Engineering Management

 Describe in detail the 4 functions of engineering management  and explain how Toyota is able to incorporate these functions while integrating product development 

Another Look at How Toyota
Integrates Product Development

by Durward K. Sobek, II, Jeffrey K. Liker, and

Allen C. Ward

Harvard Business Review Reprint 98409

For the exclusive use of R. Nigaglioni, 2018.

This document is authorized for use only by Rolando Nigaglioni in 2018.

2 P H OTO S BY M org a n S e g a l

hallenged by world-class
competitors, manufacturing

companies in the United States have
undergone a renaissance in the last
decade. The renaissance started on
the shop floor with an emphasis on
built-in quality, the elimination of
waste, and faster throughputs. But
attention quickly turned upstream
to product development, where Japa-
nese companies were outperforming

U.S. competitors on nearly every
measure: speed to market, design
quality, product-design manufac-
turability, cost, and productivity.
Observers concluded that the key to
Japanese success, and U.S. industry’s
weakness, was integration – both
between product design and manu-
facturing-process design, and with
marketing, purchasing, finance, and
other business functions.

I D E A S AT W O R K

The company that’s famous

for integration also excels

at building functional

expertise.

Another
Look at How

Toyota
Integrates

Product Development
by Durward K. Sobek, II,

Jeffrey K. Liker, and

Allen C. Ward

C

Durward K. Sobek, II, is an assistant professor of mechanical and industrial
engineering at Montana State University in Bozeman. Jeffrey K. Liker is an
associate professor of industrial and operations engineering at the University
of Michigan in Ann Arbor. Allen C. Ward is an adjunct researcher at the Uni-
versity of Michigan and the president of Ward Synthesis, an engineering con-
sulting company in Ann Arbor.

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

Copyright © 1998 by the President and Fellows of Harvard College. All rights reserved. 3

I D E A S AT W O R K

A great many companies attacked
the issue head on. Typical solutions
were such product-development
tools as quality function deploy-
ment and Taguchi methods. Compa-
nies also introduced organizational
solutions; those solutions ranged
from keeping the basic functional
organization intact and assigning
people to temporary project teams to
disbanding the functional organiza-
tion altogether in favor of organizing
around products, as Chrysler did in
the early 1990s. (Here we use the term
function broadly to mean the vari-
ous groups of specialized expertise
required to make new models work –
including the engineering special-

ties within the design process, such
as electrical, body, or test engineer-
ing, as well as other business func-
tions, such as manufacturing and
marketing.)

The new solutions have brought
substantial improvements to the
companies and dramatic results in
the marketplace. But they have
also created problems of their own.
Cross-functional coordination has
improved, but at the cost of depth of
knowledge within functions, be-
cause people are spending less time
within their functions. Organiza-
tional learning across projects has
also dropped as people rotate rapidly
through positions. Standardization

across products has suffered because
product teams have become auton-
omous. In organizations that combine
functional and project-based struc-
tures, engineers are often torn be-
tween the orders of their functional
bosses on the one hand and the de-
mands of project leaders on the other.
As these new problems take their
toll, U.S. companies are beginning
to see the effectiveness of their prod-
uct-development systems plateau.
More important, that effectiveness
seems to have leveled off far short of
the best Japanese companies.

This article explores how one of
those companies, Toyota, manages
its vehicle-development process. We

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

studied Toyota’s process for five
years through in-depth interviews at
all levels of management. Interest-
ingly, we found that in many ways
the company does not resemble
what is often considered the model
of Japanese product development – it
has maintained a functionally based
organization while achieving its im-
pressive degree of integration, and
many of its practices are actually
similar to those that U.S. companies
employed during their manufactur-
ing prime earlier in this century.

We can group Toyota’s managerial
practices into six organizational
mechanisms. Three of them are pri-
marily social processes: mutual ad-
justment, close supervision, and in-
tegrative leadership from product
heads. The other three are forms of
standardization: standard skills,
standard work processes, and design
standards. Alone, each mechanism
would accomplish little, but every
piece has its own role and at the
same time reinforces the others, un-
like many of the sophisticated tools
and practices at companies in the
United States, which tend to be im-
plemented independently.

Together, the mechanisms give
Toyota a tightly linked product-
development system that achieves
cross-functional coordination while
still building functional expertise.
This balance allows the company to

achieve integration across projects
and over time, as well as within
projects. U.S. companies have con-
centrated on bringing the functions
together within projects, but a single-
minded focus on that goal can actu-
ally undermine attempts to share
information across projects. Cross-
functional teams, for example, work
well within individual projects, but
the temporary, personal nature of
these teams makes it hard for them

to transmit information to teams on
other projects.

Toyota, by contrast, seems to go to
the opposite organizational extreme.
It relies on highly formalized rules
and standards, and puts limits on the
use of cross-functional teams. Such
rigid policies can have enormous
drawbacks. To avoid those draw-
backs, Toyota has added a number of
twists to ensure that each project
has the flexibility it needs and still
benefits from what other projects
have learned. The result is a deftly
managed process that rivals the
company’s famous production sys-
tem, lean manufacturing, in effec-
tiveness.

