Tuesday, June 7, 2011

Lessons For Turning Crisis Into Opportunity

Toyota Under Fire: Lessons for Turning Crisis into Opportunity
Toyota Under Fire takes you beyond the headlines and into the offices and factories of Toyota to reveal the truth behind the company's highly publicized and controversial recall of nine million vehicles last year.

Jeffery Liker, the author of Toyota Way, and Timothy Ogden co-author this historic case study providing new insight into Toyota's culture. Toyota Under Fire chronicles the events of the recession and the recall crisis in detail, providing valuable lessons any business leader can use to survive and thrive in a crisis, no matter how large:
  • Crisis response must start by building a strong culture long before the crisis hits.
  • Culture matters far more than decisions made by top executives.
  • Investing in people, even in the depths of a recession, is the surest path to long-term profitability.

The books consists of five roughly chronological chapters:

1.      The Most Admired Company in the World
2.      The Oil Crisis and the Great Recession
3.      The Recall Crisis
4.      Response and the Road to Recovery
5.      Lessons

This book provides a clear account of the crisis amid a litany of heresy.   They get to the truth by going to the source, or what we call genchi gunbutsu - go and see for yourself to learn what is really going on.  Toyota Under Fire is a very well researched and detailed book.

I particularly enjoyed the last chapter where Jeff and Tim provide a comprehensive analysis of what others can learn from Toyota about crisis management and turning crisis into opportunity. They summarize four main lessons to be learned from how this crisis was handled:

Lesson 1: Your Crisis Response Started Yesterday
Turning crisis into opportunity is all about culture. It's not about PR strategies, or charismatic leadership, or vision, or any specific action by any individual. It's about the actions that have been programmed into the individuals and teams that make up a company before the crisis starts.

Lesson 2: A Culture of Responsibility Will Always Beat a Culture of Finger-Pointing
By not pointing fingers Toyota was able to turn the energy from the crisis from anger or despair to positive improvement energy. The starting point was to take care of customers. Then energy turned to looking in each function and finding opportunities for improvement to respond more quickly to every customer concern, whether rooted in technical defects or customer perception.

Lesson 3: Even the Best Culture Develops Weaknesses
Toyota's investment in a shared culture of continuous improvement is remarkable and practically unique.  But, the company still encountered difficulties that were directly attributable to weaknesses in their culture.  The greatest threat to a culture of continuous improvement is success.

Lesson 4: Globalizing Culture Means a Constant Balancing Act
Developing a shared corporate culture across varied national cultures is perhaps the biggest challenge facing modern multinational corporations.  The balance between centralized and decentralized, global and local is even harder than most people think.  It was out of this balance toward too much centralization and where they took bold actions to provide more power and influence to local leaders.

Challenge is the source of energy to go beyond goodness to greatness.  After a crisis the goal is never a steady state of returning to the status quo.  That's perhaps the final and most important lesson of turning a crisis into an opportunity.

Toyota Under Fire is highly recommended business leaders, Lean thinkers, and those interested in learning from crisis management.  I believe the message of this book will serve as an essential lesson on the importance business culture and crisis management for all students of business.

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  1. "Jeff and Tim" - well that rings a bell!

  2. Ah a webinar participant I assume. Great duo.

  3. Tim,

    These are interesting lessons learned, especially #3. Some people seemed to think that the recall was a sign that they turned away from TPS. It's probably more likely a sign that even Toyota needs to keep pressing on their continuos improvement process. Thanks for sharing.


  4. Very good book. Toyota is still the best Lean example. By the way Tim, i am a dutch guy and started the first Lean Development Blog in Holland. The focus in this blog is Lean Product Development.
    www.leandevelopmentblog.com is still in dutch, but in the near future it will also be in English

    Just take a look and let me know what you think

    I want you to congratulate with your fantastic site!
    Kind regards
    Klaas Droog

  5. Toyota Under Fire really put things into perspective. I was intrigued to learn that Toyota did not depart from their roots, but rather sought to "Go Back To Basics".

    Another keen observation is the demonstrated leadership that continues to prevail from the executive ranks. This, coupled with Toyota's commitment to their people and acknowledging their social responsibilities allowed them to further strengthen the company as a whole.

    The result is a company that is ever stronger and able to take on even greater challenges. Toyota is one of the few companies that did not abandon the very principles upon which the company was founded. In contrast, they revisited, enhanced, and developed new best practices.

    Great review - nice summary!

  6. Leanexecution, Toyota is still one of best examples we have. It just goes to show you this is a journey and you are never done learning and improving. Also, no one is immune to problems.