schneiderism

That is Soichiro Honda (1906-1991), the founder of Honda, above in an image from 1963 when Honda was still somewhat of a fledgling company, though already a powerful innovator. He is sitting on one of the many racing cars, this one for Formula 1, that Honda was developing at the time, and not because racing for Honda was a marketing exercise. At the time most of Honda’s attention had been focused on motorcycles, and it was in 1963 that Honda became the best selling motorcycle in the United States. Moving into automobiles was the next priority for the company, and only as an innovator. As Honda began building cars, so it also started racing them, just as it had been doing successfully with motorcycles (in 1966 Honda won the Constructors Championship and all five motorcycle Grand Prix classes). For Soichiro Honda, racing IS Honda, the ideal environment for Honda’s engineers, designers, and leaders to be challenged, to innovate and address situations, problems, and opportunities in a way that ultimately benefits the entire culture of the organization. This approach is not an ancillary element of Honda culture as Mr. Honda succeeded in making racing synonymous with the culture of Honda. He had been a successful racer himself, winning and setting longstanding speed records in the 1930’s, and understood intimately that the passion for winning in motorsports can translate into product innovation and market success. Previously, I had written about innovation at Honda and touched on the racing culture of the company. Just recently, though, I had cause to dig deeper into how Honda’s passion for racing has informed the entire company, and lead to innovations across the comprehensive product range that Honda offers.

Several automobile manufacturers benefit from comprehensive racing programs. Think about BMW, Porsche, Ferrari, and Toyota. For each of these companies, as with Honda, R&D happens on the racetrack, and the successes from the track quickly make their way to the road, to the customer. For Honda, though, there is something deeper with regards to racing and innovation, and this is due to the place that Soichiro Honda ensured that racing held in corporate culture. More than the engineering benefits of a successful racing effort, Honda has imbued its entire culture with a passion for innovation that found its inception on the racetrack, but now touches and informs the development of robotics, aircraft, marine engines, and a long list of other products. Honda doesn’t just race cars and motorcycles, they race everything. Or, perhaps, it is accurate to say that for Honda everything is a race. For people like me, who share similar passions (and I have never owned a Honda product), it is windows into the Honda culture of racing and innovation, like below, that continue to earn my admiration and respect:

Video found at UGG.

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