Managing Innovation: Toyota’s Strategy

Point: Take a Systems Approach to Innovation

Story: I had the opportunity to ask Bill Reinert, national managerbillreinertphoto2 of advanced technology at Toyota Motor Corporation, how he manages innovation. His answer was multi-faceted, so I’ll describe his ideas over several blog posts. First, let’s look at the numerous innovations that Reinert and his team integrated into the Toyota Prius hybrid automobile. For the 2010 Prius, Toyota took a systems approach to innovation. That is, rather than simply changing one subsystem, the company redesigned many aspects of the car to achieve the end goal of fuel economy. The Prius isn’t just a regular Toyota car with the combustion engine swapped-out for a hybrid drive system.

To achieve the best possible fuel economy, the 2010 Prius has extensive aerodynamic features. The front, sides, top, back, and bottom are all designed to minimize drag-inducing air turbulence. The changes are much more than cosmetic. Reinert’s team replaced the rarely-seen rough underside of a normal car with smooth aerodynamic panels and two little winglets that reduce drag in the air that passes between the road and the car. Even the wheelhouse liner and shape of the wheels help reduce the drag. The result is that the Prius’ shape gives it a lower coefficient of drag than the “sleek-looking” sports cars on the road.

To reduce fuel-guzzling weight, the team made the battery an integral structural part of the car, not just a bolt-on box. Nothing escaped the team’s scrutiny. The team even improved the interface between the car and driver. The car now provides real-time feedback on fuel consumption and power system activity — something that hypermilers love. Specifically, the new 2010 Prius offers three performance modes in which it can be driven, each at the touch of a button. The car can be driven in EV-Mode (running off the battery alone for about 10 miles), Power Mode for snappy acceleration, and Eco Mode for fuel-sipping energy conservation. The different modes actually change how the car responds to the gas pedal: Eco Mode means that even a lead-footed driver gets better gas mileage. Finally, the new Prius has a solar-powered fan on its roof that cools the cabin temperature so that drivers don’t have to blast the air conditioning when first entering the car.

In all, Toyota created more than 1000 patents during the development of the Prius, resulting in an EPA estimated city/highway mpg rating of 50 in the city, 49 on the highway and a combined 50 mpg.


  • Think about the ultimate purpose of some proposed or available innovation (e.g., a hybrid powertrain can improve fuel economy)
  • Examine other design elements for opportunities to achieve that purpose (e.g., aerodynamic shape improves fuel economy)
  • Provide users with product features that help them achieve that purpose (e.g., add controls and displays that affect and monitor performance)
  • Integrate all the improvements together to mutually reinforce the ultimate purpose.

For more information: Bill Reinert at the Conference on World Affairs

3 Comments »Case study, How-to, Innovation, New Product Development, Strategy

3 Responses to “Managing Innovation: Toyota’s Strategy”

  1. Claire Walter Apr 9th 2009 at 08:49 pm 1

    This, as much as anything, explains why America’s Big 3 automakers are in the toilet. If anyone in R&D had expressed such thinking in the companies’ high-flying days, he would have been slapped down.

  2. Debbie Apr 11th 2009 at 08:54 am 2

    This goes to show how reducing expenditures in one area (by not covering the underside of a car with a panel) costs us and the environment in other ways. It’s a perfect example of how we need to change our accounting system to embrace the environmental price of a product.

  3. Bret Borders Apr 13th 2009 at 09:51 am 3

    I have read the reviews of the 2010 Prius and by all accounts it’s an amazingly innovative machine. I never really stopped to think about how people would have a systematic approach to innovation…. to me… it’s just a flash of creativity or something I write down in my notebook… but I can now understand how a major mechanical product manufacturer needs to be more organized than that!

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