a3339fc99dccad0b64e4e3b3de7e9ddd4b415224_m

The once admired Toyota brand is in deep trouble. Not one day passes without another recall and frightening insights into the culture of the rapidly expanding brand. If any company was ever the banner child for business management strategies and lean manufacturing, it was Toyota. Kaizen (Japanese for improvement) was the buzzword for Toyota’s business system, continually improving all functions of their business, from manufacturing to management and from the CEO to the assembly line workers. Key elements of kaizen are quality, effort, involvement of all employees, willingness to change, and communication. Most see kaizen from an operational point of view. That’s where the disconnect is. At its core, kaizen is about cultural change and unless this change is implemented none of the tools and technologies will work. Kaizen is about focusing less on short-term goals and shifting the cultural focus to long-term goals and stability. And that’s where Toyota lost its way.

They were so focused on grabbing the title of world’s largest automaker that they completely forget about their principles that made them such a respected brand: Focusing on gas-sucking vehicles because Detroit owned that market. A secretive and bureaucratic culture, centrally controlled after Jim Press left for Chrysler. Resting on their laurels and believing in their own corporate speak, not connecting with their stakeholders, purely focusing on expansion and shareholder value.

It’s just maddening to read how for years Toyota tried to skirt the issues, not dealing with the real problem, just trying to avoid bad PR. Compare this to Johnson & Johnson’s Tylenol recall: the first death occurred September 29, 1982. 6 days later Johnson & Johnson pulled 31 million bottles, with a retail value of $100 million. They also advertised that nobody should consume any products containing acetaminophen. Their market share collapsed from 35% to 8%, just to rebound within a year.

Why was Johnson & Johnson able to react so promptly and why is Toyota acting like Bill Clinton, debating the definition of ‘is’?

A look at Johnson & Johnson’s credo is very revealing:

We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical. We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens–support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.”

J&J’s primary goal is to satisfy their customers. Not the shareholders. The shareholders come last. Shareholder value becomes an organic result of good customer experiences and valuable relationships with stakeholders. Toyota went exactly the opposite way: Cutting prices for all their suppliers, not reacting to dropping customer satisfaction scores and disregarding customer complaints that lead to the devastating recalls.

Sure, there is the Toyota Way. While J&J lived its credo throughout tough times, Toyota got sidetracked. Joseph Jaffe gives good advice to the marketing and PR department at Toyota. But that’s the second step. The first step for Toyota is look deep inside and change their culture. It’s getting late. Kaizen made you the admired brand you once were. Kaizen as a cultural change system can do it again.