How the Mighty Have Fallen

Turning Point

By most accounts, including its own, Toyota is having a bad year. It has gone from the top of the automotive heap for dependability, quality and customer satisfaction to fifth place in a recent survey that now places Porsche at number one. Porsche?

 
Back in 2002, Toyota made a strategic decision to go for the brass ring for the world’s biggest auto maker. It made sense since the company was already nipping at GM’s heels at the time. But being within striking distance and actually having the “kick” to close the gap may be where Toyota erred.
 
As is usually the case, a strategy is only as good as the strategist’s ability to execute it. Execution is the transition point between strategic and tactical, and by its own admission, it was the tactical phase where the company fell down.
 
In its quest to achieve the strategic goal of growing the business to number one status, Toyota took a detour from its mission of building the highest quality and most dependable cars. In just a few short months, pummeled by recalls and soon class action lawsuits, the company’s once enviable world-class reputation has proven too vulnerable. Even the company’s president, Akio Toyoda, admitted the company may have grown too quickly in pursuit of its corporate goal.
 
On its fast track to bigger, the company needed more plants in more places, many new employees, expansion of its supplier base, and new models designed for faster and cheaper production all put quickly in place to sell more cars.
 
On the surface, this growth seems an ideal outcome. Most businesses believe a continuous high rate of growth is not only a laudable goal, but necessary for success. The lesson from Toyota’s mess is that growth, simply making and selling more stuff without the controls in place to give early warning that something is amiss with quality, can undo years of building a sparkling brand—very quickly.
 
In spite of being bloodied and bruised, I believe Toyota will survive its nightmare. Although, I hope a take away for them will be a better understanding of the complex nature of managing growth along with a good dose of humility.
 
And for our businesses, there are lessons to be learned from Toyota. Taking customer loyalty for granted is dangerous. Not being able to fix customer problems to their satisfaction by ignoring them or covering them up could prove fatal.
 
The relationship between supplier and customer is first built on trust followed by consistent performance that reinforces that initial trust. Smart shops understand the need to re-earn a customer’s trust with every job. Over time, it becomes cultural, engrained in every employee and supported by management.
 
Toyota’s temporary insanity, brought on in part by a misguided strategy to be number one in the world, forgot the basics of its own well oiled system. The Toyota production system was first envied and then copied by manufacturers around the world.
 
However, it’s a big mistake to assume that any manufacturing system, even one with a successful track record like Toyota’s, will run on cruise control for very long. Every business has a human factor that cannot be ignored and must be constantly nurtured and reminded of the mission. 
 
In businesses large and small it’s the employees that must implement the company’s strategies. They are the tacticians and require the tools and knowledge to make correct decisions to move the strategy forward as well as the power to raise red flags before a problem gets out of control. They also need to know what the strategy is, how it can be done and what their role in its execution is.
 
If that strategy is to help the company grow, it’s important to understand from Toyota that leaving the growth gas pedal floored until the engine “red-lines” is not the way to go (sorry, I couldn’t resist). Rather, it’s much better using the accelerator to move the growth strategy along for a little while then back off and slow down to allow processes, controls and people to catch up.
 
I think Toyota has learned that a growth strategy is a complex thing and that its resultant changes are dependent on human behavior. Some day, this episode will be a case study in public relations text books. In the mean time, take a look at your business strategy and tactics to garner what’s germane from Toyota’s painful experience to your shop. 