Toyota: Managing Nightmares

The Nightmare

Toyota continues to be plagued by recalls.  The current acceleration issues (either floor mats or “sticky” accelerators), braking issues on the Prius Hybrid, and now reports in the USA of steering problems with 2009 and 2010 Corollas.  While the majority of the news reports focus on the next steps to repair faulty vehicles, the real nightmare is the human tragedy that was and may still be pending until these issues are resolved.

What is also surprising is the scope of the recalls as they extend to include 2004 model year vehicles.  This is a lot for one company to absorb over such a short period.  It is clear that a flawed design can bring a company to it’s knees overnight.  In the wake of this nightmare, it is also disappointing that Toyota has been less than forthcoming with their communication strategy.

Toyota Lessons Learned

A crucial lesson for Toyota and other companies is to learn to recognize when a problem is really a problem.  Rather than dismissing a fault or failure as a remote possibility or “highly unlikely event”, the key to solving any problem is acknowledging that one exists.  This may have been the greatest error of all in this case.

As consumers we may be too naïve to think that companies are operating with our best interests in mind and not necessarily putting the interests of their stakeholders first.  To be more specific, there is a very fine line between managing solutions, managing risk, and managing a profitable business.  Problems without resolutions or preventable measures are subject to risk management strategy and the price of many products on the market today include a company’s costs to manage risks and potential liabilities.

Responsiveness versus Excuses

Is it the investment or the lives that were lost that call for varying degrees of “investigation”, problem solving, and government intervention?  The timeline of events leading to the recall for accelerator issues spans months and perhaps even years when the problem was first reported.  What does it take before a company finally decides that an event has statistical significance?

The lesson that all companies can learn from this is that the value of human life cannot be measured or dismissed by a risk assessment or  an extremely remote chance of recurrence.  There is little comfort in statistics if you happen to be that one person in a million that has the problem.  We are not suggesting that Toyota dismissed prior reports of problems; we are simply asking “out loud” if they could have had cause to act sooner.

Some media reports have suggested that Toyota grew too fast over the past few years.  How would that have any impact on the design of the vehicle?  Toyota design changes are typically perceived as enhancements and improvements over time.  Yes, Toyota gained significant increases in market share as interest in hybrid vehicles grew with ever increasing gas prices.  Yes, increased volumes place an unprecedented strain on resources throughout the supply chain and perhaps even more so for those suppliers that have been surviving on reduced staff and personnel.  None of these are excuses for a failed design.  This was not a manufacturing defect as we understand it.

Toyota Trust

Unfortunately for Toyota, this recall is not a nightmare they can just wake up from – it is a bitter reality.  Although Toyota vows to improve quality, this needs to be demonstrated.  These same words were uttered by Toyota President Katsuaki Watanabe in 2006 as investigations were pending for the recall of over a million vehicles for a faulty steering component that was initially discovered in 2004.  Akio Toyoda now finds himself making similar commitments again in 2010.

When we consider the number of vehicles produced, we also have to consider the effectiveness of the solution seemingly contrived over recent weeks or, for the benefit of the doubt, months.

How do we really know the proposed solution is effective?  The reality is that we don’t.  As with the discovery of the original defect, only time will tell.  Despite all the testing performed to simulate “the real world”, it is crucial to understand that tests are only simulations – they are not real life.  Even though a failure is predictable, it is not always preventable and just because it didn’t happen doesn’t mean it can’t happen.

Restoring consumer confidence and trust will take some time and Toyota’s crisis management skills will certainly be challenged.  The communication strategy to date has been less than admirable by some accounts, while others continue to praise Toyota’s product line and have re-affirmed their confidence in the company.

Owing to their own lean principles, we are hopeful that Toyota will continue to embrace problems as opportunities to learn and to strengthen the company  and its products.  Toyota is the last company we would expect to see with this number of problems on their hands at any one time.

Our disappointment with Toyota is the lapse between discovery and fix, and subsequently the lapse in communication as the recalls are officially made public.  To this end, Toyota’s reputation may be waning.

Until Next Time – STAY lean!