Coordination Based on
Writing
One of the most powerful ways to
coordinate one’s efforts with those
of people in other functions is to talk
to them face to face. In this manner,
each party gets the other’s point of
view and can quickly make adjust-
ments to find common ground. This
mutual adjustment often takes the
form of a meeting: a product designer
and a manufacturing engineer, for
example, get together to discuss the
effects that a proposed design for a
particular car body would have on
the cost of production.

Direct contact between the mem-
bers of different functions is cer-

tainly important – some
say it is the essential in-
gredient in getting func-
tional groups that have
traditionally been at odds
to work together. Indeed,
many observers, manag-
ers, and engineers claim
that face-to-face interac-
tion is the richest, most
appropriate form of com-

munication for product develop-
ment. Numerous companies now
colocate functional experts so that
interaction can occur with much
greater ease and frequency. Often
these companies have done away
with written forms of communica-
tion because, as some claim, written
reports and memos do not have the
richness of information or interac-
tive qualities needed for product
development.

Meetings, however, are costly in
terms of time and efficiency, and
meeting time increases with coloca-
tion. Meetings usually involve lim-
ited value-added work per person,
and they easily lose focus and drag
on longer than necessary. Engineers
in companies we’ve visited often
complain of not having enough time
to get their engineering work done
because of all the meetings in their
schedule.

Toyota, by contrast, does not co-
locate engineers or assign them to
dedicated project teams. Most peo-
ple reside within functional areas
and are simply assigned to work on
projects – often more than one at a
time – led by project leaders. By root-
ing engineers in a function, the com-
pany ensures that the functions de-
velop deep specialized knowledge
and experience.

In lieu of regularly scheduled
meetings, the company emphasizes
written communication. When an
issue surfaces that requires cross-
functional coordination, the proto-
col is first to write a report that pre-
sents the diagnosis of the problem,
key information, and recommenda-
tions, and then to distribute this
document to the concerned parties.
Usually, the report is accompanied
by either a phone call or a short
meeting to highlight the key points
and emphasize the importance of
the information. The recipient is ex-
pected to read and study the docu-
ment and to offer feedback, some-
times in the for m of a separate
written report. One or two iterations
communicate a great deal of infor-
mation, and participants typically
arrive at an agreement on most, if
not all, items. If there are outstand-
ing disagreements, then it’s time to
hold a meeting to hammer out a de-
cision face to face.

In such problem-solving meet-
ings, participants already under-
stand the key issues, are all working
from a common set of data, and have
thought about and prepared propos-
als and responses. The meeting can
focus on solving the specific prob-
lem without wasting time bringing
people up to speed. By contrast, at
many U.S. companies, attendees
often arrive at meetings having done

4 harvard business review July–August 1998

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n tI D E A S AT W O R K

Toyota combines a highly
formalized system with twists
to ensure that each project
is flexible and benefits from
other projects.

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

little or no preparation. They can
spend the first half of the meeting
just defining the issue, and responses
are shoot-from-the-hip reactions to
a problem that people have had little
time to think about.

Toyota takes its focused style of
meeting quite seriously. One engi-
neer we talked to showed us his
schedule for the day, which included
two meetings at separate times with
the same group of people. When
asked why he would schedule sepa-
rate meetings with this group, he
explained that they needed two
meetings to discuss two distinct
problems. It was important not to
confuse the issues by combining
them into one meeting.

Once the writer of the original
report has consulted with all inter-
ested parties, he or she writes a final
version of the report that presents all
sides of the question. The overall
reporting process therefore has two
benefits. First, it documents and
summarizes analysis and decision
making in a convenient form for the
rest of the organization. Second, and
more important, it forces engineers
in every function to gather opinions
from other functions regarding the
ramifications of the changes they are
proposing.

Twist: Although Toyota often re-
lies on written communication as
the first line of attack in solving
problems, it does not suffer from the
voluminous paperwork we associate
with bureaucracy. In most cases, en-
gineers write short, crisp reports on
one side of size A3 paper (roughly
11 ´ 17, the largest faxable size). The
reports all follow the same format so
that everyone knows where to find
the definition of the problem, the re-
sponsible engineer and department,
the results of the analysis, and the
recommendations. The standard for-
mat also helps engineers make sure
they have covered the important an-
gles. The result is a clear statement
of a problem and solutions that is
accessible not only to people within
a particular project but also to those
working on other projects.

Writing these reports is a difficult
but useful skill, so the company
gives its engineers formal training in
how to boil down what they want to

communicate. Supervisors see to it
that engineers do the appropriate
groundwork to ensure that all perti-
nent views are taken into considera-
tion. Toyota has also created a cul-
ture in which reading these reports
is highly valued and essential to do-
ing one’s job well. Indeed, we heard
about a certain Toyota executive who
refused to read any report longer than
two pages.

