schneiderism

I don’t care what business or what industry you are talking about, innovation matters big time. I get this, and my investigations into how you cultivate a culture of innovation is an ongoing theme on schneiderism. I find it really interesting that companies like Toyota (as well as BMW, Porsche, Audi, Tata, Nissan, VW, Mazda…) continue to receive coverage with regards to the success of the innovative internal cultures they have supported, and the measurable benefits of those cultures in terms of market success, while essentially the entire American automotive industry struggles to find itself, let alone perpetuate a culture of innovation, let alone even THINK about market success. Many, including myself, have looked closely at how Toyota’s long history of creating and supporting innovation wherever it sets up shop. In many ways, innovation defines Toyota. Recently, Fortune took a similar look at Honda and revealed another deeply innovative company culture. It also revealed the demonstrable benefits of that culture.

For Honda, innovation is equivalent to excellence, and excellence clearly pays. The article states that since 2002 Honda’s revenues have grown close to 40%, approaching $94.8 billion. Most interesting to me is that Honda’s U.S. market share has risen from 6.7% in 2000 to 9.6% in 2007. That is partly because of American manufacturers LOSING market share, but is also because Honda continues to provide smart, affordable and innovative products that people WANT. Badly. Honda, along with Toyota and BMW, are the only automobile companies to make it into Fortune’s list of the top 20 of the World’s Most Admired Companies. Apple is number one, by the way.

So, how does Honda make this happen? They let people experiment and explore. The culture encourages this. Leadership wants it. More specifically, they encourage their engineers, especially those who drive R&D, to be entrepreneurial in their pursuits. The kicker is that at Honda not only are employees typically paid less than at the competition, but their opportunities to move up in the organization are pretty limited. That’s because Honda is very, very flat as an organization… and it is this flatness that empowers people to experiment and to be entrepreneurial. To innovate. Employees tend to be incredibly loyal to Honda, as an added bonus, and this also is directly related to the flatness of the organization. That, and they magnify their passion by being around others who are so invested in experimenting, improving, and creating. Others that are passionate about innovating. There is even a surprisingly cool section on Honda’s corporate website dedicated to their focus on innovation, and the important results of that focus. Masaaki Kato, president and CEO of Honda R&D, offers his perspective on Honda’s innovation success:

“We want to look down the road. We do not want to be influenced by the business.”

Masaaki Kato, president and CEO of Honda Research and Development