Greg Hutchins
Published: Wednesday, March 17, 2010 - 07:06
Toyota is in the news daily for its safety-related recalls. It’s sad… no, tragic. How could a company’s quality reputation be diluted so quickly? The pundits are saying that it will take many years to regain its lost quality reputation.
For Toyota, its reputation was its most important asset—not its property, plants, and equipment; not its Toyota Production System (lean management); not its quality tools nor its just-in-time processes. Toyota’s most important asset was its goodwill or brand equity. This is now history.
Toyota invented the Toyota Production System (TPS), which incubated the lean industry, including just-in-time, quality processes, and countless improvement tools such as kanban. Toyota epitomized quality, not only in the auto industry, but globally. But something tragic happened.
According to news sources, Toyota wanted to overtake General Motors Co. to be the No. 1 auto manufacturer in the world. The New York Times reported:
“In his testimony to the House oversight committee on Feb. 24th, Mr. Toyoda acknowledged that in its pursuit of growth his firm stretched its lean philosophy close to the breaking point and in so doing became ‘confused’ about some of the principles that first made it great: its focus on putting customer satisfaction above all else, and its ability ‘to stop, think, and make improvements.’”
What happened? Hubris? It’s desire to overtake GM to be the world’s No. 1 auto manufacturer? Unscalable and unstable supplier processes? Who really knows? Perhaps a string of seemingly unrelated issues and events. What we do know is this shouldn't have happened.
My read of what could have caused Toyota’s quality debacle is that the company didn’t connect the dots of seemingly unrelated issues and events up to the enterprise level. Toyota executive management viewed the issues as technical, quality, tactical issues that they felt had parochial fixes.
Toyota has world-class quality tools and lean production processes. The acceleration challenges ostensibly occurred with second-tier suppliers. Toyota, as most original equipment manufacturers, manage and surveil their first-tier suppliers and rely on the due diligence of the first-tier to manage the second-tier to the same level that Toyota might. That obviously wasn’t the case.
One of the problems I’ve seen in the quality profession throughout the last dozen years is that quality has moved from a total quality management enterprise model to a fixation on project problem solving tools such as Six Sigma, where solutions are usually low-level tactical, transactional, service, or product fixes. Then, lean management exploded because it had a higher level, process focus. But, the problem with Six Sigma and lean methodologies is that they don’t have an enterprise governance, risk, and compliance focus. I believe these tools would not have revealed and mitigated Toyota’s problems by discovering and connecting the dots.
How about a visual metaphor? If you stare at the knothole in a twig of a tree for a long time, you sooner or later forget about the branch, limb, trunk, tree, and forest. This may be what happened at Toyota.
What Toyota needed was an enterprise look and solution to the issue of public safety. Toyota seemed to treat the unexpected vehicle acceleration as a product nonconformance issue, the recalls as a cost issue, the vehicle electronics as isolated anomalies, and second-tier supplier management as a first-tier supplier issue.
Toyota seemed to view technical quality problems as anomalous and fixable, not systemic, chronic, and material. Toyota didn’t appreciate the importance of enterprise governance and risk issues, such as public safety due diligence, transparency, and disclosure.
With perfect hindsight, the issues seem to point to a systemic inability to connect interrelated dots, most importantly at the strategic levels of governance and public safety. This is depicted in the inverted triangle in the above figure. Enterprise risk management has a governance, risk, and compliance focus, and integrates process tools (lean management) and product tools (Six Sigma).
So, do Toyota’s problems have any bearing on your career as a quality professional? Twenty years ago, we espoused that quality is everyone’s job. Great! Now that everyone is responsible for quality, what is our role? We’ve been great at the lower two levels of the above figure, but we’ve missed the highest level. With the quality emphasis on Six Sigma, we self-relegated ourselves to the tools level. In much the same way, I think that Toyoda distilled it; Toyota became confused about some of the principles that first made it great.
