Shocking, yes? But no less shocking than Toyota, the world-class manufacturing quality expert, recalling millions of cars across its product lines. Three generations after its founder created Toyota on a philosophy that built quality into every step, it turns out that Toyota’s quality has been steadily eroding.
Today, Toyota’s quality issues are deep and systemic.
After all, the company’s problems:
- Involve multiple components, vehicles and years of manufacture.
- Create dangerous safety issues – failing brakes and uncontrollable self-accelerating gas pedals.
- Were surfaced years ago yet are leading to recalls only under regulatory pressure.
- May not have had the attention of top management until after all hell broke loose. (Toyota’s CEO just recently committed to creating a senior level “quality committee” to look into the problem.)
- May not yet be truly resolved. While the accelerator fix has been identified, it’s unclear whether there’s an electrical system glitch causing some uncontrolled accelerations.
- Are not being presented truthfully. Toyota’s leaders make false statements that put Toyota in a better light, only to rescind these comments when a government agency points out the truth.
The winning value promise
Toyota’s compelling and unique value promise propelled Toyota to surpass GM as the world’s largest automobile manufacturer: With Toyota, you can have comfort without frustration, a welcomed relief in an industry formerly fraught with reliability issues from all but Honda.
Leveraging its quality advantage, Toyota built a line of cars from economy to luxury that reduced the frustration of car ownership (Lexus versus Mercedes/BMW and Camry versus GM/Chrysler/Ford brands). Its brands also increased comfort compared to Honda’s reliable line. The Prius extended Toyota’s brand promise into its hybrid engine cars.
The root cause of the Toyota’s quality problems
No one would expect 100% perfection on Toyota’s part. Suppliers and designs change, materials have defects, etc. in manufacturing companies. But quality issues in multiple parts and vehicles and a growing number of recalls over the years point to the deeper cause of Toyota’s quality issues.
New automobile component technologies (more electronic and less mechanical) should have led to new quality systems and far more careful attention to drivers’ experiences than Toyota provided. Whether it was over-confidence in its historical quality systems or pressure to keep production and profits rolling as demand grew, internal forces precluded a relentless drive to fine-tune internal systems to Toyota’s value promise as technology changed.
This drive – to align everything to the value promise while generating profitability – should be front and center in any strategic leader’s agenda. Instead, Toyota maintained its brand promise in external communications, but failed to align internal decisions with its value promise.
Another piece of evidence that Toyota lost an internal focus on its value promise comes in Toyota’s reactions to its quality issues. Toyota fixed new cars being produced without recalling cars in the field, delayed communicating quality issues to customers and regulators and made many misstatements to the public. Toyota’s historic value promise for sure didn’t drive these decisions. Rather, Toyota’s reactions have raised frustration and reduced perceived reliability of the Toyota brand, the opposite of its value promise.
Growth often destroys brands. As companies get larger, C-Suite leaders lose the pulse of the business at the same time that communication channels to the C-Suite become convoluted or blocked. Growth and profits become aims, while delivering on the value promise becomes secondary or even forgotten. A disconnection arises – between what is promised and what is then delivered – that erodes brand equity.
Hopefully Toyota will learn the lesson that a business’ value promise must drive all internal actions and decisions. It will take an incredible communicator to instill a singular focus on the value promise all over again, a focus Toyota’s founder created and his son and grandson lost. Meanwhile, Ford and Hyundai are driving their cars and messaging right through the hole Toyota left in the market.
Do you regularly ask or hear in meetings, “What should we do in light of our value promise?” If not, make sure everyone in your organization knows your company’s value promise and get busy with alignment. Your Toyota moment may not be as public. But the lost reputation, revenue and profits will nevertheless be substantial.
For insight on business model innovation, read my recently released book, Beyond Price.