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What Is Going on with Toyota

by Hal on February 8, 2010

in lean

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Akio Toyoda is on the hot seat. Reportedly, he is a forward-thinking guy who is intent on bringing the legacy of the family to the design of the future of the company. Unfortunately, CEO Toyoda is being tested beyond that of any of his recent predessors. Toyota is in trouble…in the market for cars…in the financial markets…and as as model for managing companies.

Last week I was speaking with Norman Bodek, Godfather of Lean, about Taiichi Ohno and Shigeo Shingo for my up-coming book. Norman knew both of them. He was their English-language publisher and he introduced 100s of people to them on his more than 75 study missions to Japan. I had just finished my weekly staff video conference where our consultants lamented that Toyota must have lost their way. I asked Norman what he thought.

Confront this reality: Electronic hardware and software is not bug free.The conventional wisdom about Toyota's quality issues is that they got distracted while pursuing a goal to be the world's largest car company. Norman didn't think they were ever pursuing that as a goal. At one time Toyota's CEO Watanabe predicted that it would happen, but it was never the goal. Yet, we can't ignore their rapid expansion into many new markets across the world. Norman speculated that too many of Toyota's managers of today weren't influenced by Engineer Ohno and Dr. Shingo.

Another contributing factor is the complication in today's vehicles. I read an article in the last week that said there are upwards of 100 computer chips controlling everything from emissions and speed to real-time fuel economy and handsfree cellphone capability. All that hardware requires software. Programmers will tell you that no software is bug free. Ever see the Windows blue screen of death?

One of my good friends wrote a short note to me this morning asking,

"WTF is up with Toyota? How did this happen? I thought they set the standard for quality control?"

Great questions. My answer:

"It's not as bad as Secretary Ray Lahood and the media have made it.
"It's worse than anything that has happened before at Toyota.
"Toyota's solution to the sticking accelerator is elegant.
"It took Toyota way too long to put the pieces together to get there."

It's the same question my colleagues have been asking me. I haven't known how to answer any of them until this morning. Today, something clicked.

Toyota's situation is not unlike the failed intelligence and security system that allowed the Christmas Day (underwear) bomber to board a plane and nearly kill 100s of people. The system is highly dispersed. It relies on people. It operates in a variety of political situations, governments and local customs. People speak different languages. All the data was there; they just hadn't (couldn't?) put it together.

Finding those mistakes in a timely way and acting responsibly will separate the best organizations from all others.Toyota is the world's most dispersed designer and manufacturer of automobiles. Yet, my hunch (not any more than that), is that Toyota has not fully recognized that fact. Their traditional management practices have not kept up with their expanding presence in the world. Toyota, like the intelligence community, hasn't developed their capability to make sense of the data that is available to them. They have no alternative than to use business intelligence (BI) tools to understand their evolving situation. Everyone needs to grasp this reality: systems and situations that rely on people must confront the fact that human beings make mistakes. Every one of us makes mistakes. Finding those mistakes in a timely way and acting responsibly will separate the best organizations from all others.

I expect Toyota will become a very big user of BI software to see patterns developing early. They have no other choice. Automobiles are becoming ever-more complicated. I don't see that changing. Toyota is also participating in far more markets, with far more local languages and local content. That won't change either. They have to find a way to make sense of what people throughout their network are learning throughout design, production and while the product is in use. There is no alternative.

I expect Toyota will become a very big user of BI softwareToyota people, like the vast majority of people in the world, are well-intentioned. As successful as they are, Toyota people are struggling with the limitations of of what they can see and understand from a local perspective. Toyota is dealing with a world teetering on going out of control at any minute. Complexity is just one small step away from chaos. That is Toyota's problem and our redemption. They are the canary in the mine for every company that has complex products which are developed, manufactured and sold throughout the world. We can be thankful that it is Toyota, with their legacy of problem-solving and respect for people, who are at the forefront of addressing this compounded complexity and dispersed model.

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{ 15 comments… read them below or add one }

1 Bob Corrick February 9, 2010 at 4:49 am

Hal, thank you for these insights into Toyota.

As a note of caution, I wonder how much BI software would actually help Toyota to see patterns developing early? I work in that field, and I suggest that there would be many and time-consuming issues with data collection and data quality on the way to learning and detecting patterns.

