Are we observing rise and (quick) fall of the of the Toyota? The Economist had an interesting article about the recent issues at Toyota, saying that unless they can find a solution to their problems, their stint as the world biggest car maker may be short. (“Losing its shine”, December 2010).
The article makes several interesting points on the reason for the decline. First, the competition is catching up:
For years Toyota has been the quality benchmark for every carmaker, but at the very moment it faltered, others were finally catching up. The truth is that although a few fail to make the grade—Chrysler still has a lot of catching-up to do—most cars these days are extraordinarily well-made. The quality surveys by which buyers used to set such store are now based on minute differences. This is the main reason why the manufacturers’ positions in the league tables have become increasingly volatile.
This is very related to an article Marty was discussing several months ago (“Southwest flies to Logan and a teaching cliché die“) discussing Southwest’s decision to fly from Logan: all airlines became discount airlines, and the field caught up with Southwest. Using the same methods that brought Toyota to the top, most car makers can manufacture well-made cars. The second reason for the (temporary?) decline of Toyota it not unrelated, and is the recent surge in quality issues plaguing the firm. The reason is not unexpected:
People within the company believe these quality problems were caused by the strain put on the fabled Toyota Production System by the headlong pursuit of growth.
When we teach about lean operations and use Toyota as the poster boy (and the bedrock) of the method, we say that gradual and continuous improvements are the essence of the method. The key question we leave open is how to balance gradual improvement with quick growth that may hamper the ability to sustain the key drivers of the firm’s success. Mr Toyota has taken the first step always suggested in the Toyota Production system: he pulled the legendary Andon cord:
The test will be to keep the ingredients that have made Toyota great—the dependability and affordability—while adding the spice and the flavours that customers now demand. It will not be easy, and the competition has never looked more formidable. But by recognising the scale of Toyota’s problems, by proclaiming their urgency and then by drawing on the firm’s strengths to fix them, Mr Toyoda has already taken the first, vitally important, step towards salvation.