A Culture of Scarcity

Friday, April 6, 2007

One of the interesting insights I have gained from reading Thomas Friedman’s columns in The New York Times is his observation that oil-rich nations have a history of not investing in the development of their human talent. These countries tend to spend less on education as well as technology infrastructure, such as broadband Internet capacity. I agree that having lots of something that other countries desperately need can make you “fat and happy” and less likely to spend public money on things that don’t bring the same immediate, financial returns, such as education. Of course this state of bliss can only continue if the right mix of supply and demand continues. Lower the demand and increase the supply and countries like Nigeria, Iran, and Venezuela are in a different boat. In any case, these countries both benefit and suffer from a culture of plenty – summed up by “why bother trying to compete in the world when we have enough oil to take it easy?”

But the opposite is equally revealing – a culture of scarcity. In a recent article in The New York Times Magazine (I swear I read things other than The New York Times), Jon Gertner explains how Toyota conquered the car world. I found the following excerpt very revealing on the roles national culture, resource scarcity, and marketplace demands played in shaping Toyota’s corporate culture. I’ll let Jon explain it.

Toyota’s success has often been attributed to a Japanese quality of persistence and ingenuity. One of the first Western academics to look deep inside the company, Michael Cusumano, now a professor of management at M.I.T., debunked that notion when he compared Toyota and Nissan in the early 1980’s. “The founders and the managers created and refined Toyota company culture, which is far more powerful than Japanese culture,” he says. “It does build on many things that are Japanese – precision, quality, loyalty. But the Toyota culture dominates.” Cusumano adds that Toyota’s origins, in a rural prefecture, hours from the international influences of Tokyo, provided a beneficiary insularity. The company began growing just after World War II, nurtured by government regulations that effectively shut out big American automakers. Still, the devastated postwar economy in Japan necessitated extraordinary resourcefulness: because there was a lack of materials and parts suppliers, for example, Toyota had to create them from scratch. Since the early 1930’s, Toyota engineers have looked everywhere for inspiration while tearing apart American products to see how they work. Toyota’s systems and worldview derive from an economy of scarcity. In 1950, the company’s near-bankruptcy during a difficult year further defined its philosophy of frugality. Toyota soon began to focus obsessively on reducing muda – or waste – and building up a vast storehouse of cash for security.

So early on, circumstances and its leaders hardwired Toyota’s culture in a particular way. My take on Gertner’s reporting is that it is this very culture that gives Toyota a particular competitive advantage in today’s marketplace. Yes, Toyota has lots of money to throw at product development and quality but this cash reserve seems to come directly from a cultural characteristic of the company – frugality. Now contrast this with Microsoft. They have their own version of “having more money than God” and have spent lots trying to get into the Internet game. But Google is still the king of the search hill and Window’s Vista continues to require patches as well. Even with all this money, Microsoft can’t seem to be a heavy hitter in the places they need to compete (with the possible exception of Xbox. I’m no gamer, any out there that can educate me on Microsoft’s competitiveness in the gaming industry?). When was the last time Microsoft was seen as innovative? Have they slipped into a culture of plenty? Can Steve Ballmer turn Microsoft’s banquet into a Victory garden to re-ignite a culture of “hunger?”

Side bar: for some strange reason I googled Microsoft to find its website (here’s a guess, maybe its www.microsoft.com) and the first thing that popped up, as a Google sponsored link was “Microsoft Updates: Detect & Remove Malicious Software. Free Removal Tool from Microsoft.” Does the expression “canary in a coal mine” come to mind?