Without Warning

Making The Problem Visible

March 9th, 2010

One of the first steps in solving a silent problem (a problem that is being avoided, neglected or is going unnoticed) is to make the problem visible. This is what I refer to in the book Without Warning as a component of a CAP Initiative. And part of making the problem visible lies in putting forth a solution, since solutions are the truth serum of any problem. It tells you how important the problem is and puts in motion the resources and timetable to make it happen.

I therefore found this article about the growing concern about bank liquidity over at Bloomberg interesting and telling. Here are a few excerpts worth noting.

China plans to nullify all guarantees local governments have provided for loans taken by their financing vehicles as concerns about credit risks on such debt increases.

“By striking the fear of God into lenders, regulators hope to get them to turn off the tap,” said Patrick Chovanec, a professor at Tsinghua University in Beijing.

“China’s sending a very strong signal that this kind of financing is over,” said Chovanec, an associate professor in the School of Economics and Management at Tsinghua University. “It raises the specter that China’s banking system has a lot more risk in it than people previously thought.”

In effect, the Chinese Ministry of Finance is stating, “We have a problem and we’re concerned.” Second, the Ministry has escalated the problem by putting in place a solution “this kind of financing is over.” Prior to this, rhetoric surrounded the problem, but not a solution. Third, by putting in place a solution, the Ministry has made the problem visible, thereby declaring its importance.

Making the problem visible is a critical step in every problem-solving situation. By making the problem visible, it helps fosters a culture of candor and creates a place where the truth is encouraged to be spoken. And when we make a problem visible, we state “this is really important.”

Bottom Line: Making a problem visible should go hand-in-hand with problem solving. Problems are an integral component to leadership development, critical thinking skills and personal growth.

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What Did Toyota Really Know?

March 7th, 2010

The last couple of months has been painful for Toyota. Several large recalls have been initiated. Toyota executives have appeared in front of a several congressional hearings. Sales and customer loyalty numbers are declining. And now news that unintended acceleration in cars that have been fixed have been reported. What else could possibly go wrong?

If you’re a business leader, it doesn’t get any more challenging than this. The ship has a gaping hole in its fuselage, you’re taking on water, and your future is unsure. Which leads me to the question, “What did Toyota know about their problemn and when. Was it 6-months ago? 1 year ago? Possibly 6-years ago?

When you look back at history, the story eventually surfaces through an autobiography, a whistleblower lawsuit, or an internal leak. And when the truth finally surfaces, I expect the findings will be revealing. What might we learn?

We might learn the how, the why and the where the problem started.
We might learn who made the decision and who supported it.
We might learn how Toyota was able to keep it silenced for so long.
We might learn what they hoped to achieve by their decision, and what they feared if it leaked out.
We might learn that they were unable and unwilling to take on such huge problem.

The “What Did Toyota Really Know and When” questions are the basis for the congressional hearings about Toyota’s safety problems. So far, these hearings have achieved little in answering this question. Although the Toyota problem is now visible, and the pressure is on to get to the bottom of it. Eventually we will learn the answer, and when this emerges, a certain war analogy will likely sum up the findings.

Every military defeat can be explained by two words - “too late.” Too late in anticipating danger - too late in preparing for it - too late in taking action.

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What Will You Be Remembered For?

March 4th, 2010

Over the next 2 years, what do you believe you and your organization will be remembered for? Will you be remembered for the great customer service you deliver on a day-to-day basis? Maybe, but doubtful. Will you be remembered for a new product you delivered into the marketplace with great fanfare? Possibly. Will you be remembered for the 50 years you’ve been in business, despite enormous odds? Unlikely. Or, will you be remembered for how you handled a disaster? The odds are, it will be the latter.

I’ve told clients many times, “Your leadership/organization will be recognized more by how it handles disaster, than by how it managed success.” Does this resonate with you? It should, because every once in a while we encounter one of those defining “disaster” moments. Or what some might refer to as “A Moment of Truth” situation.