Mentoring Supervisors
In product development, supervi-
sion traditionally took place within
individual functions. Electrical engi-
neers, for example, were supervised
by other electrical engineers because
only they fully understood the work
involved. Recently, some U.S. com-
panies have experimented with
cross-functional team-based organi-
zations in order to force engineers
to think beyond the needs
of their own function.
Chrysler, for example, is
organized around product
platfor ms rather than
functions, and the plat-
form team leader heads all
product engineering in
the platform.

Toyota, however, has not forgot-
ten the value of instructive supervi-
sion within functions. Supervisors
and higher -level managers ar e
deeply involved in the details of en-
gineering design. In fact, young engi-
neers (anyone with less than ten
years’ experience) must usually get
approval from their functional su-
pervisors not only for the designs
they propose but also for each step
involved in the process of arriving at
the final design.

The company depends on supervi-
sors to build deep functional exper-
tise in its new hires – expertise that
then facilitates coordination across
functions. But functional supervi-
sors also teach engineers how to
write reports, whom to send the re-
ports to, how to interpret reports
from other functions, and how to
prepare for meetings. Direct supervi-
sion thus works in concert with mu-
tual adjustment in order to promote
coordination.

Twist: To American eyes, such in-
tensive supervision would seem to

be a kind of meddling that stifles the
creativity and learning of new engi-
neers and other specialists. U.S.
companies are moving in the oppo-
site direction as they preach em-
powerment, with superiors acting as
facilitators rather than bosses. But
Toyota has succeeded in keeping its
supervision fresh and engaging, in
two ways. Like Toyota’s supervisors
on the factory floor, managers in
product development are working
engineers. Instead of merely manag-
ing the engineering process, they
hone their engineering skills, stay
abreast of new technology, maintain
their contacts and develop new ones,
and remain involved in the creative
process itself. Functional engineers
are not frustrated by the experience
of working under someone less
skilled than they are. In many U.S.
companies, by contrast, engineers

who rise through the ranks become
managers who stop doing engineer-
ing work.

Perhaps more important, Toyota’s
managers seem to avoid making de-
cisions for their subordinates. They
rarely tell subordinates what to do
and instead answer questions with
questions. They force engineers to
think about and understand the
problem before pursuing an alterna-
tive, even if the managers already
know the correct answer. It’s not a
boss-subordinate or even a coach-
athlete relationship, but a student-
mentor relationship.

Integrative Leaders
Perhaps the most powerful way to
integrate the work of people from
diverse specialties is to have a leader
with a broad overview of the whole.
Many U.S. companies have recently
been moving toward a heavyweight-
project-management str ucture.
Heavyweight project managers coor-
dinate all the specialists from func-
tional departments around a com-
mon project with a common set of

Supervisors are deeply
involved in their subordinates’
work, without giving orders.

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n t I D E A S AT W O R K

harvard business review July–August 1998 5

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

goals. Their authority in these ma-
trix organizations comes from their
complete control over their particu-
lar project rather than from any di-
rect supervisory authority over the
individual functions.

Toyota’s equivalent is the chief
engineer. Each chief engineer, based
in one of Toyota’s three vehicle-
development centers (which oversee
long-term planning across projects),
maintains full responsibility for a
single vehicle program but wields no
direct power over the functions.

Indeed, Toyota’s chief engineers
come close to matching what others
have described as the prototypical
heavyweight project manager. Be-
fore attaining their position, they
must demonstrate both exemplary
technical expertise and fluency in
synthesizing technical knowledge
into clever, innovative designs. Toy-
ota’s managers feel strongly that

only a good designer can evaluate
the quality of someone else’s design.
Chief engineers also need to be able
to conceptualize whole systems. It
is one thing to understand the me-
chanics of a brake system and an-
other to apply that knowledge to-
ward an actual brake system design;
but it is quite another thing to be
able to conceptualize a brake system
and visualize how it can be integrated
with the rest of the vehicle. By con-
trast, a number of companies with
heavyweight product managers do
not have such stringent technical re-
quirements.

All chief engineers have a small
staff of 5 to 15 engineers to assist
them in managing the development
process and in coordinating the
work of the functional specialties.
The hundreds of other engineers on
the project report only through the
functional chain of command. The
chief engineer has no formal author-
ity over them, so he must “per-
suade” them to help him realize his
vision for the vehicle. One former

chief engineer described the position
as being the “president of the vehi-
cle”: just as the U.S. president heads
the country but has no direct author-
ity over legislation (beyond vetoes),
so a chief engineer cannot dictate
what functional engineers do. But
his extensive technical expertise
wins him tremendous respect, even
admiration, from functional engi-
neers – a key source of his enormous
informal authority.

