velopment to make sure their vehicles work properly under all conditions. Whether the component comes from an in-house Toyota factory or a supplier makes no difference. Toyota engineers are responsible.

In terms of general management, such as of the supply chain and overall quality, Toyota clearly failed to live up to its historical standards. Executives within the company admit they overstretched their managerial resources and overseas supply chain in the push to overtake General Motors as the world’s largest automaker, which Toyota finally did in 2009. More specifically, the quality problems appear connected to overly rapid expansion of production and parts procurement outside Japan, particularly given the decision to use a different brake pedal. In the past, Toyota manufactured new models in Japan initially for a couple of years, using carefully tested Japanese parts, and only then did it move production of the best high-volume models to overseas factories. Over the last decade, by contrast, Toyota ramped up overseas production of new and old models with new suppliers much more quickly and, apparently, with inadequate stress testing.

Also at the management level, Toyota executives seem to have paid increasingly less attention to product and process details. It may well be that Toyota managers as well as staff engineers believed their company had already reached such a high level of perfection that there was nothing much to worry about. But automobiles are themselves very complex systems, with lots of hardware and software, and as many as 15,000 discrete components. It is not surprising that some things go wrong and recalls are common in the industry. Other automakers over the past year recalled more than 10 million vehicles, not counting the Toyota recalls. 2 In the grand scheme of things, moreover, the number of accidents and even deaths attributed to Toyota are not so large compared to what other companies have experienced. For example, Ford had a massive recall in 2000 of some 13 million faulty tires made by Firestone and fitted on its Explorer SUVs, reportedly resulting in over 250 deaths and 3,000 catastrophic injuries. 1, 4 Nonetheless,

even the best firms
are likely to decline
at least a little as
competitors catch up
or when managers
lose their focus.

Toyota redefined mass production and built its reputation around quality and reliability by paying attention to details, large and small. The recent slew of recalls definitely indicates something changed for the worse in the company.

What shocked me most was that the quality lapses seemed to take Toyota’s senior managers by such surprise. CEO Akio Toyoda, and other senior executives in the U.S. and Japan, admitted to having little or no information about these quality issues, which first surfaced in Europe. They were unprepared to explain the source or nature of the problems—to themselves or to the global media. Toyota also made its predicament worse by responding much too slowly to customer complaints and allowing bad news to leak out sporadically, while executives continued to deny—at least initially—that there was a real problem.

Companies with true staying power fix their problems and recover from their mistakes. Here, Toyota has not disappointed us. By the fall of 2010, Toyota managers and dealers had gotten their act together and were working hard to rebuild customer confidence. The problems seemed mostly contained to the pedals and floor mats, though Toyota also upgraded some of the software in its hybrid vehicles. Service technicians worked overtime for months to fix recalled vehicles. Sales and profits recovered. And Toyota now recalls any vehicle immediately with even the slightest hint of a problem.

technology and management
Lapses and Lessons
The Toyota debacle offers many les-
sons about technology and manage-
ment. But one observation is that, al-
though we can learn a lot about best
practices from looking at exemplar
firms and their unique processes,
like Just-in-Time production, we also
need to have some perspective. An
enduring management principle that
truly differentiates firms over the long
haul must also be separable from the
experience of any particular firm, in-
cluding the originator. This sounds
like a contradiction but it is not. Ev-
ery company, market, and country
will experience ups and downs. Even
the best firms are likely to decline at
least a little as competitors catch up
or when managers lose their focus.
Moreover, success often brings with it
the potential seeds of decline—such
as increases in the size, complexity,
and global scale of operations, which
can be much more difficult to man-
age. In this case, Toyota’s quality
problems in 2009–2010 do not mean
the principles of “lean production” or
lean management more generally are
any less valuable to managers. What
managers need to understand are the
limitations of any best practice as well
as the potential even for great compa-
nies to lose their focus and attention
to detail—at least temporarily.

References

1. Ackman, D. Tire trouble: The Ford-Firestone blowout.

Forbes.com (June 20, 2001).

2. Bunkley, N. and Vlasic, B. Carmakers initiating more recalls voluntarily. The New York Times (Aug. 24, 2010); http://www.nytimes.com/2010/08/25/ automobiles/ 25recall.html

3. Welch, W. Toyota plunges to 21st in auto-quality survey; Ford makes Top 5, Bloomberg (June 17, 2010); http://www.bloomberg.com/news/2010-06-17/toyota- plunges-to-21st-in-j-d-power-quality-survey-ford- makes-top-five.html.

4. Wikipedia. Firestone and Ford tire controversy. Wikipedia.com.

Michael A. Cusumano ( [e-mail]) is a professor at the MIT Sloan School of Management and School of Engineering and author of Staying Power: Six Enduring Principles for Managing Strategy and Innovation in an Uncertain World (Oxford University Press, 2010).