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It's Not the Crisis; It's How You Respond to It

John Shook
2/5/2010
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He probably didn't ask for a problem of quite this magnitude, but like it or not, Akio Toyoda has his crisis. Akio took the reigns with a proclamation that he wanted to change the company, to rid it of (his words) "pervasive hubris and arrogance" or, (my words) the same Big Company disease that he saw grip GM so deeply for so long. For about a year now Akio has been saying that he wants to take the company "back to basics." No less an authority than Taiichi Ohno said you need a crisis to truly embrace TPS. So, Akio has his opportunity.

As always with things like this (Toyota's crisis, if it doesn't go without saying) it's not the crisis; it's how you respond to it. So far Toyota hasn't responded well. The company will pay a price for that. But, if they problem-solve their way out of the quality and cost issues, the public may forgive them quickly enough.

Murphy on Steroids
Things can and do go wrong for any company. Yet Toyota has a special relationship with problems. The company has thrived for years by developing an obsessive focus on continuous improvement and problem solving. In Japan, they call Toyota people "problem-solving junkies." If any company can get to the bottom of an issue like this, a problem like this, it's Toyota.

The first thing they have to do is protect the customer. For whatever reasons, through whatever set of complex circumstances, they have failed their customers. I know that fact is absolutely excruciating to the leaders of the company now. Secondly, they have to take care of their dealers, so that the dealers can take care of the customers.

Thirdly, the company must turn its attention back to itself, to examine the root causes of what has happened throughout this entire episode. Toyota must conduct this investigation on two levels. First it has to confirm the specific technical cause or causes. People have died here. The company tells us it has figured that part out. Secondly, it must look at itself deeply and ask whether there is something more systemic going on: is there something deeper inside us as an organization that has allowed this to occur? Knowing the company as I do, there is no question in my mind that it will go through this reflection, this deep self-examination.

If Toyota finds something seriously awry deep inside the company that it has become, will its people be able to resolve the issue? After all, human organizations are imperfect. Maybe even ... yours. The question is, can we look at ourselves honestly, challenge ourselves at the deepest levels, and try to take ourselves - as imperfect humans who work in imperfect organizations - to higher, better levels? Toyota has done that in the past. Toyota has shone a light on ways that a human organization can work at levels never seen before. So, if any company can do it in the face of a crisis such as this, I think Toyota can. But, we shall see. It is up to them.

First: Protect the Customer
We all know how this works in the factory. When you encounter a problem, your first responsibility is to protect the customer - in the factory this is the following process, the immediate downstream worker. That means, before you "encounter a problem" you have to know how to spot a problem, you have to know what a problem is. Then you need to know exactly what to do, what action to take, once you've spotted one. That action is to call for help, for someone to come help you decide what to do. Those two actions together are known as "stop and notify." Then you need to know what will happen next (if you expect to be blamed, you probably won't be eager next time to "stop and notify"!). So, what will happen is that someone (your team leader) will come to your aid. He or she will take a look and make a quick decision of whether to (1) apply a quick remedy, (2) stop the line, or (3) let it go through marked for remedy later (with 1 or 2 being BY FAR the preferable alternatives).

Having handled the immediate problem, the next step will be to stop and ask if there is a deeper root cause to investigate: Is this a repeating problem, is there a pattern to its occurrence, does engineering need to be notified? And so on.

That's in a factory.

The same sequence of steps is playing out now for Toyota with their massive accelerator, floor mat, sudden acceleration crisis. Right now, they are in the "stop and contain the problem to protect the customer" phase. They must protect the customer and take care of the dealers so the dealer can take care of the customer (reminiscent of the principle laid down by Shotaro Kamiya, developer of Toyota's approach to sales & marketing: "Customer first, dealer second, company third!"). Separately, they will need to go back and thoroughly analyze exactly what happened and why

Slow to Respond ...
Toyota's response to the gas pedal, floor mat, sudden acceleration problem has been slow and curiously ambiguous. What sounds simple enough on the surface (gas pedals and floor mats for crying out loud) has turned into a massive crisis for the company. One would think that if a simple mechanical fix could fix it, the company would have already done what it needed to do. Now additional technical issues are being raised.

Scrutiny of problems attributed to the accelerator pedal and floor mats is leading to scrutiny of the ETCS-i system it has used for the past eight years and could even lead to scrutiny of the electronic controls on vehicles going back even further. And that is an issue that is far too messy to want to deal with in the midst of a media circus like this.