The limits on the chief engineers’
power, despite their prestige, are
real, and the engineering expertise
and equal rank of the general man-
agers in charge of the functional
areas can keep chief engineers from
making potentially dangerous mis-
takes. For example, in designing a
new model of the Celica sports car
several years ago, the styling depart-
ment suggested a longer front-
quarter panel. The change would

have increased the panel’s
extension into the top of
the front door, allowing
the door to curve back at
the top, thereby creating
an angular and more ex-
citing look. The manufac-
turing engineer assigned

to door panels, however, opposed the
change because the altered panel
would be difficult to produce.

After assessing both sides, the
chief engineer for the vehicle fa-
vored the altered front panel. Never-
theless, the manufacturing engineer
felt strongly that the change was un-
wise. If Toyota had organized around
projects rather than functions,
styling would likely have gotten its
way, and the car might well have
suffered production problems. But
because the chief engineer’s author-
ity was only informal, the manufac-
turing engineer was able to raise the
issue to the level of the general man-
ager of manufacturing, who strongly
challenged the chief engineer. After
substantial argument, the two sides
reached an innovative compromise
that achieved the cutaway look that
styling wanted with a satisfactory
level of manufacturability.

Such incidents explain why one
Toyota engineer, when asked what
makes a good car, replied, “Lots of con-
flict.” Conflict occurs when people

6 harvard business review July–August 1998

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n tI D E A S AT W O R K

A chief engineer is less the
manager of and more the
lead designer on a project.

from different functional areas
clearly represent the issues from
their perspective. Its absence im-
plies that some functional areas are
being too accommodating – to the
detriment of the project as a whole.
Still, when managers resolve con-
flicts through organizational influ-
ence, horse trading, or executive
fiat, the results are often poor. It is
the ability of chief engineers to see
the broad picture clearly – and the
ability of functional managers to
contain the chief engineer’s enthu-
siasm – that leads to highly integrat-
ed designs. And while the chief en-
gineers keep individual projects on
track, the autonomous functional

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

decisions. His authority over design
decisions stems from the fact that
the vehicle is quite clearly “his car.”
He is therefore less the manager of
and more the lead designer on the
overall project.

As lead designer, chief engineers
design (and subsequently manage)
the entire process of developing the
product, and they personally articu-
late the vehicle concept that be-
comes the blueprint for the entire
program. That concept includes the
major dimensions of the vehicle; de-
cisions on such major systems as the
transmission; the variety of models
to be offered; the characteristics of
the target customer; sales projec-
tions; and targets on weight, cost,
and fuel economy. Chief engineers
integrate the work of the functions
by planning how all the parts will
work together as a cohesive whole,
soliciting input from the various en-
gineering, manufacturing, and mar-
keting functions, of course. Once a
chief engineer has designed the over-
all approach for a car, the different
functions fill in the technical details
that are required to realize the vehi-
cle concept.

Some of the remaining integration
problems at U.S. companies may in
fact stem from a lack of precisely
this kind of system design. Even
companies with able heavyweight
product managers tend to jump di-
rectly from product concept to the
technical details of engineering de-
sign. They bypass, without going
through, the very difficult but im-
portant task of designing the overall
vehicle system: planning how all the
parts will work together as a cohe-
sive whole before sweating the fine
details. At Toyota, the chief engi-
neer provides the glue that binds the
whole process together.

Standard Skills

Every company depends on highly
skilled engineers, designers, and
technicians to bring a product to
market. Organizations can coordi-
nate their activities by giving each
person within a specialty the same
set of skills to accomplish his or
her tasks. When we know what to
expect of others because they are
trained in a certain way, we can re-

quest specific services with relatively
little effort in coordination. In engi-
neering, most U.S. companies rely
heavily on universities or special-
ized training companies to provide
their people with the skills needed
to do their jobs.

Toyota, by contrast, relies primar-
ily on training within the company.
It views training as a key compe-
tency, worth developing internally
rather than outsourcing. Engineers
receive most of their training through
the intensive mentoring involved in
direct supervision, although the
company also runs a training center
with instructors who are experi-
enced Toyota engineers. The process
not only develops excellent engi-
neers but also teaches new hires
Toyota’s distinct approach to devel-
oping the body, chassis, or other sys-
tems in a vehicle.

Additionally, Toyota rotates most
of its engineers within only one
function, unlike U.S. companies,
which tend to rotate their people
among functions. Body engineers,
for example, will work on different
auto-body subsystems (for example,
door hardware or outer panels) for
most, if not all, of their careers. Be-
cause most engineers rotate primar-
ily within their engineering func-
tion, they gain the experience that
encourages standard work, making
the outputs of each functional group
predictable to other functions. In
addition, rotations generally occur
at longer intervals than the typical
product cycle so that engineers can
see and learn from the results of
their work.

