>Why Reputation Is The Foundation For Innovation

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Toyota is a technology company with some of the most high-tech and “green” cars on the planet. But right now Totoya’s leaders seem to lack integrity, and they haven’t proactively handled the current crisis. As a result, everything they have built is in danger.

Too often, IT leaders think that their technical competency is sufficient. However, these days it takes far more to succeed. Of course, profitability is a key measure of achievement and sustainability. But if basic integrity, accountability, and open and skillful communication are absent, then no amount of innovation in the world can save you.

Looking back, no one would have thought that Toyota would go down in a flaming debacle of credibility lost. For years, Toyota ate the lunch of the largest American car manufacturers—and two of the three were driven to bankruptcy just last year. Moreover, they had a great reputation built on quality – and that rocketed Toyota to be the #1 car company in the world.

A reputation for quality gave Toyota a significant edge among potential buyers. Purchasing a Toyota meant investing in a car that would last years and years without defect or trouble—it was an investment in reliability and it was well worth the extra expense. Other car companies were discounting and incenting sales with low or zero interest rates, cash back, and extended warranties, and so on. But Toyota held firm and at times their cars even sold for above sticker price. In short, their brand elicited a price premium. Toyota had credibility and that credibility translated into an incredibly successful company.

Now Toyota has suffered a serious setback by failing to disclose and fix brake problems so serious that they have allegedly resulted in loss of life. Just today, the Boston Globe reports that Toyota has been sued in Boston by an individual who alleges that “unintended acceleration (of his Toyota vehicle) caused a single-car crash that killed his wife and left him seriously injured.” The Globe goes on to report that “dozens of people reportedly have been killed in accidents involving unwanted acceleration.”

While nothing is perfect, not even Toyota engineering, in my opinion the key to recovering from mistakes is to be honest, admit them, be accountable, and take immediate action to rectify. These are critical leadership must do’s! Had Toyota taken responsibility in those ways, I believe their reputation would have been enhanced rather than grossly tarnished as it is now, because ultimately people respect integrity above all else, and they will forgive mistakes when they are honest mistakes and quickly rectified.

Unfortunately, this has not occurred with Toyota, and the brake problems appear to be mistakes that were known and then not rectified—essentially, Toyota’s transgression may have been one of commission rather than simply omission. For example, this past week, the CEO of Toyota, Akio Toyoda, testified before Congress that “we didn’t listen as carefully as we should—or respond as quickly as we must—to our customer’s concerns.” However, in reality, company executives not only didn’t respond, but also actually apparently stalled a response and celebrated their success in limiting recalls in recent years. As Congressman Edolphus Towns, chairman of the House Committee on Oversight and Government Reform, stated: “Toyota’s own internal documents indicate that a premium was placed on delaying or closing NHTSA investigations, delaying new safety rules and blocking the discovery of safety defects.” (Bloomberg News via the Austin American Statesman)

In other words, Toyota strayed from its promise to customers to put safety center stage. Rather, profit took over and became the benchmark of success.

Even the company’s own managers acknowledge the deep wound that this scandal has inflicted on the company, and have doubts about its leadership. According to the Wall Street Journal, a midlevel manager stated, “Mr. Toyoda cannot spell out how he plans to alleviate consumer worries….it is a recall after another, and every time Mr. Toyoda utters the phrase ‘customer first,’ it has the opposite effect. His words sound just hollow.’” Said another, “The only way we find out anything about the crisis is through the media….Does Mr. Toyoda have the ability to lead? That’s on every employee’s mind.”

Indeed, the Journal echoes these sentiments, noting that under Toyoda’s leadership, there was a focus on “getting the company back to profitability, after the company last year suffered it first loss in 70 years.” In other words, in an attempt to “reinstate frugality,” it appears that CEO Toyoda went too far and skimped on quality—becoming, as the saying goes, “penny wise and dollar foolish.” We will see if this debacle costs Toyota market share and hurts the bottom line over the intermediate to longer-term.

In recent times, we have seen a shift away from quality and credibility in favor of a fast, cheap buck in many sectors of the economy. For example, I have heard that some homebuyers actually prefer hundred-year-old homes to new construction due to their perception that the quality was better back then and that builders take shortcuts now. But somehow Toyota always stood out as a bulwark against this trend. It is therefore deeply disappointing to see that even they succumbed. While the company has a long road ahead to reestablish their credibility and rebuild their brand, I, for one, sincerely hope that they rediscover their roots and “do the right thing.”

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