Leadership Reading: Special Toyota Edition
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Sakichi Toyoda founded Toyota in the early Twentieth Century as Toyoda Spinning and Weaving Company. In 1929, he sold the production and sales rights to his looms to a British company, Platt Brothers. He took the money from the sale and gave it to his son, Kiichiro to expand the company and to develop new technology for automobiles.
Toyota surpassed GM and the rest of the field by doing three things. They created a production system that sets the standard for efficiency. They produce higher quality cars for less than the competition. They've been good at learning from their mistakes
In 1959, Toyota entered the US market with the Toyopet Crown. Two years later, after selling just 2000, they pulled the car from the market.
When they planned to introduce the Lexus, Toyota applied lessons learned from the Toyopet. Result: One of the most successful product launches in history. Toyota surpassed its first year sales goals. Dealers made money. Customers loved the Lexus.
Today, Toyota is facing what may be the most significant crisis for the company, since it had to re-organize and recover after World War II. The question is: "Will Toyota return to the quality and efficiency strategy that has served it well for over half a century or will this be the start of a long, downward slide?"
We won't know the answer to that question for quite a while. But several stories in the business press can help you get your head around what's going on. Here's my pick of the best.
From the Detroit Free Press: Toyota accused of 'not being frank' on problem
"When owners of Lexus sedans began reporting harrowing crashes involving stuck accelerator pedals in early 2007, Toyota told U.S. safety regulators there was no safety problem with its floor mats -- but it would send owners an orange warning sticker just to be sure."
From the Economist: Make or brake
"IN A race that matched Formula One for its predictability, Toyota Motor Corporation slipped past General Motors just under two years ago to become the world’s biggest carmaker. But even as Toyota built up the revs, all has not been well. The latest setback came on Tuesday January 26th when the firm announced that it would halt production temporarily at six assembly plants in North America and suspend sales of eight of its most popular models, including the Camry, the best-selling car in the United States."
From Fortune: Toyota's Tylenol moment
"In the midst of its biggest recall ever, Toyota is grappling with an existential crisis. By suspending production and sales of eight models in the U.S. and recalling millions of vehicles, it is putting its business on hold for an indefinite amount of time while it attempts to correct its twin problems of sticky accelerators and faulty carpets. This is an especially difficult dilemma for the company, because it has built its reputation not on looks or performance or great deals, but upon quality and dependability."
From the Washington Post: Toyota has a fix for gas pedals that stick on models including Camry, Corolla
"Toyota told dealers Saturday it has developed a fix for the accelerator issue in the millions of cars it recalled last week, and that the parts for the repairs would be available as early as this week."
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Categories: Leadership Reading,Toyota
Tags: Leadership Reading
Wally,
As a Toyota owner, I've been following all of the news and latest developments on this as well. It is amazing how a brand which has been around for over 80 years can so quickly tarnish the name it has built. In today's market place, it only takes one major screw up with national attention to do it though. In my opinion, Toyota is taking a good leadership role by halting sales and production of these models, showing the public that it feels this is an important issue that needs to be handled immediately. Once the problem is corrected, the future of the brand and its reputation will all depend the problem not repeating itself and on how the brand is marketed. I've read many articles on both companies and individuals who have made terrible mistakes capable of ruining their public image forever. How they are marketed after the crisis tends to greatly control their chances for future success.
Carl
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Thanks for adding that perspective, Carl. I can empathize somewhat because I was driving a Ford Explorer back when the Firestone tire issue/recall happened.
Reputations are based on trust. And trust is based on more than production efficiency or value-for-money. It's also based on whether a company cares about its customers and demonstrates that care by the way it acts.
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Does anyone remember the Pentium <http://en.wikipedia.org/wiki/Pentium_FDIV_bug> bug? At the time, people started writing off Intel. Andrew Grove made some compounding errors in handling the situation. After of few days of less-than-brilliant, Intel offered to replace any flawed chips. Few users took them up on it. Intel remains a Colossus in world electronics.
The moral of the story: Do the right thing ("clean up the spilt milk") and start rebuilding your image the way you built it the first time....
All that remains to see is if Toyota will learn lessons from this episode, or need "intensive re-schooling" like Ford did after the Pinto. <http://en.wikipedia.org/wiki/Ford_Pinto#Safety_problems_and_scandal>
Desertcat
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Thanks for those reminders, Kirk. I had forgotten the Pentium incident entirely.
One thing worth mentioning is that "doing the right thing" is the start, but not the whole game. Toyota will need to evaluate how they got into this mess. If it turns out that it's a fixable process problem that will be one thing. But if it turns out that Toyota lost its single-minded focus on quality, that will be much bigger potentially much more harmful.
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Wally, great background into Toyota. I'm interested in how you feel about the piece that Akio Toyoda recently wrote in the Washington Post apologizing for the quality lapse and outlining his plan to change things within the company -
If Ford can recover from their trust issues in the past and turn things around today, I think Toyota can as well in the future.
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Thanks for the kind words, Ajo. I thought Toyoda's piece was a very Japanese message addressed to a US audience. I don't know how it will be either understood or received.
That's a shame because the piece describes the reason why Toyota has a possibility of coming out of this successfully. If that happens, it won't happen quickly or easily or without some mis-steps, but the Toyota culture itself means it's possible.
Over most of the last year, Tom Hall and I looked at companies who had been successful for a long time because they focused on a single core strategy. The danger was always that a successful company would try to move beyond the basic strategy, often to something that would, hopefully, accelerate growth.
Toyota was one of the companies we studied. Since they shifted from making power looms to the automotive business, the company has been characterized by two things. They have focused on quality. And they have learned from their mistakes.
As an example, their first foray into the American market, with the Toyopet, was pretty much a disaster. But lessons learned from that introduction were explicitly included in the planning for the Lexus.
Toyota can come back from this crisis if they re-focus on the quality/improvement strategy that worked for several decades. The strategy did not stop working. They stopped working it. And they will need to take lessons from this crisis and use them to improve things in the future.
Even if they do those things, there is no guarantee that they will come out OK. Trust is a fickle thing and very hard to regain once it's questioned. We'll have to wait and see what happens.
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Thanks for the reply. Was curious why you called it a very Japanese message. Wouldn't you agree that such a message needs to be sent by any CEO, even U.S. ones?
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My sense is that for a Japanese company, the message is culturally mandated. Group/company identity is much more important. In the US, this sort of thing is avoided if possible and then handled by the crisis PR agency of choice. That's what American readers are used to. I think many American readers of Toyoda's article will think be highly skeptical of both the apology and the intent to fix the problem.
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