That consistency over time means
that the company’s engineers in the
manufacturing division, for exam-
ple, need to spend less time and en-
ergy communicating and coordinat-
ing with their counterparts in design
because they learn what to expect
from them. Indeed, Toyota firmly
believes that deep expertise in engi-
neering specialties is essential to its
product-development system. We
often heard such comments as, “It
takes ten years to make a body engi-
neer” in our conversations with the
company’s managers. In short, the
widely held notion that Japanese
companies rotate their personnel

harvard business review July–August 1998 7

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n t I D E A S AT W O R K

engineers and managers ensure that
knowledge and experience fr om
other projects are not forgotten in
the current one.

Twist: Chief engineers do differ in
one important respect from even the
best heavyweight project managers.
The latter typically delegate deci-
sion making to functional teams,
while retaining authority over the
team’s decisions and taking respon-
sibility for implementing those deci-
sions throughout the development
process. If a heavyweight project
manager doesn’t like a decision, he
or she can veto it. By contrast, a chief
engineer takes the initiative by
personally making key vehiclewide

For the exclusive use of R. Nigaglioni, 2018.
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broadly and frequently simply does
not apply to Toyota.

Twist #1: Rotating locally and
building functional expertise would
seem to create rigid functional
boundaries, or chimneys, in which
engineers work only to be the best
in their function. An electrical engi-
neer, for example, might aim to de-
velop the most elaborate electrical
design possible, without thinking
about how that design will work
with the rest of the vehicle. But we
have found that the so-called chim-
ney effect is not the result of young
engineers being too loyal to their
functions or too narrow-minded
about what cars need. Rather, it is
usually the result of experienced en-
gineers and managers hoarding their
knowledge, which becomes the ba-
sis of their power in an organization
rooted in functions.

To avoid such political conflict,
Toyota takes care to rotate most of

its senior people broadly. Engineers
at the bucho level – which usually
means the head of a functional divi-
sion (for example, power-train engi-
neering for front-wheel-drive pas-
senger cars) with at least 20 years’
experience – typically rotate widely
across the company to areas outside
their expertise. Such moves force
buchos to rely heavily on the experts
in their new area, building broad net-
works of mutual obligation. At the
same time, buchos bring their own
experience, expertise, and network
of contacts that they can use to facil-
itate integration.

Twist #2: Buchos (and chief engi-
neers) encourage their people to see
the needs of the product as a whole,
but Toyota also keeps design engi-
neers aware of the ramifications of
their decisions throughout the de-
velopment process. These engineers
retain responsibility for their parts

of the car from the concept stage to
the start of full production. A door-
systems engineer, for example,
works with stylists to determine the
concept of the door and then devel-
ops the detailed design by working
with production engineers and out-
side suppliers. The engineer also
goes to the factory to be part of the
launch team as the vehicle ramps up
to full production.

Flexible Work Standards
The stereotypical bureaucratic way
of coordinating work processes is to
specify in detail the content of each
step in the process. Tasks are prepro-
grammed so that one group knows
what to expect from another and
when to expect it, with little or no
communication required. Factories
use this kind of coordination exten-
sively, standardizing the tasks at
each workstation to ensure that the
work is done consistently and in a

set amount of time. All
the workstations can then
be easily coordinated by a
schedule.

Many U.S. companies
have tried to apply this
concept to product devel-
opment, notably General
Motors with its four-
phase process. A special
team at GM defines the

process in great detail, telling each
department what it needs to do
when, whom to send results to, what
format the information should take,
and so on. The plan for the styling
function alone covers the length of
one wall in a sizable conference
room. The four-phase process is al-
most never followed as its authors
envisioned, however, because the
process is so detailed that every ve-
hicle program has exceptions that
force designers to deviate from the
prescribed process – the real world
resists such intensive planning. In
addition, a separate group develops
and maintains the details of the
standard process; as a result, the peo-
ple who must follow the process do
not have ownership of it, and the
prescribed processes are not likely to
be truly representative of the actual
one. Indeed, the four-phase process
seems to do little to shorten cycle

times or to bring other benefits that
such thorough planning aims to pro-
duce. Companies such as General
Motors face a dilemma: the more
they attempt to define the process of
product development, the less the
organization is able to carry out that
process properly.

Toyota, by contrast, has success-
fully standardized much of its devel-
opment process. Product-engineer-
ing depar tments follow highly
consistent processes for developing
subsystems within a vehicle. Rou-
tine work procedures – such as design
blueprints, A3 reports, and feedback
forms for design reviews – are also
highly standardized. The overall
process of developing a vehicle fol-
lows regular milestones. Indeed, the
suppliers we visited in Japan could
describe from memory Toyota’s ve-
hicle-development process because
it is so consistent from model to
model. Every model has a concept,
styling approval, one or two proto-
type vehicles, two trial production
runs, and finally a launch; and sup-
pliers know the approximate timing
of each event. (For more on how Toy-
ota uses standards to coordinate its
work with suppliers, see “A Second
Look at Japanese Product Develop-
ment,” by Rajan R. Kamath and
Jeffrey K. Liker, HBR November–
December 1994.)

