How Toyota became the Werewolf

Akio Toyoda, President of Toyota Motor Corpora...

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Akio Toyoda to testify in Washington: maybe he’s finally waking up to the fact that he runs a global company and has to behave that way. – Tweet by Michael Schuman, Correspondent Time magazine – 18/2/10

As most of us know (If you follow movies), there is some lead time involved before ‘The man’, turns into a Werewolf (only when there is a full moon). Well, Toyota (the werewolf) had known about the complaints ranging from unintended acceleration to brake failure in 2002 (US regulators informed 2004). Even Steve Wozniak, mentioned his Prius problems and indicated that the problem was software based in an interview in early February. The transitional phase had started for Toyota to become a werewolf. All Toyota had to wait for was nightfall. The dreaded night for the werewolf came in January and by the end of that night, the werewolf had killed an estimated 19 people in the US alone, recalled 8.5 million cars, sales had fallen by 16% in January alone and an inquiry launched into Toyota Corolla’s power steering problems. The Toyota that had won the Japanese quality award for 1980 had been consumed by the powerful werewolf that was now the largest car maker in the world since 2008.

The damage had been done! The werewolf awoke the following morning and realised that it had to remedy the situation. As we know, the remedies for werewolves are painful (not mentioning the silver bullet). As Japan sped up its car recall system, the US knew it could not live with a werewolf amongst its midst and congressman Edolphus Towns, told Toyoda in a letter that American drivers were “unsure as to what exactly the problem is, whether it is safe to drive their cars, or what they should do about it.” The latest news is that the werewolf’s representative (the boss himself) has agreed to attend the Congress hearing.

The werewolf is trying hard to fix its problems, including the infamous sticky accelerator problem – Click here – (excellent interactive graphical courtesy of the Guardian) with a brake-override system in all future models. The werewolf had hugely underestimated the problem as in the winter of 2008-09 it had reports of “stiff” pedals.

President Akio Toyoda, grandson of Toyota acknowledged on 17/2 for the first time that the firm had expanded too fast in its quest to increase profits and overtake General Motors as the world’s biggest carmaker, a feat it achieved two years ago, according to the Guardian website. He acknowledged in an opinion piece he wrote for The Washington Post recently that the company had “failed to connect the dots” between the sticky pedals in Europe, surfacing as early as December 2008, and those in the U.S. that culminated in the massive recalls. He also said, “The Company needed to improve sharing important quality and safety information across our global operations.” The werewolf believed it to be a “quality” not a “safety” issue. Steven C. McNeely. Manager, SMS , in his article, Lesson Learned from Toyota, argues that, “safety is an unspoken and unwritten quality expectation of our customers, and you cannot separate the two. You can have a quality product or service, as defined by the ISO standards, and still not have a safe product or service. Toyotas’ problem clearly accentuates this point”.

“Toyota managers did not respond to the early signals. That’s when they should have identified the root causes,” said Sharma, who teaches Toyota production methods to businesses. “If the Toyota brand no longer stands for quality, what does it stand for?” – Anand Sharma, chief executive of TBM Consulting Group, based in Durham, North Carolina, told The Associated Press

“Toyota drivers have gone from being customers of the company to being wards of the government,” says Jim Cain, senior vice president of Quell Group, a marketing-communications firm in Detroit, and a former Ford media-relations executive. ” according to Time.

“As far as we know, Toyota is still the best manufacturing company in the world when it comes to production management,” Michael A. Cusumano, professor at the MIT Sloan School of Management, the gas pedal and floor-mat defects were design errors in supplier parts, and the faulty braking in hybrid models was caused by a software glitch. They weren’t manufacturing errors, the kinds of defects workers at plants have been trained to pick out — a piece that doesn’t fit, a crack in a part, something that diverges from the design.

“Toyota has been exemplary at surfacing problems in the factory and stopping production before a crisis was reached,” said Jeffrey Liker, professor of Industrial and Operations Engineering at the University of Michigan, who has written books on the Toyota Way.

“Failure to follow all the principles of the Toyota Way led to this crisis. Now the Toyota Way is the only way out of it,” said Liker.

CIOs and IT Management can learn from the Toyota debacle. The most important question I had to ask myself when I heard of Toyota’s woes was a simple one. Do I unlearn everything about Just In Time (JIT), lean management, Total Quality Management (TQM) and ‘The Toyota Way’ and start over? I will leave that question open, for now!

