Toyota dynasty will survive the death of Eiji Toyoda

September 19, 2013

Eiji Toyoda a former president and later chairman of Toyota died on the 17th of September 2013, a few days after his hundredth birthday

An informative interview was conducted for Milwaulkee Public Radio by Robert Siegel with Micheline Mayard who had written an obituary for Forbes “How Eiji Toyoda created the modern version of Toyota.” She talked of an incident when Eiji Toyoda visited the Ford plant in Michigan in the 1950s. Maynard picked up her story:

Back at the moment in time, the rouge operations were enormous. Henry Ford had this idea that you could actually start from Northern Michigan, from the mines up there, and move raw materials down the Great Lakes. And they would arrive at docks, and then Ford would be able to go, literally, from ground up to an automobile on its own. So what Eiji Toyoda saw when he got to Ford was this great process of raw materials to finished automobiles. But he also saw a lot of waste. He saw quality issues, and he saw workers that weren’t being listened to. And he took a lot of notes and took them back to Japan.

The quality movement

It was to be the start of the quality movement which changed production thinking and practice for the next half a century.

A recent production crisis made an excellent case study of the dilemmas of success and fast growth contributing to decline in quality standards.

The Toyoda dynasty

In 2010, LWD looked at the history of the company and its dynastic nature seen as a modern institutional form, retaining dynastic power internally. The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father’s company Toyota Industries.

A year earlier we analyzed the fight for the company to preserve its global brand.

Toyotaoism

Earlier, [2007] we had published from the work of the Japanese scholar Fangqi Xu and introduced the term Toyotaoism to capture the production system which had become hailed as the greatest process innovation in automobile manufacture since Henry Ford’s first production line gave rise to ‘Fordism’

Sometime in 2007, Toyota seems likely to become the World’s biggest auto manufacturer. In contrast, Ford workers face substantial job cuts. Toyota represents one of the outstanding illustrations of developments which have been gradually refining and replacing the production line processes and mentality of the 20th Century. The company has pioneered a fusion of Fordist methods with a more Eastern philosophy of respect towards the environment, customers, and employees. The fostering of empowered teamwork in Toyota is a central element of the philosophy, production system, and leadership style of the corporation.

Toyota reminds us that modern business methods can survive and be substantially improved within an ancient dynastic culture. A nice example of the dilemmas of leadership successfully resolved.


It’s tough doing business in China … and in America

May 29, 2010

Western business has developed a mindset that it’s tough doing business in China. This year, international firms are reaching a similar view over doing business in America

In the gossip of business airport lounges around the world, it has been a regular refrain that doing business with China is worthwhile but tough. This tallies with the received wisdom in textbooks on international business. Cultural differences and subsequent misunderstandings are often mentioned.

Maybe it’s time to look also at how doing business with America is also fraught with the difficulties of cultural differences for international organizations. When ‘normal relationships’ are disrupted, the rules of the game are found to be different from what was assumed to be the case by the organizations at the centre of the dispute..

The Toyota Case

Toyota has been remarkably successful in its growth into a global superstar. Then a well-reported crisis occurred which in shorthand was labelled as a safety issue. Toyota took steps internationally and was criticised for lack of speed of response. The criticism was particularly harsh in the United States. A legislator made a highly-charged statement about the dangers of buying any Toyota car. An earlier Leaders We Deserve post noted

Toyota is experiencing one of those crises which can rock a company to its core. Shares plummeted, as the company prepared to recall eight million vehicles globally because of problems with accelerator pedals on seven models. At a Congressional hearing on Wednesday, [Feb 3rd 2010] US Transportation Secretary Ray LaHood alarmed both investors and consumers with the advice, which he later retracted, that owners of a recalled Toyota should “stop driving it”.

This week, [May 2010] lawyers in the States are reported as bidding for the lucrative business of suing Toyata through the courts. It’s tough doing business in America.

