Posted: May 25th, 2022

Knowledge Management: A Case Study of Toyota

Knowledge Management: A Case Study of Toyota

Knowledge management is a system capable of making comparisons, analyzing trends, and presenting historical and current knowledge. But more importantly, such a system enables decision makers to analyze and understand the patterns quickly and identify the most significant trends. It is needed in an enterprise because it provides an accurate predictive method for decision makers. In addition, a knowledge management system can track and evaluate key critical success factors for decision makers, which is valuable in assessing whether or not the organization is meeting its corporate objectives and goals. Overall, a knowledge management system can assist decision makers in making better informed decisions that affect all aspects of a company’s operations (Dalkir, 2005).

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Toyota allegedly had just such a system in place. However there was clearly a major flaw in the system early in 2010, which resulted in safety issues that led to negative publicity, a tarnished reputation and being forced to suspend eight of its most popular car models. So what happened at Toyota, and what could have been done differently? Perhaps more importantly, what can Toyota do now to prevent similar problems in the future? These are the questions this research project will attempt to answer and analyze.


For decades, the quality of leadership and innovation in the automobile industry has been equated with Japan. Even in light of massively funded and channeled campaigns to get U.S. .citizens to “Buy American,” American auto manufactures have long been criticized as being inferior to the Japanese manufacturers. However, Toyota’s recent troubles have cast a new light on the situation, causing many people to rethink the trust they have placed in the Japanese automaker. In January of 2010, Toyota was forced to recall eight models, and stop selling them, because of a faulty accelerator that had the potential of sticking when depressed, which is obviously a major safety hazard. This has debacle has cost Toyota money, prestige and consumer trust. Although the company posted a $1.7 million profit for their fourth quarter in 2009, “the suspension of U.S. sales of eight of its most popular models and repair costs are expected to undermine earnings in the current quarter” (“Toyota Posts,” 2010, par. 3).

Toyota has been praised for its Total Production System (TPS) strategy for decades. The company runs on 14 principles which are outlined in Appendix a. Many of these principles are rooted in the concepts of knowledge management. For example, Principle 9 reads “Grow leaders who thouroughly understand the work, live the philosophy, and teach it to others”; and Principle 12 reads “Become a learning organization though relentless reflection (hansei) and continuous improvement (kaizen).” Toyota certainly seemed to be on the right track in its organizational strategies, yet somewhere along the line, something went off the rails. By applying various models of knowledge management (KM) as outlined by Dalkir (2005) it may be possible to figure out where Toyota went wrong, and what the company can do to get itself back on track.

KM Models

The following chart briefly compares the four primary models discussed in chapter 3 of Knowledge Management in Theory and Practice:

Name of model

What does it state?



Von Krogh and Roos KM Model

Knowledge management is both an individual and interaction-oriented strategy. The model adopts a “connectionist” approach: “Everything known is know by somebody” (Dalkir, 2005, p. 51)

Promotes group sharing of knowledge and provides a solid connectionist model.

Is inflexible in terms of perceiving knowledge as abstract

Nonaka and Takeuchi Knowledge Spiral Model

Metaphors, slogans and symbols spur organizational innovation. Also, everything is connected and part of a larger entity. Therefore knowledge is “group knowledge” however, “knowledge creation begins with the individual” (Dalkir, 2005, p. 52)

Provides a well established and often used framework for knowledge conversion in terms of explicit and tacit knowledge.

The eight emergent characteristics for company survival are vague and generic.

Choo and Weik Model

Sense-making is imperative for knowledge creation and effective decision-making.

Provides a viable explanation of how chaos turns to order.

This is a holistic model but it does not account for abstract interactions.

Wiig Model

“In order for information to be useful and valuable, it must be organized” (Dalkir, 2005, p. 61). Completeness, connectedness, congruency and perspective/purpose are the model’s four primary dimensions.

Emphasizes the importance of the individual knowledge worker

The perspective and purpose dimension needs further development

In attempting to analyze Toyota from a KM perspective it is important to apply these models, and their various aspects. Several themes that cropped up frequently in the discussion of all of these models are 1) the knowledge worker; 2) Organizational development; and 3) Knowledge exchange.

