Tom Johnson: Toyota and the Price of Growth

Tom Johnson (H. Thomas Johnson), buisness professor at Portland State University, co-author of Profit Beyond Measure, and long-time Toyota watcher, has a few articles on the company's current crisis.

From "How Toyota Ran Off the Road--and How It Can Get Back on Track," at Leverage Points Blog:

Toyota's current quality crisis is not a sign that its longstanding reputation for excellence was a mirage, that its fundamental management system was never really superior to the systems in competing organizations. Rather, it reflects disastrous policies adopted after 2000, when top management's thinking changed sharply in a direction that, while consistent with that of most other Western companies, would never have been tolerated at Toyota in the past.

From "Financial results such as revenue, cost, and profit are by-products of well-run human-focused processes," at The Lean Edge:

When examining [the] difference in viewpoints between Western and Toyota (pre-2000 Japanese) observers, it is important to consider the very different view each group has about the purpose of a business. ...

[T]he Toyota people in Japan who founded and grew the company down to the 1990s saw the company as a disciplined organization of “employee/suppliers” whose purpose is to serve “customers” in a way that earns sufficient profit to ensure the long-term survival of the organization. 

From "Toyota's Current Crisis," in The Systems Thinker (subscription).

In short, Toyota’s management culture at its zenith was process-driven, not results-driven. …

Toyota, unlike almost every other large publicly traced company in the world today, has relied scarcely at all on financial markets to raise capital for long-term investment. Instead, Toyota has used internally generated funds to finance virtually all its growth for at least the past 50 years. … [S]uch cash balances made it possible to spend billions in the 1990s on hybrid power-train development, leading to the highly successful Prius. …

For Toyota, the pathway to achieving low costs, at which they have always excelled, was to reduce total costs by continuously reducing consumption of resources. … By contrast, the American pathway to low costs has usually been to achieve low average costs per unit of output, the metric that follow from the economies of scale mindset. ...

Indeed, I firmly believe that true sustainability in an economy dominated by publicly traded firms is an oxymoron. True sustainability might be possible, however, were businesses in our real economy to escape the destructive growth-oriented emphasis imposed on them by the global financial sector.

Toyota was free from this pressure throughout virtually all of its modern history, until very recently when finance-motivated growth stretched its management ranks too thin, weakening its unique process-improvement kata, and causing quality to slip.

(Hat tip: P+T)