Did Toyota Lose its "Way"?
Toyota executives are calling 2010 the "11-month year," because they literally paused the production and sale of new cars in January 2010 in order to handle the massive recalls. It was a devastating year. Between November 2009 and April 2010, 8 million Toyotas were recalled worldwide; executives were skewered in the media, a record $48.8 million was paid in fines and claims in the US; sales declined, and Toyota missed some of the auto market rebound at the end of 2010.
Yet what may be most remarkable about this story is Toyota's resilience--in particular the degree to which Toyota buyers generally stuck by the company. ("December/2010 Sales Show Toyota's Resilience.") Toyota is still the world's largest automaker; the Camry is still the top-selling passenger car in the U.S., and Toyota sold only 6500 fewer cars and trucks in 2010 than it did in 2009--a remarkable accomplishment given the scale of the recall debacle.
As an observer of the impact of culture on companies (I define culture simply as "how we do things around here"), my big question is what role did Toyota's operating philosophy, "The Toyota Way," play in creating this resilience? And why did it not prevent the mistakes that led to the recalls?
On balance, analysts have concluded that the recalls had nothing to do with poor manufacturing, or Toyota's manufacturing philosophy (AKA the Toyota Way): "As far as we know, Toyota is still the best manufacturing company in the world when it comes to production management," says one MIT professor. Rather, the weakness lay in communication and coordination problems outside the factory, and outside the traditional purview of the The Toyota Way. (See "Recall shows new challenges for "Toyota Way").
Indeed, I would argue that the Toyota Way is too narrowly defined when we view it only as a "manufacturing philosophy;" and that its potential as a cultural operating system for the company as a whole may have been overlooked both inside and outside the company. Based on a highly revealing interview in the Harvard Business Review with then Toyota president Katsuaki Watanabe, I wrote an article in early 2008 called "What Toyota is Telling Us." In it, I argue that the Toyota Way was not just a a set of manufacturing guidelines, but rather a company culture, and a tremendous asset.
Please read it and let me know what you think. And while you are there, enjoy the other resources on the Axialent web site. (I am a member of Axialent's Faculty Network.) Here is the link again: What Toyota is Telling Us.
One year after Toyota's historic recalls of January 2010, executives can ask themselves "what risks are we exposing ourselves to when we forget who we are as a company?"