The BP case

BP Oil Spill has become one of the most damaging ecological events in recent memory, as well as a personal tragedy to many individuals including the casualties of the initial burst. The case differs from that of Toyota. However, it has some parallels in the confrontational public stance taken by the US Government. Mark Mardell BBC’s North America editor commented as BP claims success in efforts to stem to oil leak:

Remember President Obama saying he was going to pursue BP “aggressively”? Remember him talking of the “ridiculous spectacle” of the companies involved in the spill making excuses [to Congressional hearings]? The aggression hasn’t lessened, as BP tentatively proclaims the success of its plan to suck up the oil and gas spilling out of the ruptured pipeline into a storage ship. First the secretaries for the interior, Ken Salazar, and homeland security, Janet Napolitano, sent a stern letter demanding to know if BP really meant what it said when it promised to pay all the costs. Now another barbed statement has followed.

“This technique is not a solution to the problem, and it is not yet clear how successful it may be. We are closely monitoring BP’s test with the hope that it will contain some of the oil, but at the same time, federal scientists are continuing to provide oversight and expertise to BP as they move forward with other strategies to contain the spill and stop the flow of oil. We will not rest until BP permanently seals the wellhead, the spill is cleaned up, and the communities and natural resources of the Gulf Coast are restored and made whole.”

Mardell has taken the view that President Obama was aware of criticisms levelled at the previous administration of its tardiness and insensitivity to the human suffering in the aftermath of Hurricane Katrina. His current public stance has a calculating ring to it. There is talk of retrospective legislation to recoup all damages consequent on the spill.

How tough is that?

Such talk from the Chinese government would produce the ‘difficult to do business in China’ reaction. Maybe Global Business leaders are starting to whisper about the ‘difficulties of doing business with the Americans’.

Acknowledgements

Image from Congressman Zach’s webpage, showing the Congessman in robust form at a hearing with Chinese officials [June 2009] to examine discrepancies in the trade relationship between China and the U.S.A.


Toyotas, stones and glass houses

March 15, 2010

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Toyota continues to fight against damaging blows to its reputation for producing safe high-quality cars. But there is one good reason why it may avoid the worse type of dirty-tricks campaigns

The Toyota brand may have been damaged in the short-term. But there are reasons to suggest that the company will escape further damage of deliberate comparative campaigns on its safety record. Throughout the recent crisis months, there have been no catastrophic stories of accidents due to the infamous faulty accelerator. Claims that the electronic circuitry can be programmed to crash the car seem too much like the demonstrations that any computer programme can be hacked into.

More recently there have been further safety problems with brake issues on thePrius hybrid, and a suspension of sales of the Lexus GX 460 model, after press reports suggesting it might roll over. Yes, if you try hard enough it may well be possible to roll the Lexus under extreme conditions. Now, there’s a report that the Sienna Minivan has a dodgy cable holding its spare tyre in place.

A world-wide problem for Toyota. And all the bad news stories pile up to suggest that according to the law of the jungle now is the time for competitors to attack the wounded Japanese beast. But US carmakers, or indeed any other rival in the industry, will be cautious about overtly trying to take advantage of Toyota’s problems by insisting they offer better, safer products.

As the BBC noted:

Toyota’s luxury brand Lexus was rated the market leader in automotive consultants JD Power’s 2009 Initial Quality Study, with Toyota itself in seventh place – well above the industry average.
So while there are signs that Toyota may no longer be offering the absolute best quality, its rivals also know that any insistence that they themselves are immune from problems could backfire. After all, every major carmaker has been hit by large-scale recalls in the past. For instance:

In October 2009, Ford completed a recall affecting 14 million vehicles with potentially faulty cruise control deactivation switches. Risk: fire.
In August 2008, GM recalled some 850,000 vehicles with potentially faulty windshield wiper systems. Risk: fire.
n December 2007, Chrysler recalled some 575,000 vehicles with potential gear problems. Risk: cars could shift out of park without the ignition turned on.

So while both GM and Ford are offering additional $1,000 (£640) discounts for Toyota or Lexus drivers who buy one of their cars, neither firm has opted to change their marketing strategies and allow dealers to make direct [quality or safety] comparisons with their Japanese rival.

