Timothy Renshaw, an editor at BIV, has been talking to me about some lessons learned from the Toyota crisis of 2010, and more recently, about Japan and its shocking earthquake crisis. This week, Timothy's column about this topic is released on newstand.
Please scroll to the second page of the article attached below to see the column.
Lean Sensei in Business in Vancouver
A cautionary tale of fat cats and lean thinking
Lean manufacturers can get fat real fast.By Timothy Renshaw, Business in Vancouver magazine
Toyota’s 2010 saga is a testament to that. The addendum to this yarn, however, is that companies built better from the start can turn even the worst corporate cock-ups into improving that solid foundation.
David Chao can speak to that. In our last episode with the man from Lean Sensei International (issue 1041; October 6-12, 2009), Toyota was riding a hot streak. In auto industry argot, it had accelerated past the overweight General Motors motorcade to become the world’s top automaker.
But the exhilarating wind in the hair for the executive team in the bright Toyota convertible motoring down the fast lane didn’t last long.
The company took some ill-advised detours along Toyota Way. The apostles of lean manufacturing and enlightened corporate vision that championed customer care were soon getting sideswiped at every turn. You might recall something about braking-system problems and faulty accelerator pedals. Around nine million vehicle recalls later, the media piling-on had begun to wane somewhat.
But the damage inflicted was significant. Early in 2010 Toyota’s stock price was down 20%. Its 2010 year-end financials showed revenue and sales recovering but still down from pre-recall days. Net revenue dropped 7.7% compared with the previous year. The corporate pain, however, was not confined to sales and revenue. The company and its corporate culture of continual improvement (kaizen) and innovation (kaikaku) were shaken from the top down, its reputation for quality tarnished worldwide.
But, as Chao sees it, that was not all bad. The series of corporate calamities, he said, made “the world’s most powerful car company stand up and take notice.”
That it did, and it would have been an obtuse operation had it not. But more than taking notice, Toyota was “humbled … brought to its knees … [it had forgotten] that crises can happen to the best of companies.”
Time for some of Toyota’s much vaunted lean thinking – the antidote to the ill effects of what Chao calls Big Company Disease. Among other initiatives, executive ranks were trimmed and decision-making processes localized to promote nimbleness of execution and reduce head office micromanagement.
The customer-focus mantra that the sturm und drang of unprecedented global expansion had drowned out was back atop the playlist for new Toyota president Akio Toyoda.
The company appears now to be heading in the right direction on Toyota Way.
Revenue in fiscal 2011’s first nine months was up 5% compared with the same period a year earlier.
For Chao, recently returned from Japan and the devastation that has crippled parts of that country, there are parallels between the corporate and country disasters and how the Japanese culture is helping rather than hindering the recovery process. The finish line for both is still many miles away: Japan struggling to rebuild; Toyota facing production shutdowns in North America because of parts shortages in Japan. But humility, patience and consistency are among the common cultural traits coming to the fore on both fronts.
They look good on a global auto colossus. Far more appealing they are than the inert culture of entitlement that helped topple the former auto-making champ of the world from its pedestal and whose homeland, staggering under an accumulated debt estimated to be around $44 trillion, still does not know how to control spending. Any bets on which corporate culture will deliver real long-term recovery and improvement sooner? •
Timothy Renshaw (trenshaw@biv.com) is the editor of Business in Vancouver. His column appears every two weeks.
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