century need to evolve in order to stay relevant in a changing business environment. Ness emphasized the need to be less hierarchical and more in touch with the consumer experience. This reinforced a message which Toyota had heard earlier at Amazon, where they found out that founder Jeff Bezos spends at least one day a month working in the company’s call center.

Sharing Economy and Blockchain

With IoT and corporate innovation occupying the majority of the space on Toyota’s agenda, we just had time to squeeze in a few more sectors. Naturally enough, car usage in the sharing economy was an area of interest for the Japanese manufacturer.

To that end we visited Turo, operator of a peer-to-peer carsharing marketplace. Founder and Harvard Business School MBA Shelby Clark opened up to Toyota on what his reasons were for launching the company, in the process providing much-needed insight into the motivation of entrepreneurs and the difficulties they can face when regulatory frameworks don’t keep pace with technology. As Shelby recalled, the color of innovation is often “grey” because new markets are being created about which little is known and even less is clear from existing legal structures.

We also found time to study the world of blockchain and specifically its use cases in combination with IoT to improve supply chain efficiency. This helped the Toyota team crystallize their thinking on what blockchain truly is and could be, apart from just a buzzword they were hearing more and more often.  Max Fang, a lecturer from the research group Blockchain at Berkley, shared insights from the blockchain world, including that there are currently around 100 startups operating in the blockchain-IoT space focused on coming up with innovative solutions to the kinds of problems faced by a manufacturer like Toyota Material Handling.

Many Innovations to Come

At the end of their three days, the feedback we heard from the Toyota team told us they felt their trip to Silicon Valley had been worthwhile. As the company had stressed to us in the months leading up to their arrival, one of the reasons they wanted to visit the tech hub was to get ideas on how they could rewire their own internal strategies. In that the sense the tour provided plenty of inspiration, not least from the big companies like Google, Microsoft and Amazon, all of which proved that innovation is possible even when operating as a global corporation.

At the other end of the scale Toyota saw how tiny companies, sometimes as small as just a team of developers, can make a big impact and really disrupt the status quo. Connecting these dots together, the executives realized how their own approach to innovation as a big company would require a more active approach to partnering and investing with startups.

From the point of view of SVIC we considered the tour a success too. When the Toyota team told us how they felt alternately awed and overwhelmed by all the new insights and impressions they were being exposed to, we knew we had done our job well.  For a year we had working closely with the Japanese manufacturer to make sure everything about the trip was just right, so when we saw how the Toyota team arrived ready to learn and left feeling inspired, we too went away happy. 1-650-274-0214