Stones and glass houses

As the old saying has it: people in glass houses shouldn’t throw stones. Or…companies who share production facilities should avoid dirty-tricks ad campaigns.


Toyota, Duty and Destiny

February 21, 2010

The successive bad-news stories at the start of 2010 for Toyota illustrate the effect of cultural factors on leadership and organizational behaviours. An understanding of dynastic history will help assess future prospects for the company

In considering the prospects for Toyota, I found myself reflecting on the nature of dynastic rule. Japan itself is still an example of a dynasty-based culture. The Japanese Dynasty is believed to be the oldest continuing hereditary monarchy in the world, with a bloodline stretching back nearly three millennia (660 BC – present day). The Emperor (天皇) symbolises a unity of the state with the Japanese people, and is head of the Japanese Imperial Family, and also the highest authority of its Shinto religion.

It has more recently become accepted to use the term dynasty to refer to family-owned businesses, where we also find transmission of authority and control handed down from generation to generation. Metaphors can be useful for imaginative purposes, but can also be misleading. Nevertheless, it is perhaps worth reflecting on dynastic leadership, and its implications for Toyota.

The Dynastic Principle

Western thought about dynastic power has been greatly influenced by the German social theorist Max Weber. One of his many significant contributions was his work on the nature of ancient and modern social structures. He proposed that traditional societies maintained stability by the society’s acceptance of the legitimacy of their ruler, and the power this permitted in the interests of the State.

Weber went on to suggest that overthrow of a society’s structure and traditions came about through charismatic opposition to them. For Weber, newer religious forms (aligned to state power) often were accompanied by charismatic leaders. He further argued that new form of control suited to modern industrial societies functioned through the power backed up by the legal authority expressed through rules and regulations. His terminology of bureaucratic control is still in common use. That’s how business students used to be taught about Weber’s theories.

Dynasties ancient and modern

The connections between the foundation of sociological thought, and today’s structuring of global organizations, are also being studied by researchers into institutional forms. A promising new area of work is into varieties of capitalism (VoC). The potential significance of this research can hardly be over-emphasized. It offers insights regarding the competitiveness of industrial firms globally, as much as insights into the diverse attempts to ‘civilize capitalism’ (as one researcher puts it).

Toyota, Ford, and other modern dynasties

Toyota may be seen as a modern institutional form, retaining dynastic power internally. The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father’s company Toyota Industries, and today’s President is Akio Toyoda.

It would be a great over-simplification to assume that such a family-based structure inhibits change and adjustment. Nevertheless, its response to its recent manufacturing and strategy problems appears consistent with a tendency to avoid radical actions which appear as threats to core cultural values.

Generalisations can be dangerous. In America, the history of the mighty Ford motor empire also shows the dynastic principle at work. From the days of Henry Ford until recently, power resided with the founding family, with current Executive chairman William C Ford the fifth generation (by my counting) of the family on board. Interestingly, Ford also came near to ruin with a safety crisis associated with the Ford Pinto in the 1970s. Ford survived that crisis, but has arguably been relatively slow to deal with competitive pressures. In the UK, its acquisition of the much-loved (but eventually cash-strapped) Jaguar mark was reversed by its sale to Tata, another globalising dynasty.

Born or Made Leaders?

Associated with dynastic structure of institutions or cultures, is the question raised of the fitness to lead. Are descendents of a founding entrepreneur especially equipped to lead into the future ? The evidence is less than clear-cut. At very least, the all-powerful leader acting ‘to the manner born’ is vulnerable to events that threaten the continuity of any organisation. Hereditary rulers of States and leaders of organizations exercise power mediated through advisors. At times the advisors contribute to forces which bring about the demise of the figurehead, in the wider interests of the Institution.

