Wednesday, February 3, 2010

Mixed Metaphors: Total Recall Redux, Dancing with the Stars, and Goodness Gracious Great Balls of Fire!

The spectacle of Toyota’s Total Recall is sort of like watching re-runs of the Audi 5000 sudden acceleration crisis from the 1980s. There are a lot of lessons out there that have been ignored by more than just Toyota. Toyota’s crisis is new territory for their team; their once impregnable brand can now be seen to have a certain fragility to it. Toyota customers buy Toyotas because they have the best quality. The bible, Consumer Reports (CR), tells them this. OK, does this CR-endorsed quality satisfy Toyota’s customers? No. “Satisfaction” with a mere material object is a foreign concept. Their loyalty is intellectual. And there’s the rub. How can Toyota’s customers solve the riddle of high quality and CNN’s/ABC’s/NBC’s/Fox News’ reports of questionable safety? We will see. Looking deeply into this fiasco, the news will not be so much about any nasty facts. Rather, the news will be all about how Toyota managers will dance through this crisis. Let’s hope we don’t hear, “you’re doing a heck of a job Jimmy.”


I’m sure Toyota Motor Sales’ president and COO Jim Lentz can identify with Arnold in Toyota’s version of Total Recall. It is hard to get by 5 minutes on cable news without an update – now they are building stories around Toyota being “safety deaf”, whatever that means. Broadcasters seem to be searching for those once-in-a-lifetime “you’re doing a heck of a job Brownie” moments.

Seeing the real action in this recall is a lot like watching Dancing with the Stars on the Wide World of Sports. We are watching Toyota dance using uncertain choreography. And, there’s the thrill of victory and the agony of defeat. Most baby boomers vividly remember how ski jumper Vinko Bogataj’s dreadful jump and crash became an icon for stunning failure. Don’ t remember many thrilling victories.

We have celebrated Toyota’s invincibility for the past 30 years, and now cable news is giving us a front row seat to be spectators, 50 times a day, of what the news seems to portray as their most stunning failure.

Time out: you know, CEOs need a simple 3x5 card to always remind them of a few things

If every motor vehicle CEO had this written on a 3x5 card, well, it would be more valuable than a Harvard MBA. Go ahead and write this down. No charge.

I was at VW headquarters on the Friday before they Danced with the Stars on 60 Minutes – November 23rd, 1986. They had done their homework and knew that the Audi 5000’s “sudden acceleration” problem was pretty much bogus. The Audi 5000 was an icon brand that changed how automobiles were styled (Ford Taurus did that second for the mainstream market). On November 21, 1986, I learned from the VW executives why 60 Minutes was not worth cooperating with or talking to.

Had to un-learn that one because that approach certainly didn’t work.

On the dance floor, Audi tasted the agony of defeat and ultimately had to change the name of the Audi 5000 in order to resuscitate it. Audi’s dance choreography was nearly as important as Tylenol’s – we all learned what not to do in a crisis.

Jim Lentz is now dancing with the stars and all of America is watching. The dancers everybody’s still talking about were on that Tylenol team, and they did pretty well: recalled everything, changed how products are packaged for the entire industry, and literally turned the agony of defeat into the thrill of victory. That’s one hard act to follow.

So, Toyota will be on the dance floor for a while. Others have been there and survived. In fact, Toyota is nowhere near the top of the list in “Total Recalls.” Ford, the darling of today’s US automotive industry, holds the top two spots.

Toyota’s crisis is not about some fundamental flaws. To the contrary, on the industrial side, Toyota is generally regarded as pretty much flawless – they have been in the role of teacher for the past 30 years. The Toyota Production System has been adopted by many others and is still considered best-in-class. So, they did not screw up in any of the fundamentals of manufacturing. On the wholesale side, Toyota dealers rank among the most satisfied in the industry. Maybe too satisfied – they make a ton of money and that’s pretty satisfying.

If Toyota has a soft underbelly it’s on the consumer side – Toyota customers suffer from acute schizophrenia. A typical Toyota customer is a mainstream “commodity” buyer who adores Toyota’s quality, but rates them less-than-average in customer satisfaction.

