Toyota has developed a thought-controlled wheelchair (along with Japanese government research institute, RIKEN, and Genesis Research Institute). Honda has also developed a system that allows a person to control a robot through thoughts. Both companies continue to invest in innovation and science and engineering. The story of a bad economy and bad sales for a year or two is what you read in most newspapers. In my opinion the more important story is why Toyota and Honda will be dominant companies 20 years from now. And that story is based on their superior management and focus on long term success instead of short term quarterly results.
Yes Toyota can improve their performance, based on the last few years. Does management understand what they need to do? I think so. Does management understand that the system needs to be improved rather than the numbers on the spreadsheets of various managers have to be made better? I think so. Do I think most companies today, with bad results, understand the difference between bad numbers on spreadsheets that are used to judge various managers and a system that needs to be improved? No.
I do not believe the bad earnings for the last year for Toyota are indicative of a failed system. The results do show a weakness in the Toyota system that allowed them to perform this poorly during this credit crisis. The risk to Toyota’s future is that they become too focused on short term results, mistakenly thinking the problem to be fixed in the bad quarterly results recently. They need to focus on improving the system for the long term. And the recent experience likely shows some areas that need to be improved. But in no way do the fundamental tenants of the management system need to be changed. For many other companies today, changing fundamental aspects of their management is what is needed.
Related: Toyota as Homebuilder – Honda’s Robolegs Help People Walk – Honda has Never had Layoffs and has been Profitable Every Year – Toyota’s Partner Robot – NUMMI, and GM’s Failure to Manage Effectively – Toyota iUnit – Invest in New Management Methods Not a Failing Company by William Hunter, 1986
If Toyota really wants to take a on a big improvement project they should deal with the dealer problem. The biggest weakness now (in my opinion) is not the quality of their cars, or the overcapacity, or pricing, or recent management decisions, or the model lineup, but that the dealers are not nearly as focused on customer value as Toyota is. Many still have the perverse incentive that the worse deal they provide customers the better financial performance the dealer gains. This short term success is harmful: it results in behavior that teaches customers Toyota (because they think of the dealer as Toyota) is trying to rip them off as much as they can instead of think of Toyota as trying to provide them the best value. Yes I realize it is a hard problem to deal with. Guess what, you should work on important problems even if they are hard.
“There are two kinds of companies, those that work to try to charge more and those that work to charge less” – Jeff Bezos, Amazon Founder and CEO
With the dealer network now, Toyota’s system include both aspects. Toyota Motor Company works to charge less the dealers work to charge more. That is not the best system.
Read more on the technology of the wheelchair on the Curious Cat Science and Engineering Blog.
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It is a “blue ocean” type of thinking for Toyota. They have always tried to focus their attention to what customers want, and give that value to them (look at the Scion example and strategy for attracting young people to buy it…). In the last years though, they have raced too much to become n.1 and that is why they are in crisis now as all the other automakers, but with the new direction from Akio Toyoda I think thay will be back to the basics and continue their dominant TPS system which took them to be the most efficient automaker in the world (and also the most valued one).