Toyota into the future

Jim Taggart, who writes on leadership issues, points to the manufacturing issues facing Toyota. He also cites a press story criticising Toyota’s risk-management approach . To understand Toyota’s present crisis, wider factors also need to be taken into account. Toyota-bashing in the US, as pointed out, is taking place with regard for socio-economic and political vested interests. Students of leadership will find much to consider in this, and in the ‘born or made’ dilemma of leadership.


Toyota Fights to Preserve its Global Brand

February 4, 2010

Toyota faces its biggest crisis over a serious weakening of its reputation for quality control. How might creative leadership preserve its global brand?

Toyota has been hailed as the company of the future. This site has made no secret of its admiration for the company’s success. But events are now suggesting that the company has a lot of work to do in preserving its global brand. A year ago we wrote [Jan 2009] that Toyota’s business model was on trial:

Toyota is hurting, and Company chief Katsuaki Watanabe recently announced a projection for a first annual trading loss in its seventy year history. But Toyota’s pain still seems likely to be more sustainable than that being suffered by its rivals, whose fate is one of the urgent problems facing incoming President Obama, and who are pressing (begging?) for state bale-outs. For Chrysler, and GM, job losses are inevitable, while even survival in their present state seems increasingly unlikely. Its reaction to over-supply is to announced a temporary suspension of production for 11 days [Feb-March 2009] in all its 12 Japanese production units.

Now, [Jan 2010] Toyota is experiencing one of those crises which can rock a company to its core. Shares plummeted, as the company prepared to recall eight million vehicles globally because of problems with accelerator pedals on seven models.

At a Congressional hearing on Wednesday, [Feb 3rd 2010] US Transportation Secretary Ray LaHood alarmed both investors and consumers with the advice, which he later retracted, that owners of a recalled Toyota should “stop driving it”.

The carmaker said it was not aware of any accidents resulting from the issue and that only 26 incidents involving accelerator pedals had been reported in Europe. Last year, Toyota was forced to recall about 5 million cars worldwide over problems with floor mats trapping pedals. END
Toyota’s UK spokesman Scott Brownlee denied that the firm had delayed the accelerator pedal recall in the UK, stating it was a quality rather than a safety issue.

The Perrier Story

The developing story, although potentially far more significant has echoes of the Perrier case.

This relates to the crisis faced by the Perrier brand in the late 1980s. John Mowen & Michael Minor in their text book on Consumer Behaviour explain what happened

Perrier Group of America announced a highly embarrassing product recall [February 9, 1990]. The recall came in response to a report stating that Perrier’s high-priced bottled water was contaminated with benzene. Even though the U.S. Food and Drug Administration (FDA) said that the benzene levels did not pose “a significant short-term health risk,” Perrier’s management requested the removal of the brand from supermarkets and restaurants in the United States and Canada.

The incident turned into a public relations disaster, in large part because the company’s explanation for the recall kept changing. After traces of benzene were found in Perrier bottles in other parts of the world, company officials altered their original explanation. Benzene, they now said, is naturally present in carbon dioxide (the gas that makes Perrier bubbly) and is normally filtered out before the water is bottled. For unknown reasons workers had inexplicably failed to change the filters. Meanwhile, Perrier still insisted that its famous spring in Vergeze, France was unpolluted. By 1995, Perrier sales had fallen to one-half their 1989 peak. The company had to mount a comeback strategy. While attempting to regain share for the Perrier brand through new distribution channels, the company began to invest in other brands that did not have the Perrier name attached to them. The question remains, however, will the memory of the benzene incident forever tarnish Perrier brand name?

Lessons for Toyota

In times of corporate crisis, Denial is still a likely response. What might Toyota do to avoid the dangers of permanent damage to its future as a brand? Can lessons be learned from the fate of Perrier? What steps might a creative leadership take?

Acknowledgement

With grateful thanks to Susan Moger for her insightful comments on this story.


Toyota’s Business Model on Trial

January 7, 2009

toyota-i-unit
Toyota’s business model comes under increasing scrutiny as auto sales plummet around the world. Its reaction to a forecast billion-dollar loss suggests it has a promising long-term survival plan that contrasts with its American and European rivals

Update

This gloomy report [Jan 2009] was followed by a more upbeat one six months later.