Consumer Reports subscribers rate Toyota’s brand as the best in the industry. It gets a score of 196 – more than twice the score of Lexus. Hummer is the worst with a score of 11. For the past few decades, CR’s subscribers have consistently rated Toyota products as having the highest quality and dependability, and they have shown up on CR’s top recommendation list for as many decades.

Time out: I used to be a CR subscriber. It is like a big commune of like-believing people. Sliderulers. The media loves CR, because they speak for millions of those kinds of people out there. They killed the Suzuki Samurai with rollover tests that nobody understands – you know, the test where they strap these giant outriggers on a car and make it look like a Hawaiian parade canoe. Then they do a slalom course. Hey, I only do stuff like that on weekends.

Brands are fragile affairs. The mighty Toyota brand has a certain fragility as well. Toyota’s customers don’t care about all that kaizen kanban muda jujitsu. Toyota’s consumers sit on a fairly narrow reputational foundation of world-class quality. That was okay up until recently. Now the struggle for all of Toyota’s middling satisfied customers is how to reconcile quality with concerns about safety. Who cares about vehicle dependability when everybody on TV is hinting that the dang things aren’t safe? It’s not like Toyota’s customers are coddled, or even want to be coddled. They want, they demand, quality. It is that simple. … And, of course, safety.

Too bad Toyota is not more like dead-brand-society Saturn, with customers who love them. Or, maybe, it’s vice versa.

Most icon brands will inevitably face a crisis in their lifetimes. Sometimes the crisis will kill them. Other times it is just a stupid business model. Good managers need to avoid all of the usual suspects (no cyanide, no fireballs, none of that sort of stuff) and to anticipate crises of different sorts. They need practice/experience and coaching, or extraordinary insight. Toyota’s last real crisis was in the 1970s with Toyopet, so there has not been much opportunity for practice. Experience is pretty important, and the lack of it is working against Toyota.
  • Toyota lost its ride ‘em cowboy brilliant and decisive American leaders/managers over the years. Bob McCurry was the first cowboy who put Toyota on the map. Jim Press was the last of this breed – he’s more like Bonanza’s Ben Cartwright. It has been easier for Toyota to become more Japanese since Jim Press left … relying more on consensus in decision making. It is hard to get consensus agreement on what to do at tomorrow’s news conference; especially if the consensus management nexus is in Japan.
  • 2009’s recession forced a lot of belt tightening – you know, early retirements and stuff like that. So, we are all left with a younger team with less experience. Toyota is no exception.
  • Listening to industry insiders, it seems that the Japanese government has been pressuring Japanese companies to eliminate/reduce overtime for a couple of years. Prior to this, when new vehicle project designs were up for bid, experienced Japan-based engineers and designers would win projects because they could underbid the outsiders by “hiding” hours/costs to develop vehicles. They would low-ball bid projects using 7-8 hour days (5 days a week) … and then the team in Japan would work 12-hour days to make budget. It was not only Toyota that lost in this unintended system dynamic that replaced hard-working seasoned product development staff with globalized newbie-ness and ineptitude.
  • There are some lessons from anybody who has been at the top of the heap. You can be: (1) the biggest player, (2) with the best quality, and (3) have the highest safety. Pick any two, and choose wisely.
That leaves coaching and extraordinary people. … OK, extraordinary people. Let’s cross our fingers and hope Toyota gets out of this alive. We still have a lot to learn from this incredible company.

Bottom Line: With product liability costs/reserves in the US market coming in at a couple of thousand dollars per unit for the high quality OEMs … it might make some sense to throw in another $20-$30 per unit to avoid those great big brand-killing, tort attracting, fireballs. And …
  • Learn from others; get the Tylenol guys on the phone.
  • Dance like Fred Astaire rather than die in the agony of defeat – complete transparency is key – communicate, communicate, communicate.
  • Show A LOT of action.
  • Get someone new and important who can talk politics in Washington fast; having the Government on your side is not a bad thing.
  • Convincingly tell the consumer it is going to be OK, their safety is Toyota’s #1 priority.
  • Get the facts straight, and get them out in public for everyone to see – think about the GM guys who acted like forensic scientists with their pickup truck fire debacle.
  • Move fast, show progress, show the world happy vehicle owners getting their vehicles fixed to “only the standards Toyota offers; no compromise.”
  • Hey, it might make even sense to keep some of the old dogs around just in case there’s another crisis.

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