Ruthless Focus: What about Toyota?
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In Tim Berry's excellent post on "The Sad Truth About Best Practices " I came upon the following.
"Jim Collins’ blockbuster business book Good to Great, published in 2001, featured 11 supposedly great companies. All of them did extraordinarily well on the stock market for 10-20 years. But by 2008, when Steven Levitt posted Good to Great to Below Average on Freakonomics, two of them had died."
It reminded me of an important truth. Every company ever held up as a shining example of what to do will probably either go in the tank or provide lots of examples of things to do wrong. It happened to In Search of Excellence. It happened to Good to Great.
For those classics, it took a few years. Tom Hall and I didn't have to wait that long.
In our book, Ruthless Focus, we used Toyota as an example of a company that maintained a ruthless focus on a simple core strategy for decades. But even before the publisher started cranking out copies of the book Toyota was in the headlines for all kinds of bad reasons.
What happened? Here's a brief version of the story.
Toyota was founded by Sakichi Toyoda in the early Twentieth Century as Toyoda Spinning and Weaving Company. Their automatic looms performed marvelously, but it was a long way from Japan to the major markets in Europe and the US.
So, in 1929, Toyoda sold the production and sales rights to his looms. He gave the proceeds of the sale to his son, Kiichiro, to expand the company and to develop new technology for automobiles. Toyota's first car was introduced in 1936
After World War II, the company developed the Toyota Production System that has become the model for "lean manufacturing." They did a lot of things right.
They developed a suggestion system that generated 70 times the number of usable suggestions per worker as the one at GM. In the 1980s, Toyota took over the management of a GM plant in Fremont, California. It went from the worst plant in the GM system to one of the best with, essentially, the same workforce.
It wasn't all smooth sailing. The introduction of the Toyopet to the US market in the late 1950s was a disaster. But Toyota learned lessons that were put to use decades later with the development of the Lexus.
Things seemed to be going well. By 2008, Toyota was, depending on who you read either the biggest carmaker in the world or about to become the biggest.
And then the wheels started to come off. I think what happened was that Toyota abandoned its ruthless focus on continuous improvement, quality products, and learning from mistakes.
Instead, they began to worship the golden calf of growth. They aren't the first company to make that mistake.
For me, Toyota is a proof of one of the principles we advocate in Ruthless Focus. Ruthless focus on a simple core strategy can bring good results for decades. But if you shift your gaze to something else, those good results can evaporate quickly. And it's very, very hard to return to your prior excellence.
Check out my latest book, Ruthless Focus, at Amazon.
Posts about Ruthless Focus
Ruthless Focus: How to use key core strategies to grow your business
The Story of the Book
Annotated Table of Contents
Keep it Simple, Strategist
Strategy: Staying with What Works
Ruthless Focus on the Business Basics
Theo Albrecht, Trader Joe's, and Ruthless Focus
Ruthless Focus: Three Kinds of Crisis
The story of Yahoo's shifting strategy
Tom Stemberg, Staples, and the Two Strategy Questions
How Doing Acquisitions is like being a Fighter Pilot
Learning about Differentiation from Barbeque
Danger, Trader Joes!
Categories: Ruthless Focus, Strategy
Tags: Ruthless Focus Strategy
I think you are correct that they focused too much on growth. I do still think the general tone around Toyota's failures though goes too far. I don't think their management system is still very good, much much better than most.
Do the recent failures show they still have to guard against failure and have room to grow? Yes. But I don't think it shows they have become like most other companies.
From 2005, my blog on the new Toyota CEO's views: "Toyota has grown in the past few years, but [there's a risk] that a belief that the current status is satisfactory creeps into the minds of employees. That’s what I’m worried about.
We should never be satisfied with the current status. In each division, function, or region, we still have numerous problems to cope with. We need to identify each one of those tasks or problems and fully recognize them and pursue the causes."
Toyota knew the risk. I think they paid much more than lip service to the issues they just still failed to live up to the expectations.
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Thanks for adding those comments to our conversation, John. I agree that the general tone of the coverage of Toyota's issues has a bit of "piling on" about it. There's very little knowledgeable analysis in the general business press.
And, I agree that Toyota may have the strength and structures to come back. Very, very few companies who hit this kind of a bump are able to do that, but I think Toyota might be one of them.
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