Toyota might have been a customer-centric company for parts of the 80s and 90s, or it may never have been customer-centric, which I now suspect. Toyota thought that understanding what customers wanted to drive; converting that understanding to car design; and then superbly manufacturing cars that fit customers tastes; made it customer-centric – and bulletproof. But two fundamentally flawed assumption have stripped Toyota of its body armor.
First, Toyota got caught breathing its own fumes – believing its vaunted Toyota Production System was so scalable the company could grow at will. As stuck accelerator pedals and failing brake systems demonstrate, bad assumption. And these maladies follow a string of other problems that had already stripped Toyota of its top quality ranking.
But second, and I believe much more important long-term, Toyota failed to realize there’s more to customer-centricity than excellent products (which it can no longer claim). Research that David Mangen Ph.D. and I conducted several years ago identifies that customers now consider product excellence and service excellence two halves of the same coin. Without one, companies have neither. And even if it grasped this fundamental truth, Toyota failed to realize that “service” was about far more than fixing cars.
Going back 10-years, Toyota started failing to deliver one of the most important service components – honesty. I won’t go into the whole litany of Toyota subterfuge here. I’m saving it for a full article I’ll write once I’m confident all the major discoveries are discovered. But turns out Toyota has been hiding serious defects from customers and government agencies for years. The company’s behavior has been outright smarmy, going back to 2002 when it tried to pawn off sludge collection in engines to drivers failing to change oil. And even after the U.S. DOT forced them to extend engine warranties to 8 years, they tried to obstruct customer filings. And today, they continue obfuscating like mad. Fortunately, the DOT and perhaps even more so the Japanese Ministry of Transportation, are up to their tricks.
I’ve read many comments from Toyota loyalists (most of whom don’t yet know what Toyota’s been doing, unless they’re reading the excellent investigative reporting in the New York Times), to the effect that “Toyota will snap right back.” From mechanical problems, perhaps. But from deceptive business practices, I seriously doubt it.
And as a sidebar for process folks reading, Toyota has provided living proof that neither the Toyota Production System nor Toyota’s Lean culture created a customer-centric company – one that puts honesty and integrity with customers on a pedestal, towering above business instincts to put profits first – especially when that means putting customer lives at risk.
Dick: business cases might inspire passionate opinions, but it’s not often they inspire complete pity. Toyota shows us why. In my experience, the company was once great. Then a senior executive got them thinking of the bragging rights they’d have as the World’s Largest Automobile Manufacturer. The higher you climb, the harder you land when you fall.
Pursuing that strategy meant abandoning the strategies for building high-quality, reliable, affordable automobiles. Largest Share of Market means optimizing economies of scale, global operations and sourcing, and limiting product offerings. It subordinates matters like customer loyalty, because new customer acquisition rules.
The problem is, there’s no value for customers in market share. Zip. Zero. Nada. It’s beyond comprehension why companies still obsess on the market-share objective. When the issue comes up, is anyone brave enough to raise his or her hand and say “Great. We’ll get 40% of the market. How does that translate into customer value?” At least now that brave detractor will have Toyota as an example for the very clear pitfalls of that strategy.
For many years to come, MBA students will know the answer to the market share/customer value question. What makes for interesting debate is how once-great companies allow themselves to get caught in the market-share morass in the first place.
I have my theories. What do you think? Does ego have anything to do with it?