Instead, how about some of their designers “going and seeing”, talking to customers and mechanics about their problems around the world – with an engineer’s mind? That could help Toyota to pick up practical issues, under different operating conditions and with different driving habits.

Many years ago (as the driver) I had a problem with a Toyota Cressida that was caused by the failure of a small plastic part in the fuel system (carburettor). I’d only seen metal used there on other cars; and the replacement failed too. Both times, I think my sudden operation of the accelerator pedal may have contributed to the failure. How could I feed all that information into a BI software system? I’d rather talk to someone, please.

2 David Schmaltz February 9, 2010 at 6:28 am

I agree with Bob, Hal. Adding more software to a system where software interoperability is a certainty might not be the answer. In this context, where it might well be unrealistic to expect to avoid building in defects, the manufacturing life cycle extends and relationships reach and drift into really different territory. I experienced a similar problem with a Toyota carburetor and the way the dealer dealt with me convinced me to never buy another Toyota product. It was as if the problem was my fault, and my identifying the problem was a threat to their otherwise perfect production system. I finally figured out how to fix the thing myself.

Toyota, like many global enterprises, seems to be suffering from perfectly expectable (if not predictable) open system effects. Manufacturing (even lean manufacturing) has traditionally focused upon controlling a defined system, what Smart World author Richard Ogle labeled reciprocity. Reciprocity is that something common to any common culture, and subtly determines who scratches who’s back; the us/them boundary. Within it is a different world that outside of it, and the rules are defined and enforced from within.

Globalization seems to require more open, dynamic, and ’scale-free’ (no typical node) operations, which are much more diverse and complex, mimicking biological systems more than mechanical ones. The engineer considers these systems unmanageably complex because they operate by really different laws, ones not amenable to Cartesian control. Think of this as lean on steroids.

Reach and Drift become two key concepts critical to open system operation. Reach refers to a breadth across cultures, the ability to integrate even orthogonal perspectives. How does the original culturally-determined identity survive continual integrations? It does not, thank heavens.

Evolutionary biology provides a useful term for the Thank Heavens part of this dilemma, by explaining that evolutionary success involves Drift, inexorable adaptations of the organism to its changing environment. As our formerly determined contexts reach out into ever more open spaces, those spaces determine what we used to determine ourselves. Whether we understand the power laws operating there or not, those laws will influence whether we cope well with the drift.

Life-cycle care used to be offered like an insurance policy when you purchased a car. The drift might well require that it be a normal component of the purchase contract hereafter. Denying service simply because the car’s out of warrantee smells strangely similar to denying a defect on the manufacturing line.

3 Michael Port February 9, 2010 at 7:03 am


Thank you for the post. I hope you continue to write about how both Toyota, as a company, and Toyoda, as a leader, are handling this crisis. I mean, if Toyota doesn’t come through with flying colors and set a new standard for quality control, who are management consultants going to write about? :)

4 Bob Ferguson February 9, 2010 at 8:16 am

I suggest you read “Managing the Unexpected: Resilient Performance in an Age of Uncertainty” by Karl E. Weick, Kathleen M. Sutcliffe. I found this book to be quite insightful. It is literally about the importance of paying attention to the details when working in the trenches, and creating the management chain to respond quickly when something bad is occurring.
Toyota is already able to do this on the manufacturing floor. Someone observes an untoward result on the shop floor is able to stop the line if necessary in order to fix the problem rather than transfer it.
The book uses several examples from very high reliability organizations. A wrench dropped on the deck of an aircraft carrier is a reason to stop the flight line.
I believe many project managers can benefit from this book.

5 Bruce Panico February 9, 2010 at 9:59 pm

Hi Hal, Toyota’s problem is not quality it is arrogance. All automobile manufacturers have design deficiencies . It is how they deal with the deficiencies that is paramount . The timeline shows that the problems with the accelerators started in 2004 the same year that Toyota switched to an electronic fly by wire accelerator. As you have stated Hal the cars of today can have a multitude of computer processors and chips that can have glitches and bugs. Why then is a new floor mat and a mechanical friction plate installed to the stem of the pedal the fix du jour ? Customers will forgive mechanical deficiencies , personal inconveniences and design failures from a car company but they won’t put up with the arrogance of deception.

6 Margaret McIntyre February 10, 2010 at 8:26 am

Thank you, Hal, for your thoughts on what’s going on with Toyota. I have thought of you often as I’ve heard the news reports about their problems and have been curious as to what your take was. It is sad to me that such a giant is falling. It shows the perils of being human.