Original Report follows

Leaders we deserve has made no secret of its respect for the creative management shown by Toyota over the years. We even helped coin the term Toyotaoism (with Professor Xu) for its unique management philosophy.

The sternest test of a business model is when it has to deal with external threats to its core products. That is the situation facing all auto-manufacturers. Toyota is hurting, and Company chief Katsuaki Watanabe recently announced a projection for a first annual trading loss in its seventy year history.

And what a loss: 150bn yen (£1.1bn) in yearly operating profits from its core operations, attributed to an unprecedented global financial downturn coupled with a rising yen. Its December 2008 US sales fell faster that than those of GM or Ford

But Toyota’s pain still seems likely to be more sustainable than that being suffered by its rivals, whose fate is one of the urgent problems facing incoming President Obama, and who are pressing (begging?) for state bale-outs. For Chrysler, and GM, job losses are inevitable, while even survival in their present state seems increasingly unlikely.

In contrast, Toyota appears to be confronting its short-term problems in light of a longer-term strategy. Its reaction to over-supply is to announced a temporary suspension of production for 11 days [in Feb-March 2009] in all its 12 Japanese production units.

The old and the new

In some ways the response is one consistent with the Japanese cultural tradition which regards employment as a life-long two-way contract. Toyota’s business model preserves that deeply-held cultural value. On the other hand its success is strongly linked to its capacity to innovate. Innovation has been incremental and remorseless, and at time radical. Professor Xu’s analysis of creative organisations in China and Japan identifies Toyota as an example of a one such organisation.

The creativity is manifest in a culture within which ideas are expected from all employees, and reinforced through leadership support providing both intrinsic and extrinsic rewards. A worker in an automotive plant is still expected to pay vigilant attention to repetitive regimes and demanding quality targets. However, the creativity (that word again) which establishes teams with a degree of involvement and control over their activities (for example through the cell system, and its quality circles) comprise a genuine innovation which contrasts with the celebrated Fordist production line, with its direct connection to Adam Smith’s principle of division of labor.

Built to last

To use the terminology of American business theorist, Toyota is a built to last company. Its leaders may or may not be charismatic, but the results speak for themselves. Toyota has to be studied in the context of its cultural setting, and care must be taken in making comparisons with firms such as GM. It is even more difficult to make a simple comparison with Marks & Spencer, which according to Sir Stuart Rose [7th Jan 2009] faces its financial crisis by closing 27 stores, 25 of which were the Simply Food group opened recently, and quickly recognised as ill-matched to the company’s strategy needs (too small, poor and locational access).

What is no longer in doubt, is that the longer-term perspective offered by the Toyotaoism model provides a compelling case for creative leadership of creative organisations. Curiously, the current financial crisis may also bring (force) opportunities for new organisational structures in the future. That is the implication of the notion of innovation arising from what Schumpeter called creative destruction


Creativity is a Leader’s not-so-secret Weapon

November 18, 2007

convergence_jackson_pollock.jpgCreativity has always been a powerful attribute of successful leaders. This has become more obviously the case over the last few decades, as leaders are seen to be engaged in creating visions, strategies, products, designs, businesses, and even creative networks. Change involves creative individuals, teams, organizations, and clusters or communities

This post accompanies a presentation on creativity and leadership (fostering creativity)

Creativity has pervaded so many aspects of all our lives. It transcends business life, as it transforms it, and in many of its manifestations it can be linked with leadership.

Definitions, definitions

Like leadership, creativity has acquired a bucket-load of definitions. One explanations of their shared profusion is that both cut across a range of academic and practical domains, so that ‘bottom-up’ and ‘top-down’ definitions have not yet successfully been reconciled. (Will they ever be?)

However, in preparing this, I was somewhat encouraged to find myself able to condense down a lot of the definitions into two robust ones that serve to capture much of the variety. Borrowing from various sources, I offer the all-purpose general suggestion that:

‘Creativity is concerned with discovery processes leading to new and unexpectedly valuable ideas’.

