Tuesday, July 17, 2007

Toyota excels by revealing hidden problems

While some wags have predicted Toyota's imminent fall from grace, the company's management discipline and long-range outlook remain rare in the business world. In the July/August Harvard Business Review, Toyota CEO Katsuaki Watanabe engages in a wide-ranging discussion of the company's plans for the future.

It's a fascinating article, and a couple of passages caught my eye in particular. In them, Mr. Watanabe frankly confronts problems that Toyota has faced on the quality of its automobiles. Rather than sidestepping questions about the problems, or "bridging" back onto his marketing message, Mr. Watanabe addresses them analytically. An example:

In 1995 there were 26 Toyota factories; in 2007 there will be 63.... I realize that our system may be overstretched.

We must make that issue visible. Hidden problems are the ones that become serious threats eventually. If problems are revealed for everyone to see, I will feel reassured. Because once problems have been visualized, even if our people didn't notice them earlier, they will rack their brains to find solutions to them.

This revealing the hidden problem, not tolerating the "quiet fix," has been discussed in a prior post. But Mr. Watanabe goes on. He immerses himself in the company's mistakes, and gets actively involved in diagnosing and fixing them. Says Mr. Watanabe:

Soon after I became president, as you know, we confronted several quality-related problems. We created teams specializing in different areas and instructed them to analyze the root causes of problems in each area. We found that in several cases the problems had occurred because of design flaws or because of short lead times that didn't allow out engineers to build a sufficient number of physical prototypes. If we had thought about product designs more clearly or had the time to conduct more experiments, we could have avoided those problems.

Can you imagine GM's or Ford's CEO making such an admission in public voluntarily? I can't. Given this degree of candor and clear thinking, I can envision Toyota's quality problems lasting a short time indeed.