Toyota's 'hybrid-strategy' pays off

Smart strategy can also sometimes be about going slower when everyone else is in a rush to capitalise on empty hype.

Toyota launched their first hybrid vehicle - the Prius - way back in 1997 [yes...Bill Clinton was the US President back then; Nelson Mandela had the top job in South Africa]. The first Lexus hybrid made its debut two years before Steve Jobs introduced the world to the iPhone for the first time. The Toyota Group have been investing in and tinkering with their technological approach to hybrid vehicles for a very long time.

Back in 1997 the Prius was revolutionary, but still very experimental. Lots of important motoring people publicly mocked Toyota for the Prius. Jeremy Clarkson even called it a "cynical marketing exercise". But despite the public flogging that it got, Toyota saw something in a 'hybrid-strategy' instead of going all-in instead on developing pure EVs...and stuck to their guns.

See unlike Tesla - who's perspective tends to be very limited to what works in California - Toyota are a global company that have deep experience in successfully selling cars in places like Africa. Toyota knew that in less-developed regions, a pure EV strategy would be a very limited one, which is why they chose instead to specialise in developing their capabilities in hybrid technology.

As recently as last year, Toyota's decision to focus on hybrids was again mocked by commentators Those in-the-know labeled Toyota a 'slow learner' - out of touch as to where the world was moving. And still Toyota did not budge from their position.

But in reality, full electric vehicles have some significant, practical downsides. They are still expensive - an entry-level Tesla Model 3 will cost you around $40 000...a Toyota Corolla Cross Hybrid will cost you half of that. They have a limited driving range - 270 odd miles on a charge for a Tesla, a hybrid Toyota...well, till you hit the next petrol station. Even in developed markets there are not nearly enough recharging points to service the existing fleet of EVs and obviously regions like Africa are just not an option at all, for obvious reasons.

In contrast, hybrids are far more practical, cheaper to buy and make far more sense in real places outside of California. And now even in California the penny is dropping that the world just isn't practically ready for an electric vehicle future.

The Toyota Group is looking like the clear winner in the energy-efficient car segment

Sales of hybrids in the US are now soaring (while sales of EV are slumping; so much so that Elon Musk is even starting to do something he never thought he would need to....advertise) and Toyota's strategy is finally really paying off for them. It's taken nearly 30 years to deliver the performance they had hoped for, and finally now they are looking like shrewd forecasters.

The Toyota hybrid-strategy is a good case study for those looking to understand a practical example of outperformance. Toyota identified a clear opportunity in the marketplace, made a judgment, took a specific, differentiated position, invested a considerable amount in building its competence and associated assets...and against considerable criticism...stuck to its choice.

It now looks like they made the right decision - their single-minded determination is now paying off.

There is a lot to admire about a big company like Toyota, but the main take-out we're getting from this is an important lesson in choice-making, which is at the heart of strategy.

Most companies try to be everything to everyone without a strong commitment to focus. This approach dilutes an organisation's efforts and leaves them in a strategic 'no man's land' where it's tough to gain any kind of traction.

Without a clear view of a plausible opportunity that has been thoroughly diagnosed as viable in a medium to long-term future there is no avenue available to access more success.

It'll be interesting to see how Toyota transitions over time towards more fully electric vehicles (their new range of plug-in hybrids give just a hint of that), but for now they're looking like the smart ones in the energy-transition room.


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