The second suggestion is that creativity occurs when somneone is

‘Looking where all have looked, and seeing what no one has seen’.

Looking but not seeing

The looking and seeing definition is an old favourite of mine. It captures the received wisdom that a creative act for someone, a moment of insight, occurs because many others have looked but not seen. I seem to remember a quote from Lord Chesterfield who confided in a letter that ‘from a hayloft, a horse looks like a violin’. The violin/horse in the presentation illustrates the noble Lord’s insight.

More significantly, the history of creative discovery relates of numerous people who were the first to see something that subsequently established as true (or, in an even more philosophically complex description, ‘truly creative’).

From Archimedes to Alexander Fleming; from Newton, to Mme Curie; from the little boy who saw that the Emperor had no clothes, all have been hailed for their significant moments of insight.

Theories of creativity

The insight school of creativity is but one among various sub-sets within cognitive psychology. Humanistic psychologists have contributed self-actualizing and transcendent theories. Information scientists have offered data-processing models. From rather different directions, we have natural scientists taking an evolutionary stance, and creationists offering their own theological interpretations.

Creativity in action

I want move from more refined theory into creativity in action. In doing so, I borrow a neat taxonomy which I learned from the Hungarian scholar Istvan Magyari-Beck. Isvan proposed some years ago that a new discipline of creatology could be developed, which could be structured into levels of the individual, group, organization and culture.

At each level, different issues arise, although there remains an overriding practical concern that requires some theoretical grounding at each level: How might creativity be fostered?

The creative individual

Magyari-Beck indicated that most studies have been at the level of the creative individual. This was true in the 1980s, and is only marginally different today. One difference is acceptance (particularly through the impact of the work of Teresa Amabile) that creativity is essentially a socially-constructed phenomenon.

Another shift parallel one in leadership research. For as long as they had been studied, Leaders were considered exceptional individuals, with special inherent traits. Only around the 1960s did the trait view of the exceptional leader soften into the situational and contextual view. Even today, the leader as ‘somebody very special’ is a widely-held belief.

Likewise, the creative individual was for a long time considered to be inspired and gifted. Around the time leadership was taking on a more egalitarian hue, educationalists and humanistic psychologists were exploring ‘everyday creativity’. Maslow, Carl Rogers, Fromm and others introduced a wide audience to the notion that ‘we are all creative and have the capacity to achieve that potential’.

The creative group

The creative group has become the shock-force for organizational change. More and more non-routine tasks are conducted in projects. Project teams are expected to show creative skills while seeking goals or targets of the wider organization.

Tuckman’s celebrated four-stage model suggested that all teams develop and change, until they achieve the norm of an effective team work. Rickards & Moger and co-workers at Manchester wondered how teams might be able to outperform expected behaviors. Their answer was through creative efforts which broke through behavioural and structural barriers.

The Creative organization

The creative organization was the subject of one of the earliest texts on creativity. However, it took the rise of the so-called Creative Industries to accelerate interest in such institutional forms. Today, the largest players in the world of electronic, communication and entertainment technologies have exploded into economic and social importance.

Nevertheless, we do well to remember that creative organizations can compete successfully in what appears to be rather ill-favored origins. Toyota, and the Chinese multi-national Haier come to mind.

The Creative culture

And so we reach the highest level of complexity in Magyari-Beck’s taxonomy. His own country had been at one time a hotspot of creative culture. Hotspots from ancient cultural clusters in China, Mesopotamia, Athens, Paris moved to modern hotspots including Cambridge (England and New England), Silicon Valley, even, some say, ‘Madchester’.

Peter Kawalek and his team seem to be rescuing the creativity in Manchester from the Madness.

The still-controversial social scientist Richard Florida is mapping the creative hot spots of the world in increasingly in-depth studies.

To go more deeply

This brief voyage around the world of creativity leaves too many ports of call unvisited. I hope to collect the views of several audiences (including blog readers) which will lead to suggestions for other perspectives.