Success Sows the Seeds of Failure – Toyota’s Complacency Causes Reputation to Crash
By Denise Harrison, Vice President
Can success breed failure? This seems like an oxymoron doesn’t it? But world class companies continue to fall into this trap – Toyota is the latest example. Toyota gained market share in the automotive market by focusing on quality – this was their strategic competency. This single-minded concentration on quality built trust with consumers worldwide, wooing consumers away from other less conscientious manufacturers. But the recent recall of millions of Toyota vehicles over several model years shows how Toyota’s loss of focus on quality has severely damaged the trust that had been built up over decades. The cost of the recall will be millions of dollars in the short-term, but the loss of future sales and its reputation is incalculable.
Toyota – Culture of Quality
How did Toyota institutionalize its quality culture? One aspect of the “Toyota Way” is that newly hired engineers were mentored for 10 years to ensure that they are fully imbued with the values around which the culture is built. Another aspect of the quality culture was the concentration on analyzing consumer complaints and acting on the analysis quickly. However, when Toyota set its goal to become the world’s largest automotive manufacturer, it lost sight of the key values that gave it its reputation in the first place. In order to meet its growth targets Toyota had to hire many new engineers globally; however it did not have the senior engineers available to mentor the new team in the manner that it had in the past. In addition, it no longer spent as much time analyzing consumer complaints – and in some cases it came up with low cost “fixes” (e.g. replacing floor mats in response to complaints of sticky accelerator pedals). One final aspect of the decline was that Toyota did not share safety information worldwide, so problems that cropped up in Europe were not shared with the US. Hence its “failure to connect the dots”, as stated by Akio Toyoda when commenting on the recent recall.
What Should We Learn?
Toyota’s early growth resulted from its relentless pursuit of quality – this was its strategic competency; however, it lost its way when growth took priority. When you lose sight of your strategic competency, the very differentiator that gives you your competitive advantage, you will damage your reputation in the market. This reputation often takes decades to build. So as you look to grow, make sure that the growth does not cause you to grow faster than you can grow your strategic competency. This means that you must have plans to ensure your intellectual capital (strategic competency) grows at the same pace as your sales growth. This competency expansion is a critical consideration as you develop your strategy.
Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at email@example.com.