Twist #1: How does Toyota avoid
the pitfalls that other companies
have experienced with work stan-
dards? When you talk specifics with
Toyota engineers – such as how
many prototypes are built and tested,
when designs are finalized, or how
long a particular phase takes – the re-
sponse is typically that it varies case
by case. The actual standardized
work plans are kept to a minimum;
they often fit on a single sheet of
paper. The basic process in the eyes
of the participants is very consistent
from model to model, but the imple-
mentation of the concept is indi-
vidually designed for each vehicle
program. Intense socialization of en-
gineers through on-the-job training
creates a deep understanding of
every step, as well as a broad under-
standing of the expectations at mile-
stones and final deadlines. The
simplified plans allow flexibility,

8 harvard business review July–August 1998

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n tI D E A S AT W O R K

To prevent the chimney effect ’s
political conflicts, engineers
at the bucho level are regularly
rotated to areas outside their
expertise.

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

ucts that use common parts across
platforms. Engineering checklists
contain detailed information con-
cerning any number of aspects, in-
cluding functionality, manufactur-
ability, government regulations, and
reliability. The styling department,
for example, has a checklist for the
license-plate well that contains
plate dimensions, bolt hole loca-
tions, regulations on tilt angles and
illumination for various world mar-
kets, and restrictions on curvature
radii. And every part of the car body
has a separate manufacturing check-
list that shows what angles will pro-
duce a good part, what kinds of inter-
faces avoid problems in assembly,
and other guidelines.

Engineers use the checklists to
guide the design throughout the de-
velopment process. The checklists
are particularly important for the
intensive design reviews that every
vehicle program undergoes. Hun-
dreds of engineers come together to
study a vehicle or prototype at key
junctures, looking for problems and
opportunities for improvement.
What keeps these extremely large
meetings from becoming chaotic is
that all engineers come with a list of
all the items they need to verify
from their perspective. If the design
conforms to the checklist, the part is
highly likely to meet a certain level
of functionality, manufacturability,
quality, and reliability. If it does not,
discrepancies between the check-
lists and the design become
the focal points of discus-
sion among the divisions.
The design review check-
lists are another example
of using written forms of
communication to im-
prove face-to-face meetings.

Once in place, design
standards add predictabil-
ity across vehicle subsys-
tems, and between product design
engineers and manufacturing engi-
neers. The engineer responsible for
audio speakers, for example, can
take advantage of existing specifica-
tions for door sizes and door compo-
nents and can begin designing speak-
ers without coordinating directly
with the other engineers working on
door components. As a result, Toy-

ota is able to bring new products to
market quickly – as it demonstrated
with the RAV4 mini-sport-utility
vehicle, which was brought to mar-
ket in 24 months, carved out a new
product niche in Japan, but still drew
on existing design standards for 80%
of its makeup.

Engineering checklists also facil-
itate organizational learning across
generations of vehicles. Toyota trains
its engineers not only to record prod-
uct histories but also to abstract from
that experience in order to update
existing capabilities. When an engi-
neer lear ns something new, the
knowledge can be incorporated into
the checklist and then applied across
the company to every subsequent
vehicle. Those lessons reside with the
organization, not in one person’s
head. If an engineer leaves, the
knowledge he or she has gained is
captured in the checklists and re-
mains with the company. Just as
standardization is the key to contin-
uous improvement on the factory
floor, standards are the basis for con-
tinuous improvement in engineer-
ing design.

Twist #1: Again, such standardiza-
tion smacks of the kind of bureau-
cratic approach that U.S. companies
seem bent on avoiding. But rather
than presenting design rules that
have been imposed by a central staff,
the checklists explicitly define cur-
rent capabilities as understood by
the responsible designers. They are

living documents: product and man-
ufacturing engineers update the
standards with every vehicle pro-
gram. New information is quickly
and efficiently disseminated through-
out the organization and into inter-
facing divisions, without any meet-
ings taking place.

Twist #2: Toyota’s continuous and
overlapping product cycles also help

harvard business review July–August 1998 9

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n t I D E A S AT W O R K

common understanding, and contin-
uous improvement, while hard dead-
lines keep the project on track. The
company thus gains the efficiencies
offered by standards without stifling
its engineers. The standards also
save product developers the trouble
of reinventing a new process for each
individual project.

Twist #2: Another difference is
that the standard work procedures
are maintained by the people and de-
partments that use them, not by a
centralized staff that may be tempted
to standardize for the sake of stan-
dardization. As a result, standards
are more likely to be simple and to
the point, relevant and up-to-date.
They are therefore more likely to be
followed. In addition, the people
who use the standards understand
their intent, so deviations are per-
fectly permissible as long as consis-
tency (and thus predictability for
other functions) is maintained. At
Toyota, developing the product and
designing standard development
processes are considered to be insep-
arable tasks.

