Wednesday, March 10, 2010


Toyota fascinates me. As a global icon only Tiger Woods has fallen further and faster. How did this happen to a brand that a year ago was characterized by its quality and durability?

The Toyota fall is the result of the goal Toyota set early in this century to become the world’s #1 in car sales. It decided to take on the wounded GM and move its global market share from about 11% to 15%. It achieved this and more, but now is struggling to maintain its starting position.

Toyota followed all the management rules. It was a case study on goal setting, measurement, and execution – and it failed. It will cost Toyota $3 billion in repairs and lost sales for its hubris. So what went wrong?

Toyota was measuring the wrong thing! Its aggressive market goal was not related to the needs of car buyers.

Toyota believed that its legacy of innovation and high quality, durable products would carry it to its goal of world #1. It forgot its customers and embraced its supply chain. As it got beyond its tier one suppliers it no longer had deep relationships that could ensure quality. Eventually the complexity of the over reach imploded into Toyota’s recall crisis.

The question behind Toyota’s goal should have been: “How much market share can we gain annually and still maintain the high quality and durable products that our customers expect from us?

Goal Confusion

I see this goal confusion all the time in my consulting work. Business plans are set with goals and metrics that have no relationship to the customer. In fact, the customer is rarely part of the discussion.

If we’re going to learn from Toyota then it looks like it will be the hard way. Our executives are still in a cost control mentality. Unfortunately, survival is being built on the backs of customers. This conflicts with the lesson of the financial collapse that shows customers are angry; they feel abused by: financial institutions, the housing industry, and now trusted name brands.

Customers don’t want to do business with companies that just get over the bar. They want to do business with companies that show: moral leadership, social responsibility, and respect for their employees. We are not meeting this customer expectation, and part of the reason is that we’re still setting business goals without regard to our customers.

I believe in goals and monitoring their achievement to know where you are. But we have to know how to set goals and then know what to do with them. All too often our goals are an incomplete reflection of the values that should be leading our business. Too often our goals are built on what we value - that is, making "profit". This causes us to forget about doing things right for those we serve, and we focus on the goal of making money. I know I will be chastised, however, contrary to popular belief the business of business isn't "to make money". The business of business is to serve customers. Making money is difficult without them.

Toyota’s goal forced it to take its eye off the customer. The cost? MasterCard. Priceless!

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