For the quality professional, as with Toyota, it’s time to get our focus back on the entire system, and apply our tools and skills from the top down. It’s time for us stop being so focused on the knot holes and losing sight of the forest.
Greg Hutchins is an engineer, certified enterprise risk manager, and the founder of the Certified Enterprise Risk Management Academy, Made in the U.S.A., WorkingIt.com, and Quality + Engineering.
Six Sigma Toyota—Connecting the Dots
And still not getting the whole picture
What happened?
This is a nice way to say that Toyota, on its way to the top, forgot its lean heritage and Six Sigma roots.
Connecting the dots
About The Author
Greg Hutchins
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Comments
Toyota - mistakes yes, complacent, I doubt it!
Greg, Great article thanks, and joining the dots is tiger country here in New Zealand too - obviously they don't teach it on MBA courses! In fact knowing what I know and who gets the jobs and how they behave, I wonder just what IS taught on MBA course that is useful.... As for your article, I take issue only with your view that Toyota's reputation is in ruins. I don't think their reputation will suffer much or for long for three reasons. First, they still make the best vehicles in the world. Anyone thinking their market opposites from the US or Europe (inc Germany) are in the same league is in fairyland. Secondly, as the saying goes, if you've never made a mistake you've never made anything. Toyota made a mistake, admitted it and their owner is taking responsibility for it. We didn't see excuses, lawyers and "not my fault" gibberish. I have no doubt Mr Toyoda will learn from this episode and ensure it won't happen again. US car makers have made the same mistakes for so long they've destroyed their entire industry - sadly, this is absolutely no surprise to any petrol head with QA skills living outside the US. Look around you, you guys over there, your motor industry has been a laughing stock for generations. Go back no further than the Ford Pinto and shudder at the "not my fault" legal fees. And don't forget Ford were Deming aficionados too, although not until the poor guy was an octogenarian! Didn't learn too well did they? But then Deming did say that America should export all it can - except American management. Thirdly, there is no such thing as bad advertising. Toyota is getting free column inches.....
Mistakes yes, complacent, I doubt it...we shall see..
Great stuff....
Toyota in the PitS
Where do we begin? At the top, as old-time Toyota executives would attest. The guilt and apology have been acknowledged. Only Toyota management knows what is going on inside the plants. I imagine that heads are rolling, politely of course. Read Crichton’s Rising Sun for a sense of how Japanese management is. The Seventh Deadly Sin of Pride (from which the 6 others can be traced) is certainly present as is the other six. They will discover that the tools are not the culprit – but the people using the tools are. Great tools and bad judgment still make a bad product. The Process will be fixed. A good process has a 1.0 - .9997 chance of making an incorrect decision by random chance alone – Probably more if the decision process is influenced (a.k.a. biased) by ‘politics’ or such. A Bad or Biased process has almost no chance of making a good product, except by random chance. The ‘Baby’ will not be “thrown out with the Bathwater” on this go-around.
Americans like to say, incorrectly, that “Perception is reality.” This is another instance where that opinion is not right. The Perception is that Toyota has lost its quality so buy Government Motors. The Reality is that Toyota and Honda automotive quality is so far above American automotive quality that even on their worst day, the Japanese are better than U.S. Why? Well think “Long Term” not ”Short Term.” Think 50 years of using quality tools like Americans use a calculator…second nature. Think “Fix the Process” not “Find the Perp.”
Toyota
I find it funny as well that a company with such a good reputation as Toyota has had such a swift decline and the media is, in my opinion, only partially to blame. Does it seem strange to anyone else that the problem is so big and so quick, almost too big and quick. I mean, it almost seems intentional.
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Toyota Mangement
W. Edwards Deming said to Japanese management - they must remain vigilent in their pursuit of quality. Quality comes first. Or in Joseph Juran's terminology "fitness for use". If the TV blows up the second or third time I use it, it doesn't matter how great the picture looked before that - the set is junk.