Living

Design Standards

In the past, product developers often
used standardized product rules to
guide their work. Many companies,
however, seem to have shied away
from design standards in recent
years. Engineers at automakers in
the United States have told us time
and again that design standards are
largely ignored at their companies.
Arguing that technology is changing
too fast for standards to be valuable,
they boast about “starting from a
clean sheet of paper” in new prod-
uct-development projects. (Test en-
gineers, of course, rely on standards
to ensure that the final product
meets government regulations and
other requirements, but those guide-
lines concern the product’s function
instead of providing information for
the product’s design.) Design stan-
dards appear to be archaic or stifling
to companies that depend on inno-
vation for success.

Toyota, however, still maintains
voluminous books of engineering
checklists to guide design work.
These checklists act as the first cut
at designing manufacturable prod-

When an engineer learns
something new, the knowledge

is incorporated into a
checklist and applied to all

the company’s vehicles.

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

How the Coordinating Mechanisms
Work Together

Contin
uous,

overla
pping

produ
ct cyc

lesStable, long-term employment

keep standards fresh. The company
launches new vehicles on a regular
basis, several times every year. It al-
so has annual product renewals, and
a major model change every three to
four years, unlike other companies
that stretch out their product cycles.
Accordingly, standards are revisited
every couple of months (as opposed
to being used once and then put
away for a couple of years); they nev-
er become outdated. The frequent

changes to the checklists also give
engineers continual opportunities to
develop and hone their skills.

Managing Product
Development as a System
Together, these six mechanisms
make up a whole system, each part
supporting the others. Mentoring
supervision serves mainly to build
functional expertise, but it also
teaches young engineers how to

write and interpret reports, work
with chief engineers, and under-
stand and use standards. The chief
engineer’s prestige reinforces the
importance of expertise while it also
balances out the functional bent of
the other engineers. The chief engi-
neer also promotes mutual adjust-
ment by providing the working in-
structions for each vehicle program
and by resolving cross-functional
disagreements.

10 harvard business review July–August 1998

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n tI D E A S AT W O R K

Stability and Power

The functional organization, with its intensive mentoring,

trains and socializes engineers in ways that foster in-depth

technical knowledge and efficient communication.

Three types of standards interact and support one another

to improve the speed of development while allowing

flexibility and building the company’s base of knowledge.

Levels of StandardizationIntegrative Social Processes

Standard Skills

intensive mentorship

local rotation

broad rotation at
higher levels

Standardized
Work Processes

consistent but
minimal processes

standards maintained
by departments

Design Standards

voluminous
checklists

living
documents

Integrative Leadership

chief engineer as
lead designer

Mutual Adjustment

mix of written
communication and

meetings

long-term socialization
and development

Direct Supervision

working engineers

mentoring
supervisors

Customer Focus

For the exclusive use of R. Nigaglioni, 2018.
This document is authorized for use only by Rolando Nigaglioni in 2018.

For their part, the three types of
standards interact and support one
another to boost the pace of develop-
ment; at the same time, they allow
flexibility and build Toyota’s base of
knowledge. Without the other
mechanisms providing reinforce-
ment, each mechanism would not
be nearly as effective. (See the exhibit
“How the Coordinating Mecha-

nisms Work Together.”)
Indeed, the two halves of Toyota’s

system – social processes and stan-
dards – interact in powerful ways.
The functional organization, with
its intensive mentoring, trains and
socializes engineers in ways that fos-
ter in-depth technical knowledge
and efficient communication. With-
out deep tacit knowledge about how

to develop products, standardization
would become a bureaucratic night-
mare. In turn, the common use of
the different standards makes all
functions automatically aware of
the constraints imposed by interfac-
ing groups and gives focus to reports
and meetings. Toyota shows that
companies do not need to choose be-
tween functional depth and cross-
functional coordination – each can
facilitate the other within the right
environment.

Toyota’s balanced approach also
benefits from basic company poli-
cies that provide a foundation for the
whole system. With a stable and
long-term workforce, the company
can afford to invest heavily in train-
ing and socializing its engineers; it
knows that the investment will pay
off for many years. The company
also places great emphasis on satis-
fying customers. Most of its engi-
neers in Japan, for example, are re-
quired to sell cars door to door for a
few weeks in their first year of hire.
Both factors help discourage the
functional loyalties that might other-
wise afflict a company with Toyota’s
structure.

These synergistic interactions
give Toyota’s system its stability
and power. They enable the auto-
maker to integrate across projects as
well as within them. Design stan-
dards, for example, facilitate integra-
tion across functions while promot-
ing the use of common components
in simultaneous projects, and pro-
vide a ready base of knowledge for
the next generation of products.

Implications for Other
Companies
Toyota’s mix of practices may not be
right for other industries, or even for
other companies in the auto indus-
try. Different environments, differ-
ent corporate cultures, and different
circumstances mean that a com-
pany’s product-development system
must be uniquely designed to suit its
distinct needs. Indeed, Toyota’s sys-
tem is not necessarily perfect even
for Toyota. Although the company
has succeeded mightily with its new
products in mass-market sedans and
luxury cars – two well-defined seg-
ments of the marketplace – it has re-

harvard business review July–August 1998 11

h ow t oyo t a i n t e g r at e s p r o d u c t d e v e l o p m e n t I D E A S AT W O R K

Little face-to-face
contact.