The Knowledge Worker

A great deal is being said and written about the knowledge worker of today, about a workplace with workers who constantly shift among employers, are continually being retrained, or have to upgrade their skills on their own. Although much of this is true, the popular view tends to treat the new workforce as a one-dimensional entity and obscures the subtleties and complex demands of the work world. According to Davenport (2005) “knowledge workers have high degrees of expertise, education, or experience, and the primary purpose of their jobs involves the creation, distribution, or application of knowledge” (p. 10). Thus from this perspective, a stability and long-term dedication to learning is a process is imperative. As such, it is difficult to view the knowledge worker as transient or ephemeral, despite the notion that many may expect to stay on board with a company only as long as it takes to enhance their marketability and boost their salary. Ultimately, a true knowledge worker wants to use what they have learned for the betterment of the organization which has fostered that learning.

Knowledge workers thrive on change, but that does not mean that they need to switch employers every few years. It simply means that they need to apply their knowledge to a variety of scenarios within their chosen workplace. Change is, of course, a major component of learning. In fact, in Handy’s (1985) view, change can be described as another word for learning; that is, organizations that undergo change of a cultural nature can be described as going through the learning process. The learning organization is explained by Handy as having two meanings. It can mean an organization which learns and it can mean an organization that encourages learning in its people. Either way, this ‘learning mindset’ should ideally foster successful organizational development.

A true knowledge worker is one that has a long-term commitment to their field, to their organization, and to learning in general. He is dedicated to applying his ongoing acquirement of knowledge to his present environment because this is where he feels it will be the most beneficial. He also feel a sense of loyalty to his organization and feels duty-bound to put back into the organizational knowledge bank more than he has taken out of it (Lord & Brown, 2001).

According to DeTienne et al. (2004), Chief Knowledge Officers (CKOs) must interact with the organizational culture in such a way that “human barriers associated with knowledge creation, transfer and sharing” can be overcome. They note that despite the inherent ambiguity of the CKO’s role, “Chief Knowledge Officers are at the heart of KM processes” and therefore for must be adequately prepared to meet the changing goals and functions of the modern organization.

Working in the field of automobile manufacturing requires a level of critical thinking for the knowledge worker that extends beyond that of some other fields. Because automotive technology changes so quickly, there is always more to learn; New knowledge makes old knowledge obsolete all the time. For this reason, leaders in the field have come to understand that to become a knowledge worker in the true sense of the term requires flexibility, adaptability and strong critical thinking skills (Lawler, 2005).

An example of how Toyota has promoted the idea of the knowledge worker can be seen in their use of simulations and assessment as training approaches for their e-learning training programs. Toyota has employed simulations as a means of providing workers with hands-on instruction in soft skills needed for conducting sales activities. The training program was developed based on the philosophy that content must be relevant, instruction must be learner driven, and training must be convenient and cost effective (Kelly & Nanjiani, 2005).

The training system allows workers to access a module-based system that provides instruction and hands-on experience in preparing sales presentations, creating project plans, and learning problem-solving skills. Simulations based on real-life scenarios are used as a training and assessment tool in customer service, business management, sales, and other areas that are aligned with the Toyota’s organizational goals, culture, and work environment. The training program provides a safe learning environment where workers can receive personal assessment and instruction. The implementation of simulation-based training has increased worker performance and productivity (Kelly & Nanjiani, 2005).

To maintain the quality of the program and keep materials current, Toyota outsources the content creation and maintenance of the content library at a significantly lower costs than would be required if the training program was created and maintained in-house. This approach has resulted in a successful just-in-time learner driven training program that uses scenario-based simulations to provide low cost training that workers can access when and where it is needed (Kelly & Nanjiani, 2005). This is an example of how Toyota has traditionally adhered to its fourteen principles (see Appendix a) and worked to maintain an organization in which knowledge management is paramount.

Organizational Development

Almost every organization professes to understand that we are now in the age of the knowledge worker and that people are the true competitive advantage. However, if we look, not at rhetoric, but at behavior, it seems clear that much of this talk is relatively superficial. The typical U.S. corporation is still best described as a pyramid, although perhaps with some variations. The people at the top of the pyramid still have the power, set the vision, and issue directives that cascade down on and are carried out by the men and women below. When the command-and-control hierarchical structure is not explicit, it is implicit (Lord & Brown, 2001).

Either way, it is insidious and tends to undermine or assault the self-esteem of most of the people “below.” And of course it is not only self-esteem that suffers: performance, creativity, and innovation suffer as well. There is absolutely no difference between creating an organizational culture that supports and nurtures self-esteem and creating one that supports and nurtures high performance. The common denominator lies in the issue of what an independent mind needs to function optimally. Accordingly, a company needs to implement basic policies directed at promoting a positive learning environment if it is to achieve a culture of loyalty, creativity and high performance (Lord & Brown, 2001).