The key lessons for CIOs are:

  1. Acknowledge and fix the problem with any process, system or project as soon as it is highlighted by stakeholders. Do not allow it to spiral out of control.
  2. Listen, listen, and listen again.
  3. Isolate the issue(s) and ensure that it is not a part of a much larger problem.
  4. Everybody within the company is an ambassador for the company, including the IT department. If the IT dept spot a non IT issue that affects the company, take 100% responsibility for it and get it addressed.
  5. Use social media (SM) channels such as LinkedIn, facebook and Twitter to monitor your user community by proactively listening, anticipating problems and getting involved with these communities.
  6. Do not hide/shy away from social media (SM) and use it to create competitive advantage.
  7. Brand reputation can be enhanced or irreparably damaged on SM. Be there to get your message across

Related Article on Toyota pay the price for not connecting the dots 

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Can IT Management failure be caused by a deadly disease? Part II

W. Edwards Deming

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Dr Deming has always stood out in the crowd for me personally, as he continued to teach in what he had always believed in, even when he was doubted on his own home soil. This has always been a trait of most great leaders and in the true spirit of leadership, the knowledge and conviction he had developed for management was not held back but was applied with tremendous success in Japan. This was enough to create the ripple effect/tipping point for his teachings to be given credence back home in the US and Europe. A testimony to his success is the fact that at Toyota’s headquarters, his framed photograph has an even larger frame than the founder of Toyota, Kiichiro Toyoda.

Dr Deming originally developed, what he considered the five deadly diseases of western management (Two more were subsequently added, excessive medical care costs and excessive legal damage awards, not discussed in this post).

I agree with one of my readers, Thomas Keplar, who posted a comment a few days ago, “Lot of good idea’s in TQM, also a lot of areas that still must be understood that TQM will not provide answers other than as Ishakawa said “unless you have senior
management buy in, do not implement TQM”. It is a well known fact, comprehended by the recent credit crunch, management of the banks and the finance sector, that, businesses do not fail, management fail. As I go through this post, hold these two thoughts, as the importance of these two thoughts will become clarified.

“Unemployment is not inevitable but of bad management”- Dr Edward W Deming.

The five deadly diseases that cause IT management failure

1. Lack of constancy of purpose

This happens for three reasons. Firstly it happens, where the most senior IT position is a functional Head reporting into a board Director, for example, Head of IT reporting into a Finance Director. In this scenario, senior management, i.e. the CEO and the board, have not been able to communicate well enough to the Finance Director and hence the Head of IT, the business vision and the direction and/or there is a lack of planning for the future. In this situation, the information provided to the Head of IT, is second hand and as the information has been forwarded, the Head of IT, cannot understand the perceptions, background and discussion that may have led to that business vision and direction. This is management failure, in the making, as the board have failed to understand that IT should be represented directly at board level.

Secondly, it can happen where IT is represented directly at board level, the IT Director/CIO does understand the business vision and the direction but the board as a collective have no planning for the future and while they are looking after their, “cash cows”, they do not have the product of tomorrow.

The recent banking crisis is evidence of this happening. Although, explaining it is quite complicated and the way banking in general works reflects that as well, in a nutshell, the banks had, inadvertently, started to finance an expansion of lending by borrowing. IT Management, were not, in my opinion, privy to this information and as evidenced in the 90’s, rogue trader, Nick Leeson’s case (the achievements of these traders and their ability to circumvent systems and procedures).

Thirdly, as future products and innovation is stifled (Both by the business and within IT – Lack of innovation), the roadmap is unclear; processes and IT controls become inadequate and subsequently cause the failure of the business. If on the other hand, the future was planned effectively, for example, it would have been quite clear to the bank that this sort of lending was high risk. As such, it should have been reflected within banking IT systems and as a consequence would have been caught or captured by the intelligence built into the authorisation processes.

2. Emphasis on short-term profits

Again, there are two ways of looking at this. I will not go into the business aspects now but will start to deal with only how the second disease impacts IT departments.

This happens when IT departments either become quite insular or are lead to become insular as despite their attempts to, for example, attract additional funding for programmes of work that work towards longer term planning, they are stifled and are forced to think short term and are constantly, “fire fighting”. Innovation is frowned upon and newer innovative ways of using IT for competitive advantage cannot happen in this kind of environment.

