The Fall of the Mighty Toyota

by Jamie Flinchbaugh on February 17, 2010 · 16 comments

..and other such troubling headlines and comments have been popping up everywhere throughout the news cycle and the blogosphere. The major Toyota recall has stirred up activity every where, from a common leading story on the nightly news, to blog articles of all sorts.

I personally have been resisting writing about it at all. My personally practice is that I don’t like writing, or even judging, things that I do not have all the facts on. In this case, we have very few facts, although some trickle out daily. This is the same reason that Matthew May declined to comment. But at the same time, for each fact, two rumors surface. Although I felt it important to say something, I’m not going to weigh in on what Toyota did or did not do wrong, because these are facts that I just do not have.

Let me say that again in another way.. we do not even know the cause of the failure and to speculate and debate on how Toyota failed would be a mistake. I don’t debate things when neither I nor the other person do not have the facts.

On the other hand, I do have some observations, which I share and encourage your comments and thoughts.

1. Mental models are powerful, and dangerous, filters

Our mental models – or beliefs, principles, values – create a strong filter of how we interpret the data we receive. Our eyes and ears absorb information, but our brains turn that information into meaning. If one person believes that all people are inherently good, and another person believes that all people are inherently bad, the same observation will lead to different conclusions.

The situation with Toyota’s accelerators has really brought forth some of these mental models. Those who believed Toyota was evil and corrupt have used this as proof-positive that it is indeed true. To those that believe lean doesn’t work, this is the conclusive evidence. To those that saw Toyota as an organization that may have slipped a little from some pretty sound principles, this was a both a wake-up call and a demonstration of those principles.

An example of this is the Wall Street Journal’s take on reusing components and using common suppliers equaling lean. This is a false mental model, and they were taken to task by The Operations Room in Did lean ops lead to the Toyota recall? and by Mark Graban on Lean Blog. Even worse might be the media bias mental model that appears to prefer tragedy over science. This was well documented by Ed Wallace in The Real Scandal Behind the Toyota Recall.

2. The system design and the execution of the system are two different things

Enron failed because it was a bad system design. Incentives were designed to encourage the wrong behaviors with the lack of a culture to surface problems and gaps in governance that allowed it to grow. They actually executed quite well, perhaps too well, within a bad system design.

Regardless of how they failed, Toyota failed not because their system is flawed. There remains overwhelming evidence that the Toyota Production System, or the Toyota Way, or lean, works. Some have written, such as Why We Should Still Admire Toyota, that this doesn’t really change anything about the lessons we should learn. Companies have proven it to themselves over and over again. When you get the principles, skills, and methods of lean right, good things happen. Toyota’s failure was a failure in execution to that system, principles, skills, etc. As I already mentioned, I don’t know the facts of where and how things went wrong. But that doesn’t invalidate lean in any way, and certainly doesn’t mean as some of implied that lean caused the problem. Many writes struggle to distinguish between the auto industry and what is lean, as this post does.

3. Sustaining is hard, and requires continuous energy input

But things did go wrong. Sustaining cultural transformation and the behaviors. This is organizational entropy, and things will always deteriorate unless you continue putting in a greater amount of energy. This means, above all else, growing and developing people. This was always important to Toyota, but their rate of growing the business was faster than their rate of growing their people. There were experiments at all levels of how to speed up the rate of learning and development, but there are only so many ways to short-circuit the human learning process. Steve Spear, who wrote a case study on Toyota’s efforts to accelerate the development, wrote about gaps in learning and development. John Shook talked about it in Don’t Gloat Too Quickly – If This Could Happen to Toyota, It could Happen to You. Tom Johnson also shared that perspective in How Toyota Ran Off the Road.

The lesson is that you must be aware of your organization’s own deterioration. Never stop. Perhaps now fewer companies will try to claim that they are now “lean.”

4. Stopping systems, while expensive, shorten learning loops

Stopping their line, or pulling the big andon cord, is very expensive. Dealers who cannot sell and suppliers that cannot make parts are suffering tremendously. There is probably more than one supplier that was close enough to the edge that this will push them into bankruptcy. Stopping production is painful, very painful. Curious Cat reported on this early, and Evolving Excellence’s post on Toyota Finally Pulls the Big Andon Cord points this out well. It will hurt a lot of people, and suppliers will experience painful shutdowns, as reported by Reuters. So why do it?

First, it helps protect further customers. No more in the field means no more customers getting faulty product. Second, it focuses resources. A stopped line creates not only an urgency to drive this problem and no others. But it also eliminates all other distractions, excuses, and activities that can consume resources and attention. And third, whether you are stopping a whole line or just a segment, it freezes the current state so if there is something that requires observation, it can be done.

In this particular case, if they have to manufacture a large number of new components as replacements, running production strips those components that could go into recalled cars. By not running the line, the recall can be completed more quickly.

In the meantime, idled Toyota workers are making the most of the their time.

5. Customer perception is your brand

..and Toyota’s has been really hurt in a very major way. It will take a long time to earn loyalty back, and some will be gone forever. There are customers that would never drive a Chrysler again because their Plymouth Reliant broke down. Once you had a bad experience, that experience defines your beliefs in that brand.

Toyota hurt themselves with really bad, or just a lack of, PR and customer communications. We didn’t really hear anything from them until Lentz went on The Today Show. They are trying to make this up, but it is clear they didn’t know how to manage a crisis in customer confidence. They let the media define the story, and whether out of arrogance or ignorance, waited to tell the whole story when the time was right. However, while they are improving, this may be a story of too little too late.

Schumpeter demonstrates some of this failure in Getting the Cow Out of the Ditch. The Wall Street Journal explored why perhaps Toyota was ill-equipped for crisis management.

6. Complex problems are, well, complex

I was a former automotive engineer. Every engineer when they have to problem solve would love to have both clear data and be able to recreate the problem in a controlled way. Some problems just appear to be phantoms. In this case, the actual incident rate is very low. This also means it is very difficult to recreate. And data that comes after being filtered and interpreted but 1,000s of service techs and service managers is far from useful data. I’m not making excuses for them, but I’m indicating that (a) these kinds of problems often seem simple only after the fact and (b) just because they’re rolling out new parts doesn’t mean they’ve really found the root cause.

Jon Miller’s post on thoughts from a former Toyota quality manager points how complicated this problem just might be. It may be so complex that we’ll never really know the answer, or it was even really solved. This was suggested in a good analysis in Toyota’s Ghost in the Machine.

This story will be talked about for years. Books will be written about it about how obvious it was all along. But in the end lean still works, it is still hard to get work, and we should all worry more about our own gaps and progress than what some other company is doing.

Was the system failing or were the people failing to execute the system?


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