Toyota Blinks

And misses the quality boat

Published: Wednesday, March 10, 2010 - 06:00

Toyota’s name has been plastered in the headlines providing it the publicity no organization would wish for.

Historically, Toyota had achieved a global reputation for the production of very high quality vehicles. The Toyota Production System, or the Toyota Way, is being taught, learned, and implemented in a variety of organizations from manufacturing and service, to hospitality, health care, and education. That’s why the recent bungling over a spate of global recalls appears to be so out of character; did the giant blink?

While responding to the safety issues, Akio Toyoda, the CEO of Toyota, acknowledged that Toyota had gotten too focused in gaining market share and becoming the largest auto manufacturer in the world. Apparently, it failed to practice what it preached and fell short in following its basic tenets of rigorous testing, managerial oversight, and valuing customers, thereby enabling problems to creep in.  

One lesson is obvious: Quality cannot be compromised; blink at your own peril.

Jeffrey Liker, professor of Industrial and Operations Engineering at the University of Michigan, who has written books on the Toyota Way, says, “Toyota has been exemplary at surfacing problems in the factory and stopping production before a crisis was reached. Failure to follow all the principles of the Toyota Way led to this crisis. Now the Toyota Way is the only way out of it.”

Toyota has been known to empower its workers to be innovative so as to boost efficiency. Is it now going to push safety with the same passion? Will it still be the benchmark?

The question is whether Toyota will be able to regain the trust and reputation it had before the crisis. As has also been seen in the news recently, trust in the financial sector has unfortunately been eroding for a while and integrity had been compromised for profit. It appears this may have been the case with Toyota in its race to become the largest auto company in the world by 2010. Was it greed-driven (as with its financial industry counterparts), or merely ego-driven? Or was it a governance issue, as happens at many organizations that became too focused on meeting the numbers or else?

Whatever it is, history assures us that turbulent times create opportunities. These might take the shape of the introduction of new resources into the economy (e.g., replacing high-cost data centers and incompatible networks with lower-cost web services platforms), innovative combinations of existing resources (e.g., the agility of entrepreneurial organizations and the administrative capability of large organizations) or stimulating new customer demands (environmentally friendly, healthy products). The U.S. car manufacturers might take advantage of the Toyota fiasco to push the safety record of their own brands to stimulate new demand. We might see the introduction of new technology that combines the accelerating and braking systems to develop new failsafe systems.

While corporate-level personnel sit in their boardrooms and plot their forward directions, not even the best strategists can foresee how markets will unfold. It is at this time that the flexibility of an organization becomes evident. It is this strategic agility that can help the organization create the greatest effect despite limiting and turbulent times. In the past, Toyota has exhibited exceptional operational agility. It has constantly anticipated consumer’s shifting preferences for quality, fuel efficiency, and environmental consciousness; and by leveraging its revenue and cost opportunities, it has grown to be the largest auto manufacturer in the world.

Then, it blinked, blinded by the desire to become the largest manufacturer it missed important indicators of harsh realities that something was going wrong. While lean philosophies and methodologies became the hallmark of its existence, it failed to see patterns of lapses in safety. What does this portend for Toyota? Is its fate going to be similar to other late leaders of the industry who, being driven by numbers, grew so big that they failed to see trends (internal or external) that led to their loss of direction?

Toyoda has apologized, but as professor Don Sull of London Business School says, “Actions, not an individual's traits, increase the odds of success in turbulent markets.”

Given its operational agility and propensity for action, Toyota will likely emerge successfully from this crisis. It’s Toyota’s actions now that will really determine the future of the company as a benchmark.

About The Author

Akhilesh Gulati

Akhilesh Gulati has 25 years of experience in operational excellence, process redesign, lean, Six Sigma, strategic planning, and TRIZ (structured innovation) training and consulting in a variety of industries. Gulati is the Principal consultant at PIVOT Management Consultants and the CEO of the analytics firm Pivot Adapt Inc. in S. California. Akhilesh holds an MS from the University of Michigan, Ann Arbor, and MBA from UCLA, is a Six Sigma Master Black Belt and a Balanced Scorecard Professional.