This results in sacrificing the long term growth of the company for short term gains. The emphasis is on short term profits/dividends, no matter what. IT is contributing to anything it can do to raise the value of company stock, in the short term only.

3. Annual rating of performance

This is an area of Dr Deming’s theories that I do not have to adjust for IT. The annual rating of performance is an arbitrary and unjust system that demoralises employees and nourishes short term performance. It has an added side effect as it annihilates team work and encourages fear.

This annual rating of salaried people is also called the Merit system, annual appraisal and management by objective – management by fear is a better term. This system works by rewarding employees for what they have done in the past year, i.e. performance pay. The effect is devastating as the employee must have something to show and this in turn nourishes short term performance and annihilates long term planning and team work. As each employee is encouraged, to show and prove their individual contribution to qualify for the performance pay, it stifles team working. Even if individuals are working productively as a team, inadvertently, they are identifying ways in which to use the team work to justify that all important, performance pay!

Dr Deming’s theory encourages teamwork in its true sense. Actively listen to other team members’ views and ideas and counter members’ weaknesses while using the strengths of the team. This is impossible under a merit rating.

Even more damaging is the fact that when ratings are given out they cannot be understand well enough by employees and as to why they were not rated high enough.

It would be better if this system was a lottery where at least there is a good reason not to understand better, as employees would not feel superior or inferior.

4. Mobility of management

The annual rating of performance encourages mobility of management. As employees are not getting a raise, they are not loyal anymore. This has a devastating effect on the business as people have no roots in the company and are not there long enough to understand the business well enough. Management requires good knowledge of the company, its problems, production and service capabilities and that takes a long time.

For example, if a project manager has just arrived at the business and does not understand its culture, overview of its IT systems, IT and business strategy and is made to work on an individual project, how can he/she understand the overall  impact of what it is they are delivering?

5. Use of visible figures only

Finally, we arrive at disease number 5! Most IT departments will use figures that are known, for example, service desk figures. This is because most business schools and graduate degrees encourage us to use these figures. The power is in knowing known, unknown and the unknowable.

Now, the question some of you may ask is that, if it is unknown, how could it be important? Well, we need to understand the multiplying effect of a happy customer and also the unhappy one. Understanding these figures is absolutely crucial for IT departments, as just with the given example, if we can understand the multiplying effect, we can harness the effect and turn the unhappy customers into IT ambassadors within the business.

Final thoughts

As always, I look forward to your feedback, and encourage all my readers to post their opinions, both here and within the forums that I am a member of.

Do you have any areas of IT that you would like me to discuss? Please feel free to suggest any future posts by leaving your comments. I am currently compiling a list for future blogs.

For further information:

The W Edwards Deming Institute

Dr. Deming – The 5 Deadly Diseases 1984

Can IT Management failure be caused by a deadly disease? Part I

“Does experience help? NO! Not if we are doing the wrong things.”- Dr W Edward Deming.

There is always someone in your life that becomes truly inspirational. Sometimes that inspirational figure towers over others not only for their accomplishments but for their belief in their transformational capabilities without the  desire for masses of financial reward. Statistician and management guru, Dr Deming was such a thought leader. Dr Deming is considered the father of Total quality Management (TQM). He revolutionised Japanese manufacturing as he couldn’t find an audience in the US after WW II, because managers at the time thought that poor quality was caused by people who just didn’t want to do a good job.  They didn’t think there was much managers could do to improve quality except exhort employees to do a better job.

Deming’s basic message was that quality is a management responsibility, and poor quality was almost always the result of systems imposed on workers which thwarted people’s desire to do high quality work. He taught the Japanese managers how to empower production workers to investigate problems and systematically improve processes.  He taught that teamwork and long term, trust-based relationships with suppliers were far better than adversarial relationships.  He emphasised a culture of continuous improvement of both processes and products. Deming’s teachings combined with Just-in-time methods and Kanban elevated the Japanese to the pinnacle of manufacturing as we know it today.

Well, why is this all important? Simply because Deming’s teachings, today, are utilised within computer systems as well.

“A system is a network of interdependent components that work together to try to accomplish the aim of the system. A system must have an aim. Without the aim, there is no system.” Dr W Edward Deming

Now that we all understand who Dr Deming was and his contribution to our everyday lives, especially driving reliable cars! Its a bit too late now and I can’t write anymore but later in the week, I will spell out Dr Deming’s theories and attempt to provide an answer to the question, “Can IT Management failure be caused by a deadly disease?”