Last summer I wrote a series of posts about how some of the most successful organizations in the world seem to have been spoiled by their success. Examples like Google, Starbucks, Apple, China, and the Republican Party suggested that when your organization reaches the top, it tends to feel less pressure, and thus fails to improve. But BusinessWeek article on July 2 suggests that Toyota is bucking the trend.
By just about any measure I think we can conclude that Toyota is a successful company at the top of its game. Two months ago it overcame GM to become the world's biggest carmaker. It pulled down a record $15 billion profit last year. And it has one of the hottest cars on the market with its Prius.
But while the profits and accolades keep rolling in - and its competition in Detroit is suffering - Toyota executives "are worried that they'll be spoiled by success." In an interview with BusinessWeek, Toyota President Katsuaki Watanabe claimed that "the scariest symptom of 'big-company disease' is that complacency will breed." So at the top of its game, Toyota's U.S. management team is launching an improvement plan called EM2 - meaning "Everything Matters Exponentially". As part of the plan, the company is conducting a "total examination of product planning, customer service, sales and marketing, and even the car dealers that the company doesn't own.
One of the keys to Toyota's reinvention is its Japanese heritage of continuous improvement, or kaizen. This mentality drives a belief that improvement is always possible. Another key is Toyota's push to unearth and address its weaknesses. For example, its rapid growth has caused recalls to triple over the last three years, and the company has dropped a few notches in the J.D. Power quality survey.
Professor Ranjay Gulati at the Kellogg School of Management provides four tips for avoiding complacency, based on watching Toyota and studying other large companies:
- "Avoid the Post-Pellet Pause - lab rats always take a break when they find that pellet of food. Recognize that once an organization achieves success, it's only natural to want to take it easy.
- Look Outside the Industry - Comparing yourself only with industry competitors can create a false sense of security. Set performance goals that are world-class, not just industry bests.
- Use Internal Metrics - External metrics such as market share matter. But supplement them with internal goals, such as quality and sales growth, which can be better for driving absolute, year-over-year improvements.
- Give Customers More to Love - If customers already like your product, try to improve the experience that supports the product. That extends the competitive advantage of having the best offering in the market."
Bigger picture, these and other tactics help organizations keep the challenge dividend going even when they have a natural tendency to relax. With this attitude, Toyota is sure to retain and grow its lead - while making even better cars and trucks for its consumers around the world.
Comments