>Why Reputation Is The Foundation For Innovation


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.”

>Why The Customer Should Be The Center Of Our Professional World


It’s intuitive that organizations should manage oriented to serve their customers, because it’s the customers who keep them in business. Yet, in the name of “shareholder value,” many organizations continue to put short-term results at the forefront of their decision-making and this ends up damaging the long-term success of the organization to the detriment of its owners.

Harvard Business Review, January-February 2010, in an article called “The Age of Customer Capitalism” by Roger Martin states that “for three decades, executives have made maximizing shareholder value their top priority. But evidence suggest that shareholders actually do better when firms put the customer first.”

The author continues: “Peter Drucker had it right when he said the primary purpose of a business is to acquire and keep customers.”

Clearly, we serve our customers in the service of our mission. Our mission is why we exist as an organization. Our mission is to provide our customers with products and/or services that satisfy some intrinsic need.

The equation is simple:

Shareholder Returns = f (Customer Satisfaction)

Shareholder returns is a function of and positively correlated with customer satisfaction, as HBR notes. If we serve our customers well, the organization will thrive–and so will the owners—and if we do this poorly, the organization will die—and the owners will “lose their shirts”.

The problem with concentrating exclusively on stock price is that we then tend to focus on short-term returns versus long-term results, and the shareholder ends up worse off in the end.

“The harder a CEO is pushed to increase shareholder value, the more the CEO will be tempted to make moves that actually hurt the shareholders…short-term rewards encourage CEOs to manage short-term expectation rather than push for real progress.”

The article cites companies like Johnson & Johnson and P&G that “get it.” They put the customer first and their shareholders have been rewarded handsomely—“at least as high as, if not higher than, those of leading shareholder-focused companies.”

One good example of how J&J put customers first is when in the 1982 Tylenol poisonings, in which seven Chicago-area residents died, J&J recalled every capsule in the nation, “even though the government had not demanded it.”

Another good example in the article is Research in Motion, the maker of the BlackBerry. They recognized the importance of the customer versus the focus on the shareholder and already “in 1997, just after the firms IPO, the founders made a rule that any manager who talked about the share price at work had to buy a doughnut for every person in the company.” The last infraction by the COO had him delivering more than 800 doughnuts—the message was heard loud and clear.

These examples are in seemingly stark contrast to the recent handling by Toyota of its brake problems, in which there has been delayed recalls and the government is now investigating. As The New York Times (8 February 2010) reported: “The fact that Toyota knew about accelerator deficiencies as far back as December 2008 “raises serious questions about whether car manufacturers should be more forthcoming when they identify a problem, even before a recall,” said Robert Gifford, the executive director of the Parliamentary Advisory Council for Transport Safety, a nonprofit group that seeks to advise British legislators on air, rail and road safety issues.” Note: this is out of character for Toyota, which historically has been a car company known for its quality and safety.

As a long advocate for User-centric Enterprise Architecture, I applaud the organizations and the people that put the customer first—and by this, I mean not by words alone, but in deeds. It is easy to put the customer into our mission and vision statements, but it is another to manage our organization with a true service creed.

While the HBR article emphasizes short-term shareholder value as main culprit diverting us from a positive customer-focus, there are really numerous distractions to realizing the vision of a customer service organization. Some examples include: organizational politics that hinder our ability to accomplish our mission; functional silos that are self-serving instead of seeking the best for the enterprise; certain egocentric employees (a minority) that put personal gain or a lack of strain above a service ethos; and of course, greedy and corrupt individuals that seek to profit at the expense of the customer, perhaps even skimping on product quality and customer service, thereby even endangering health and safety.

While most people are essentially good and seek to do the right thing, the organization must put in place controls to ensure that our focus is never distracted or diminished from our customers. These controls include everything from establishing values, policies, processes, requirements management, product development, training, testing, measurement and reporting, and best practices implementation in order to ensure our finest delivery to the customers, always.

>Toyota and Enterprise Architecture


MSNBC on 24 April 2007 reported: through a shrewd combination of investing in environment-friendly vehicles, offering sharp new models and wooing drivers with brand power, Toyota has toppled GM from the top global sales spot for the first time ever.”

Harvard Business Review, June 2008, reports on “Contradictions that Drive Toyota’s Success.” (by Hirotaka Tekeuchi, Emi Osono, and Norihiko Shimizu) Toyota Motor Corporation has become one of the world’s greatest companies because of Toyota Production System (TPS)…enables the Japanese giant to make the planet’s best automobiles at the lowest cost and to develop new products quickly.”

What is Toyota’s secret?

Reaching for the stars—Toyota sets “near-unattainable goals.” For example, “consider the company’s strategy: Meet every customer need and provide a full line in every market.” This runs counter to Michael Porter’s strategy of “choosing what not to do.” Additionally, Toyota’s goals are “purposely vague” to force exploration, innovation, and collaboration to meet them.

