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
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.
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/
3. Welch, W. Toyota plunges to 21st in auto-quality
survey; Ford makes Top 5, Bloomberg (June 17, 2010);
4. Wikipedia. Firestone and Ford tire controversy.
Michael A. Cusumano ( email@example.com) 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).