Fostering these types of knowledge workers is not possible within a system in which micromanagement is the management style of choice. People do not and cannot give their best when a manager is standing over their shoulder, that is, when they do not feel trusted. Micromanagement is offensive to self-esteem and subversive of high performance. In fact, in the age of the knowledge worker, the whole idea of management needs overhauling. ‘Mind work’ cannot be managed in the way that muscle work could. To the extent that management still means supervision, control, and manipulation, it frustrates and blocks what we need most in an information economy: the free exercise of independent minds (DeTienne, Dyer, Hoopes & Harris, 2004).

The organizations of the past knew how to manage. The organizations of the future will have to learn how to lead – and how to inspire. It is perhaps for this reason that Davenport (2004) submits that the “growth of knowledge work is the single most important factor driving the future of management” (p. 188).

Toyota has always been a pioneer in the automotive industry. In alignment with the Wiig model’s tenet that “In order for information to be useful and valuable, it must be organized” (Dalkir, 2005, p. 61) Toyota popularized organizational techniques such as Just-in-time delivery (JIT) and kanban, which are inventory management systems that organize knowledge in an efficient manner. In fact, they were originally called the “Toyota Production System.” These techniques have become staples of supply chain management in the automotive industry. According to Bryan (2002) “The hallmark of this approach is a willingness to change direction continually as more and more distinctive knowledge is acquired. The approach implies an expectation that major midcourse corrections will be required, not that everything will go according to plan. It calls for a willingness to shut down initiatives if it becomes clear that they are headed nowhere” (p. 18)

With such a long established reputation for being an industry pioneer, both in terms of automotive technology and management systems, it seems almost unbelievable that Toyota could be facing such a devastating setback as the recent safety issues and subsequent product recalls have presented. Could the problem be attributed to a failure of communication in which knowledge was not properly exchanged?

Knowledge Exchange

Explicit knowledge is clearly developed with all of its elements apparent. Such knowledge is documented and codified. Because it is distinctly stated, it is largely structured and has no disguised meaning. A good example of explicit knowledge is a development methodology that dictates an orderly approach to solving a problem and the roles and responsibilities for participants in the process. In contrast, tacit knowledge is implied or indicated but not always expressed. It is largely unstructured and is generally based on personal knowledge from personal experiences and capabilities. For example, handwritten and unsolicited comments regarding a new product are received periodically by a company’s marketing department.

The Nonaka and Takeuchi spiral model is a model for the creation of knowledge, which is based on a process of conversions between tacit and explicit knowledge. it, involves the following four stages: 1) socialization (from tacit knowledge to tacit knowledge); (2) externalization (from tacit knowledge to explicit knowledge); (3) combination (from explicit knowledge to explicit knowledge); and (4) internalization (from explicit knowledge to tacit knowledge).

This model could turn out to be a very useful device for Toyota to think about its future directions and what its new organizational strategies will consist of. The company cannot allow itself to fall into the trap of what Dalkir refers to as the “garbage can model.” The garbage can model deters the decision-making and knowledge exchange process by allowing too many ingredients to be thrown into the pot. As Dalkir explains, “the theoretical breakthrough of the garbage can model is that it disconnects problems, solutions and decision makers from each other” (p. 60). For Toyota to have missed the defects in their products seems to indicate that there was definitely a disconnect within the company.


Toyota is an organization that has traditionally been known for its innovation, its forward thinking and its effective knowledge management systems. The major setback that the company experienced earlier this year when it had to recall eight of its most popular car models due to safety issues is notably out of character for this industry leader. However just because Toyota is ‘down’ does not mean that it is ‘out.’ By working to apply the theories and models of knowledge management to ensure that there no more breakdowns in communication within the organization, Toyota is still likely to have a bright future ahead.

Annotated Bibliography

Bryan, L.L. (2002) Just-in-time strategy for a turbulent world. McKinsey Quarterly, 2, 17-21

This article examines different approaches to corporate strategy and how they have changed as a result of external factors such as globalization. The author asserts that in a time of constant change, it is sometimes comforting to be able to rely on classical strategies like JIT.