Consider the goals stated by Toyota’s president, Katsuaki Watanabe:

“Build a car that makes the air clean [not just less dirty], prevents accidents [not just reduces accident’s], makes people healthier and happier when they drive it [not just a car that gets you from place to place], and gets you from coast to coast on one task of gas [not just incrementally improving gas mileage].”

Have you ever seen anything like these goals in your organization’s strategic plans?

I highly doubt it. But imagine how your enterprise would change culturally and competitively overnight if you did!

Of course, Toyota’s strategy of Kaizen—continuous improvement—is part of their unending desire to succeed and not be satisfied. They view improvement as not something you achieve, but as something you continuously strive for.

We can apply Toyota’s reach goals and Kaizen philosophy to making enterprise architecture planning more effective too. We need to stop conveniently “planning” on things we are working on now or for which we have a head-up that are just around the corner. Sure it’s easy to plan with 20-20 hindsight and it helps us to achieve our unit and individual performance plans and gets inappropriately recognized and rewarded, but this is really a short term outlook and not one that will drive organizational success. Instead, like Toyota, we need to set goals that are stretch goals for the organization, and which make us go beyond our comfort zones, so that we can truly work to break out of the box and differentiate ourselves and our organization from the status quo and the limits of our imagination. Setting the bar truly high and then not settling for anything less than continual improvement is a long term strategy for success and one that needs to be genuinely encouraged and rewarded.

Here’s another important aspect of Toyota’s success:

Employees are highly valued— “Toyota views employees not just as pairs of hands, but as knowledge workers.” Ideas are welcome from everyone up and down the organization. “Employees have to operate in a culture where they constantly grapple with challenges and problems and must come up with fresh ideas…when people grapple with opposing insights, they understand and come up with effective solutions.” In fact, at Toyota, “employees feel safe, even empowered to voice contrary opinions and contradict superiors.” There is a culture of open communications, and a tremendous value is placed on personal relationships and networking. Additionally, value is placed not on results, but for “how much trust and respect the manager has earned from others,” and “refusing to listen to others is a serious offense.”

This concept of valuing employees and listening to them can shed light on how we need to develop effective enterprise architecture and sound governance; whereby, we provide all major stakeholders a voice at the table–to participate in and influence planning, decision making, and innovation. This is the way to achieve higher returns and lower risks. We need to stop planning and making decisions on the whims of the few or based on gut, intuition, and politics. We must cultivate information sharing, collaboration, and elevate people as the quintessential element of our enterprise’s success.

“Toyota’s culture…places humans, not machines, at the center of the company. As such, the company will be imperfect, and there will always be room for improvement.”

People are flawed, but our endeavors make us great!

>Unmanned Vehicles and Enterprise Architecture


Cars that drive themselves, fiction or a soon to be reality?

General Motors believe that new technology enabling unmanned vehicles is the key to their business future; so GM is setting their sights on this as their target architecture for their turnaround.

The Wall Street Journal, 7 January 2008, reports that GM’s new target architecture is to develop unmanned vehicles by 2018.

Chairman and Chief Executive of GM, Rick Wagoner’s “vision of he not-too-distant future, vehicles crammed with cameras, sensors, and radar and navigation technology will be able to brake and accelerate on their own, avoid accidents, and spot congestion.”

Larry Burns, Chief Technologist at GM states “we see vehicles going from being largely mechanical o becoming more and more electronic.”

“Pushing the technological envelope is a key element of Mr. Wagoner’s strategy for turning GM around and positioning the company to compete with Toyota Motor Corp. in the long term. He is convinced being the first with game-changing innovations is the solutions to one of GM’s fundamental problems—battered image.”

While GM’s quality problems have mostly been addressed, consumers still perceive GM to be a stodgy company and have not come back to buy.

Mark LaNeve, GM’s U.S. sales and marketing chief said that “GM believes it must challenge Toyota on technology leadership in order to reverse the negative perceptions of GM and to win back customers who have defected to foreign brands…Toyota right now clearly has a leadership position on reputation, financial results, and many other measures.”

Will this new architecture strategy work for GM?

I wouldn’t bet on it for a number of reasons:

  • Toyota is not standing still while GM retools; in fact, Toyota is already on the leading edge with the Prius gas-electic hybrid, and the Lexus luxury sedan that can parallel park itself.
  • If GM doesn’t deliver on this technology promise, they will have shot themselves in the foot; it’s one thing to be perceived as behind the 8 ball and it’s another thing to prove that you can’t deliver on your commitments.
  • GM has not clearly articulated the business requirement for unmanned vehicles in the consumer market; we are not dealing with the need for unmanned aerial vehicles in fighting the enemy in Iraq.
  • GM’s strategy, as presented, is not coherent; they talk about getting ahead with technology, but have not addressed their inferior position on other issues such as financial results and other measures that GM’s Mark LaNeve acknowledged.

From a User-centric EA perspective, GM has still not caught on to the essence of the Japanese concept of Kaizen—continuous improvement and user-centricity. GM is looking at trying to steal the technology mantle from Toyota instead of incremental and evolutionary improvement time and time again. It’s a philosophy you live by, not one that you steal.