Predominantly
written
communication.

Close supervision
of engineers by
managers.

Large barriers
between functions.

No system design
leader.

No rotation of
engineers.

New development
process with every
vehicle.

Complex forms
and bureaucratic
procedures.

Obsolete, rigid
design standards.

Reliance on meetings
to accomplish tasks.

Predominantly oral
communication.

Little supervision
of engineers.

Weak functional
expertise.

System design
dispersed among
team members.

Rotation at rapid
and broad intervals.

Lengthy, detailed,
rigid development
schedules.

Making up
procedures on
each project.

No design standards.

Succinct written reports for
most communication.

Meetings for intensive problem
solving.

Technically astute functional
supervisors who mentor, train,
and develop their engineers.

Strong functions that are
evaluated based on overall
system performance.

Project leader as system
designer, with limitations on
authority.

Rotation on intervals that are
longer than the typical product
cycle, and only to positions that
complement the engineers’
expertise.

Standard milestones – project
leader decides timing, functions
fill in details.

Standard forms and procedures
that are simple, devised by the
people who use them, and
updated as needed.

Standards that are maintained
by the people doing the work
and that keep pace with current
company capabilities.

How Toyota Avoids Extremes

Mutual Adjustment
Design Standards

Standard Work Processes

Direct Supervision
Integrative Leadership
Standard Skills

CHIMNEY EXTREME TOYOTA BALANCE COMMITTEE EXTREME

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are not panaceas, and they do have
significant drawbacks. One must
weigh the benefits and drawbacks of
a particular practice, including how
it contributes to all aspects of inte-
gration (including integration across
projects) and how it affects other
parts of the system.

Finally, the success of Toyota’s
system rides squarely on the shoul-
ders of its people. Successful product
development requires highly compe-
tent, highly skilled people with a lot
of hands-on experience, deep techni-
cal knowledge, and an eye for the
overall system. When we look at all
the things that Toyota does well, we
find two foundations of its product-
development system: chief engi-
neers using their expertise to gain
leadership, and functional engineers
using their expertise to reduce the
amount of communication, supervi-
sion, trial and error, and confusion in
the process. All the other coordinat-
ing mechanisms and practices serve
to help highly skilled designers do
their job effectively. By contrast,
many other companies seem to as-
pire to develop systems “designed by
geniuses to be run by idiots.” Toyota
prefers to develop and rely on the
skill of its personnel, and it shapes
its product-development process
around this central idea: people, not
systems, design cars.

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acted late to the recent major shifts
in consumer demand: first to mini-
vans and then to sport-utility vehi-
cles. So design standards and inter-
nal socialization, for example, may
make for nimble and innovative
product development, but perhaps at
the cost of discouraging some big
leaps in thinking.

Nevertheless, we believe that
Toyota’s system has important im-
plications for other companies. First,
integrated product-development
processes should be developed and
implemented as coherent systems.
Individual best practices and tools
are helpful, but their potential can
be fully realized only if they are inte-
grated into and reinforce the overall
system. Toyota was fortunate in that
it was able to develop its system
over decades through an incremen-
tal, almost unconscious, process of
taking good ideas and adapting them
to the existing structure. Other com-
panies that conclude they are going
down the wrong track and need a
major overhaul of their product-
development systems do not have
the luxury of developing their sys-
tem gradually over time. They will
need to be much more conscious of
designing a coherent system.

Second, well-designed systems
should balance the demands of func-
tional expertise and cross-functional
coordination. The chart “How Toy-
ota Avoids Extremes” describes fea-
tures of the two opposing sides: the
chimney extreme, characterized by

strong functional divisions, and the
committee extreme, characterized
by broad-based decision making and
weak functional expertise. Toyota,
for example, uses both written forms
of communication and face-to-face
contact to the extent that each is
useful and efficient.

Achieving the proper balance,
however, is no easy task. Many of
Toyota’s current practices – such as
an emphasis on written communica-
tion, design standards, and the chief
engineer – seem to have been stan-
dard practice in the United States in
the 1950s and earlier. But in the
1960s and 1970s, as U.S. automakers
neglected their development
processes, systems that were once
sound and innovative gave way to
bureaucracy, internal distrust, and
other distractions that brought the
companies close to the chimney ex-
treme. In reaction, those companies
seem to have swung toward the other
end of the spectrum. Results in the
short term have been encouraging,
but the deficiencies of the commit-
tee extreme may well appear soon.
Some companies are discovering
them already.

The key is to strike the appropri-
ate balance for one’s situation. It
may be perfectly appropriate in
some circumstances to rely almost
solely on meetings for communica-
tion and problem solving or to aban-
don standard procedures completely.
But such practices are not good for
all organizations at all times. They

12 harvard business review July–August 1998

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