7 John Leeper February 10, 2010 at 3:17 pm

I don’t know the answer. How does Toyota or for that matter any of us, commnicate with clients to get useful feed back especially those around safety. It is about risk. There is risk to the business by not noticing a pattern of parts failures that annoy clients or customers. If there is a communication channel from the service centers to the corporation who is listening and for what? How are distinctions made between complaints that are annoying and those that are about safety. As humans we tend to hear what we are looking for and we refine the wedge of what we know that we know. I don’t know if we actually expand that or just polish a piece of it. In conversations about safety in my industry [construction], I have found that we talk about “accidents” that have occurred, stats that are “trending” up or down and that we have to change behavior in reponse to events in the past. How do we as members of organizations open ourselve up to seeing possibilities of unsafe occurences and acting on them before they occur or after they have occurred once. How do we gather the information? Who’s eyes can register the patterns? Who then has the organization act and nip things in the bud? How do you reward teams for stopping the organization from making big mistakes by seeing small patterns from small samples?
John L.

8 Bob Corrick February 10, 2010 at 5:10 pm

+1 for Bob Ferguson – the previews on Google or Amazon for “Managing the Unexpected” suggest that this is one for my reading list. Thank you.

9 Bruce Panico February 10, 2010 at 6:12 pm

Hi Hal, it is now coming out that a computer reprograming is in the works that will trigger an engine cut off if the accelerator is causing the engine to rev and the brake pedal is being depressed at the same time (much like Volkswagen and Mercedes have). Why did this take so long to figure out?

10 Hal February 11, 2010 at 8:08 am


I don’t think I understand the approach. What does “engine cut off” mean? Disengage the transmission? Shut off the engine? Is either a good approach. Should we wait to see the solution before we judge it.

Why it took so long is a good question. We can guess at answers, wait for the press to investigate, hear more from Toyota or (some other choice). I suspect that some poka yoke device is long overdue. Maybe it needs to be standard on all vehicles.

Thanks for commenting,

11 Bruce Panico February 12, 2010 at 11:21 am

Hal, the engine will turn off.

12 Jamie Flinchbaugh February 17, 2010 at 10:01 pm

I agree that they didn’t chase growth as the overarching goal. I believe they generated some momentum towards it, and that momentum probably got out of hand. I think just because they were growing fast AND this happened, it’s really hard to draw the conclusion that one happened because of the other.

I have been resisting writing about the Toyota case because so little is actually know about the defect itself, and cause and effect isn’t clear. But I have been getting enough questions about it. I don’t think this changes anything about Toyota’s success. They still have dramatically fewer recalls than others. And of course no one that knows lean would say they were anything close to perfect.

I did write up some of my thoughts and lessons in observing the story on my blog here: http://jamieflinchbaugh.com/2010/02/the-fall-of-the-mighty-toyota/

Jamie Flinchbaugh

13 Josh Nankivel February 18, 2010 at 4:09 pm

Thanks Hal.

“They have to find a way to make sense of what people throughout their network are learning throughout design, production and while the product is in use. There is no alternative.”

Statistically speaking, recalls will happen though at some point regardless of how good you are.

Your last point is the one key element I see missing in the chain. What is the feedback loop from the end users? It should be direct, whether that be via technology or traditional customer complaint systems. With local law enforcement, dealerships, etc. in the way, there may be too many potential points of failure when it comes to communicating real feedback and using that to take action. Without data, BI is useless.

Excellent post Hal, thank you!

14 Josh Nankivel February 18, 2010 at 4:12 pm

One more thing I forgot to mention in the last comment… Continuing from my last statement, what upsets me is not that there was a failure; it’s that regulatory agencies had to get involved at all. My expectations of Toyota would have been their ability to take corrective action well before any regulator raised a flag.

15 Mike April 13, 2010 at 4:42 am

Good post! But I wonder if BI software would actually help Toyota to see patterns developing early? There are new strategic challenges for the global firm. These challenges include: (i) market opportunities migrating to rapidly emerging economies in the East; (ii) the long shadow of the financial crisis and the rising prominence of sovereign wealth funds; and (iii) the urgent imperative to deal with climate change and to include a larger number of stakeholders in the firm’s growth strategies. The IMD OWP 2010 devotes a session to each of these challenges.

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