Cusumano, M.A. (1985) the Japanese Automobile Industry: Technology and Management at Nissan and Toyota, Cambridge, Mass.

This book provides insight into the automotive industry in Japan. In addition to providing lengthy histories of Nissan and Toyota, it also offers a great deal of information about the inner workings of these organizations, particularly in terms of technological innovation.

Dalkir, K. (2005). Knowledge management in theory and practice. Butterworth-Heineman

This textbook explains all of the significant details of knowledge management, highlighting the major models and theories that dominate the field. Each model is discussed in terms of its relationship to other models and theories, as well as its applicability to real world situations.

Davenport, T.H. (2005). Thinking for a living: How to get better performance and results from knowledge workers. Boston: Harvard Business School Press.

This book covers all of the basics of knowledge management, with a strong focus on employee motivations and incentives. The author advocates creating a learning environment in which employees are allowed to thrive.

DeTienne, K.B, Dyer, G., Hoopes, C. And Harris, S. (2004). Toward a model of effective knowledge management and directions for future research: Culture, leadership, and CKOs Journal of Leadership and Organizational Studies, 10, 26-43.

The authors of this article performed an extensive literature review in an attempt to examine what they consider to be the three primary elements that constitute organizational culture: cooperative involvement, trust and incentives. Within these contexts, the authors integrate questions about the role of knowledge management as it affects organizational leadership.

Handy, Charles B. (1985). Understanding organizations, Penguin 3rd edition.

Charles Handy provides advice on how to handle employees when a company is going through changes; from negative changes such as downsizing to positive changes such as product differentiation.

Kelly, T. & Nanjiani, N. (2004). The business case for e-learning. San Jose, California, Cisco Press.

This book addresses online l earning through what is known as the “Cisco approach” which is a model that functions in accordance with “The Productivity Pyramid.” It includes a section on Toyota’s e-learning simulation program that was relevant to this paper.

Lawler, E.E. III (2005) From human resource management to organizational effectiveness, Wiley InterScience Journal, 44, 165-169

The author discussed marketing strategies that offer a competitive advantage to accomplish major goals designed to meet the client’s needs. The author indicated that marketing capabilities assist in forming the foundation for developing a sustainable competitive advantage and has a direct impact on organizational performance.

Lord, R.G., & Brown, D.J. (2001). Leadership, values, and subordinate self-concepts. Leadership Quarterly, 12, 133 — 152.

Lord and Brown assert that social phenomena, such as a leader’s behaviors, can only be understood in terms of the knowledge structures that they activate within subordinates. They note however that a cursory examination of the leadership literature reveals that little information is available on this topic. Yet at the same time, they report that the need to integrate the cognitive and behavioral perspectives seems widely supported by researchers.

Toyota posts $1.7 billion quarterly profit (2010, February 4), Associated Press. Retrieved from

This article discusses Toyota’s current financial state, and its expected downfall due to the problems the company has been facing with defective products. It shows how the company was thriving in the fourth quarter of 2009 but is likely to show significant drops in profits in the first quarter of 2010.

Appendix a

Executive Summary of the 14 Toyota Way Principles

Section I: Long-Term Philosophy

Principle 1: Base your management decision on a long-term-phylosophy, even at the expense of short-term financial goals

Section II: The right process will produce the right results

Principle 2: Create continuous process flow to bring problems to the surface

Principle 3: Use “pull” systems to aoid overproduction

Principle 4: Level out the workload (Heijunka). (Work like the tortoise, not the hare)

Principle 5: Build a culture of stopping to fix problems, to get the quality right the first time

Principle 6: Standardize tasks are the foundation for continuous improvement and employee empowerment

Principle 7: Use visual control so no problems are hidden

Principle 8: Use only reliable, thouroughly tested technology that serves your people and processes

Section III: Add value to the organization by developing your people and partners

Principle 9: Grow leaders who thouroughly understand the work, live the philosophy, and teach it to others

Principle 10: Develop exceptional people and teams who follow your company’s philosophy

Principle 11: Respect your extented network of partners and suppliers by challenging them and helping them improve

Section IV: Continously sloving root problems drives organizational learning

Principle 12: Go and see for yourself to thouroughly understand the situation (genchi genbutsu)

Principle 13: Make decisions slowly by consensus, thouroughly considering all options; implement decisions rapidely

Principle 14: Become a learning organization though relentless reflection (hansei) and continuous improvement (kaizen)


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