Regardless, the result is that since Toyota failed to respond adequately in a timely manner to the acceleration problem, the company now finds itself in a credibility crisis. EMI has been a smoldering issue for the entire industry for a long time. Whether Toyota's sudden acceleration crisis trail leads to EMI is yet to be determined. But the underlying problem with EMI (as I understand it) is that it is indeed problematic and no one fully understands it. Not just Toyota, no one in the industry.

Credibility
Sounds like a long way from floor mats. And, technically, it is. But, perception is now one of the most important matters at play here - perception and reputation and credibility. And credibility along with the trust it has engendered with its customers has been Toyota's greatest strength. That credibility and associated trust equity has carried them a long way. But, now the company is expending much of that equity. It may come down to, "What did the company know and when did it know it?"

So, Akio has his crisis.

Crisis gives occasion to greatness. Without the crisis of 1950 and Toyota's determination to be the best in spite of its disadvantages, Taiichi Ohno would have been just another good production manager, remembered fondly by those who worked for and with him, not revered throughout the global manufacturing world. All accounts are that there was nothing to indicate that Abraham Lincoln would be a great leader - it took a national crisis to bring out the greatness.

Akio was born the year before his company first tried and failed to sell cars in the US. Those cars were so bad - they couldn't sell them and they weren't worth sending back to Japan - they ended up dumping a bunch of them in the Pacific Ocean.

So, for Akio now, this is his crisis. And his opportunity.

john

John Shook
Senior Advisor, Lean Enterprise Institute

10 Comments | Post a Comment
Esmeralda February 6, 2010
Excellent post to address Toyota Crisis. I would like to share with some friends throught my blog, any step needed?
Sashendran February 9, 2010
I totally agree that Toyota was too slow in addressing all the quality issues. This scar will take a long time before it heals. Yes this cisis gives Mr.Toyoda the opportunity to make the "change". The question now would be what is the "change" and how this is going to be accepted by the Toyota customers and the world. So I believe all eyes will glued on to Mr.Toyoda and Toyota on their next step.
Rafael Silva February 9, 2010
Excellent comments. The perfect companies work perfect in good and bad times, this is a big Test for Toyota and all team.
Anonymous February 11, 2010
Mr Shook is right on with this comment. "Secondly, it must look at itself deeply and ask whether there is something more systemic going on: is there something deeper inside us as an organization that has allowed this to occur? TPS 101. PULL THE ANDON!That did not happen. Someone forgot the basics. Was it Schedule commitments that caused Toyota to forget its own System??
Gregg February 11, 2010
TPS did not fail. Rather human oversight, coordination and attentiveness relative to an end-state product fit for customer consumption failed.
Anonymous February 11, 2010
It is clear that Toyota was not actually living out the system that they professed to have in place. The data clearly showed an escalating problem going back 3 years and they ignored it. The power of paradigms is so great that people will ignore any evidence that contradicts their paradigm. Toyota management believed that their cars were the best and therefore, ignored objective evidence that there was a real problem. Its not the system...its the people.
Fay Simcock February 12, 2010
From what I have read the technical problem is not just mechanical but has a software component to it (interaction between braking and acceleration). It's well known how difficult it is to fully prevent bugs or unintended effects in systems with a software component.
Does this point to the need to extend TPS to cover areas outside of 'traditional' manufacturing?
Anonymous February 12, 2010
How easy for all the "experts" to offer their advise as to how Toyota could have handled this issue. Perhaps the reason it took a bit longer was that Toyota wanted to make sure they got it right the first time, rather than rush to try something that didn't work.
Paul February 12, 2010
There is a very interesting point of view about what one of the underlying issues could be on page 12/13 of the Economist of Feb 13th-19th. Has little to do with whether Lean or TMS as philosophies have failed, more about under what circumstances they can become 'derailed' by cultural issues. The article does not follow all the way through to a conclusion, but it does speculate that the very succesful Japanese company which has developed such advanced systems of management emulated all over the world are now actually suffering by being too Japanese! Communications are stifled - particularly on bad news and no room for 'new thinking' as all important staff are Japanese and life-long Toyota people, or family of the owners. It would be interesting to see whether Lean and TMS in non-Japanese companies and/or family-owned businesses suffer the same problems due to the same cultural root causes.
Chak March 11, 2010
If i understood the 'Toyota Way' , some senior manager would have borrowed a car which had an acceleration problem, and driven it on a real road, and found out how it felt for the customer before taking it to the lab and doing some analysis.