Aside

Toyota’s Dysfunction

When you go slow, it could be you’re being thoughtful or considered, but more often than not, you are waiting for some one else to make a decision.

In the case of Toyota’s recent and public failure, it took years for this issue to come to bear and get decided.  The company knew the problem but failed to act because they were “considering it”. The NYT article today today (http://nyti.ms/cVRK0R) did a great job giving us some details on how this failure is an outward sign of internal dysfunction.

Some key phrases -

Automaker has reacted slowly to safety concerns.
Making design changes without telling customers about problems.
Took 8 years to start recalling units.
Could have communicated better as a company.
Maybe a little “safety deaf” in their North America office
At Toyota, all information flows to headquarters (before decisions made)
We took time to consider whether we needed to take market action.

All the phrases point to 1 thing: all decisions for what should happen is happening in the C-Suite of Toyota — with a very small group of people deciding what matters and why. The regional team that knew of the issue for years and probably had their friends buying unsafe cars didnothing. You might think this is unethical. Actually, what it is is ‘passing the buck’ to where the decision belongs. In Toyota’s case, very few people owned the ability to fix the problem. This is more common than not. Harvard research done in 2000 by Kaplan and Norton on the Strategy-Focused Organization said that, in most organizations only 5% of people know the strategy*, implying the rest are waiting for people to tell them what to do. The same research doesn’t reveal how many people felt they owned the creation of the strategy but you can bet it’s below 1%.

Toyota’s decision-making process probably holds a lesson for all of us.

When a small portion of the company is setting direction, everyone else is there to pass information up vertically along the decision chain. That’s awfully s-l-o-w. Even in the relatively slow car industry, this very top-down approach is causing pain. The speed of changing issues, the trend of that rate of change, and the speed at which the organization must react is crucial to competitiveness going forward. This is not an academic point. This is happening every day. Toyota’s visible failure is just another outside evidence of an internal dysfunction.

Outsourcing, localization, increased automation, open licensing, shared APIs, SaaS models, and so on….all ways in which the speed to market is getting faster because innovation isn’t happening within the walls of any 1 company. Most companies, however are still making big decisions or investments in a centralized, slow way. This is going to have to move faster. A very small number of people cannot keep up with a) the number of issues and b) the rate at which they move. And of course the trend is toward more and faster. Because customers who depend on us are also experiencing these trends, a key differentiator among companies is responsiveness. Responding quickly and well depends on how quickly and accurately information and decisions flow through the organization. Responsiveness also depends on how a company listens, discerns, learns, and organizes itself to respond quickly to what customers will pay for (knowing full well that what they say they want might change tomorrow).

How are you changing stuff so decisions get made faster in your company? (for example: Are you distributing it? Are you enabling many people with the big picture thinking? Are you setting up smaller units?)

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2 Responses:

  1. OSK77. February 8, 2010 at 6:02 am  |  

    Thanks for sharing your insights on Toyota. Will be interesting to see how org.’s embrace the need to become more responsive. Honda’s ‘Failure leads to Success’ documentary comes to mind…lets hope they and others learn.

    Reply
  2. FranciscoKattan. February 8, 2010 at 7:42 am  |  

    Great post Nilofer. Too many companies, especially outside of Silicon Valley, have outdated management practices. Decisions need to be made at the lowest competent level.

    Reply

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