As a product becomes more and more complex fitness for use beomes increasing more difficult. And quality efforts by Japanese management were already showing the strain before these series of tragic events. But to implement an entirely new set of products - the hybrids over such a short period of time without abandoning your other lines was a disaster in the making. Toyota essentially expanded its offerings diffusing its quality efforts and making the situation much more difficult than it had to be.
Why did Toyota still make a non-hybrid Camry? A non-hybrid Highlander? Once you bridge the gap and see that the product works eliminate the inefficient so you can focus on bringing costs down and narrow your quality concerns. Didn't happen. Expansion and complexity don't work well together.
Toyota Needs to Look Inward
The media picking up on a safety issue, what a crime. I am sorry the problem with Toyota’s reputation is ego, as alluded to in the article, related to the way Japanese car makers (maybe others) have hid their recalls. I experienced a hidden recall with Acura some years back. Certain Japanese makers have brought attention to the fact they have less recalls and to some extent this is true (Toyota’s overall product lifetime quality is undeniable) but they would “take care of some things” without the broadcast recall. So if the media is focused on this now, too bad, something they have done caught up with them.
Toyota has made one of the best cars in terms of long-term quality throughout, and still probably does. However they were unable to admit to this defect or defects and tried to hide this failure. That is ego and a cultural philosophy for the company and could have a background in Japanese culture. They got caught and made a stupid miscalculation of the impact it would have on their company.
The emphasis as quality people has become a focus on the systems, Six Sigma, Lean Manufacturing, or whatever method of the day and not the end game “the customer ultimately with profit”. These systems are just tools to accomplish that end. When you lose that focus I don’t care what your statistics say, you have failed.
Sometimes you have to admit the mistake before it is “found out” take you punishment, contain the problem and fix what is broken in your company so it does not recur.
Toyota Needs to Look Inward - Comment
Tall Poppy Syndrome (TPS) is a pejorative term used in the UK, Ireland, Australia, New Zealand and Canada to describe a social phenomenon in which people of genuine merit are resented, attacked, cut down, or criticised because their talents or achievements elevate them above or distinguish them from their peers. Alternatively someone is said to be a target of tall poppy syndrome when his or her assumption of a higher economic, social, or political position is actually presumptuous, attention seeking, or without merit (Wikipedia). In my OPINION what is happening to Toyota in the media is a classic example of the first part of this definition. NO business can control all variation or prevent special cause variation, if it were so the definition of variation could be removed from our language. As Forrest Gump said, "it happens" to which of course was added "Sh"! I do agree with part of the last statement made "..take your punishment, contain the problem and fix what is broken in your company so it does not recur". From what I see and hear that is exactly what Toyota are doing; they are saying "OUR systems failed and this is what WE are doing to fix it". As to whether or not the admission was before Toyota was "found out" I am too far removed to comment with conviction. If "found out" means being pilloried by the media then I again refer to the definition of Tall Poppy Syndrome. Good speed in your journey to correct the systemic problems Toyota.
How?? You have to ask?
Nice article Greg and a point well-made. But I can't resist going back to the original question: How could a company's quality reputation be diluted so quickly?
Your article was more about how it happened and a look at contributing causes than an answer to your opening question. So let's look at the question again. I think Toyota's reputation was diluted so quickly because the media is having a field day with it. There is nothing better in the world of news than when a big guy goes down. This is right up there with Tiger Woods as far as applying the old saying - the bigger they are the harder they fall. I am not saying the media is to blame or making any judgement about whether Toyota deserves it or not. I am merely relating what I thought when I read your question. A reputation can only be diluted quickly when word spreads quickly. And in this case the huge surge of Toyota related news and analysis from all fronts seems to be enough to do the job. And Quality Digest seems to be doing it's part. I have noticed that recently there seems to be at least one Toyota article in QD online each week. Out of 12 articles! Seems like you guys have a quota. Speak to Mick about that - he will encourage you that quotas are a bad thing.