What can we learn from the Toyota debacle?

2010

The Toyota disaster - or rather chain of disasters - came as a severe shock not only to car owners, but to anyone who believes that good management can be enduring.

Toyota had the best story of all the superstars of the Japanese post-war rise to market dominance in key industries. A family owned and professionally managed company, Toyota developed a management culture that steadily transformed an obscure business into a world leader.

Before disaster struck, Toyota had accomplished its ultimate mission - ousting General Motors from the lead position in what remains the most important manufacturing industry.

Toyota personified all the Japanese triumphs, including, of course, the worldwide drive to set new standards of production engineering that left Detroit in the shade. 'Quality' was the foundation of the engineers' breakthrough.

Americans were already aware of the new philosophy of raising quality standards by systematic approaches. W. Edwards Deming, the pioneer, was credited with exporting these new ideas to Japan. Although they were just as valid for domestic use and would have won the same painless rewards, Detroit showed no interest, demonstrating a wilful ignorance repeated time after time in numerous industries.

The Toyota Production System became the world standard, thanks in no small part to a simple engineer named Taiichi Ohno whose pupils demonstrated their methods without any fear of successful imitation from the West.

The Japanese revolutions were written off in the US as products of a different culture which were unsuited to Western ways. That was garbage. Put simply, the cultural advantage lay in defining what had to be done and devising better systems for doing it. That included rigorous methods for making sure that the task was indeed better designed and accomplished.

At Toyota, a staggering failure of this basic philosophy is represented by the recalls of cars and vans to check on faulty brakes and accelerators. There must have been a breakdown in the mental conditioning at the Toyota factories, which resulted in design and production flaws that were as systemic as the traditional hit-or-miss performance of the Western rivals.

There is no room for self-congratulation, however, since the latter are beset by troubles enough of their own, such as GM's sorry bankruptcy.

Toyota's fall isn't just a Japanese incident, but rather a blow to good management, and a sign that management in general is failing to deliver.

If the management was aware of the problems, did it fail to identify the root causes? If the causes had been identified correctly, was there a delay in the reaction while the company ignored the damage to its market status? If Toyota was capable of timely repair, why wasn't this carried out?

Remember the simple rules of problem-solving:

1. Identify what needs to be done.

2. Devise systematically better ways of doing it.

3. Employ rigorous methods to check that the task is indeed better designed and executed.

The Toyota affair highlights some basic points of management. First, any company, no matter how large and renowned, can stumble into grave error. Second, damaged pride and anxious fear make it difficult to put right the error in good time. Third, management decisions should never be made on the basis of profit forecasts alone.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".