Several years ago I was working with a client with a Moment of Truth situation. They had experienced an unexpectant product failure. At first glance, they were looking for straws. What went wrong? When did it start to occur? How many clients does it potentially impact? And the most important question of all, “What should we do?” They took enormous steps to identify the problem, and more importantly, implement a sound solution. They didn’t take the easy way out, or the low cost way out. They took the path that was best for their clients, because this aligned with their corporate values. The fix was costly and the outcome was interesting. Their client loyalty did not suffer, it actually improved!!!

There are numerous high profile scenarios with similar outcomes. The most obvious being, the Tylenol scare back in the 80s. And being from Minnesota, the collapse and the rebuilding of the I35W bridge. These are stories where adversity was embraced and sound solutions to difficult problems implemented.

Unfortunately, too often companies and their leaders follow a “path of least resistance or cost” protocol. It in many respects is tactical, not strategic. It’s about how companies can still achieve their objectives and not get sidetracked along the way.

Such is the case of Toyota. They embraced and fostered silent problems (problems that were being avoided, neglected, going unnoticed or being intentionally silenced), and are now suffering the outcomes. Toyota’s President, Akio Toyoda has proclaimed repeatedly that the fix they are proceeding with has been tested and has assured customers, “this will fix any problems that could be associated with unintended acceleration.” Today, Toyota’s that have received the fix are still experiencing unintended acceleration.

Today I’m wondering, will Akio Toyoda be known for how he mishandled a disaster, and the crumbles that are yet to come.

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Are Toyota’s Safe

March 2nd, 2010

A USA Today/Gallop poll recently asked the “Are Toyota’s Safe” question to Toyota owners and prospective buyers. Depending on how you look at the data, it’s either encouraging or discouraging.

Thirty-one percent of Americans now think Toyota and Lexus vehicles are not safe to ride, while 55 percent say the carmaker dragged its feet in responding to potential safety defects, according to a poll published on Tuesday. The USA Today/Gallup survey of 2,021 adults showed fewer doubts among current Toyota owners, with only 14 percent saying the cars are unsafe. A large majority of owners — 74 percent — say they have not lost confidence in the vehicles.

Pollsters said findings also suggest enduring loyalty to Toyota vehicles among prospective U.S. car buyers generally. While 17 percent of prospective buyers said they would no longer consider a Toyota vehicle, 53 percent said they would.

Interestingly, this closely aligns with what I projected on February 8th in the article Can You Trust Toyota? I made the following prediction.

The reason these “Can Toyota be trusted…” questions are important relates to Toyota’s future success or failure. As I read countless news articles relating to Toyota’s problems, it apparent that current Toyota customers fall into 3-categories.

Faithful Toyota Followers: This group love their Toyota’s, and the many years of dependability, quality and service they have grown to love. This group likely comprises upwards of 50 - 60% of all current Toyota owners.
Concerned Toyota Owners: This group loved their Toyota, but aren’t quite sure what to think now and they’re concerned. They’re asking the question, “Can Toyota be trusted…” This group likely comprises 20-30% of Toyota owners.
Discouraged Toyota Owners: This group feels they’ve been betrayed. They’re reading the news reports and are concerned and possibly frightened. They don’t feel like Toyota has been true to the image they portrayed. This group comprises 10-20% of Toyota owners, and is growing.

The next couple of months is critically important for Toyota if they are to revive their brand and their business. It will not be an easy task, especially considering that new recalls are being announced (another 1.6 million autos will need to have leaky oil hoses fixed) and the potential for deepening recalls is possible (The NY Times recently completed an investigation suggesting that Camry’s prior to 2007 might also be at risk of a recall). All of this is transpiring while worldwide auto sales is increasing and Toyota is suffering from a lapse in quality, transparency and safety.

Toyota’s silent problem (icebox variety) is now known. How the Toyota silent problem became visible is somewhat typical. The cost to the Toyota brand, cost of repairs, lost revenue from weak sales and fresh incentives to stimulate sales will likely top $50 Billion. And this is the real challenge that Toyota is facing. Its cash position is hemoraging quickly, which will make it more difficult to revive the brand and its quality position.

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The Feel of an Organization

March 1st, 2010

It’s been a couple of days since Steve Holcomb piloted his 4-man Bobsled team to a gold medal at the Winter Olympics in Vancouver. I don’t know about you, but bobsledding at 90+ mph down an ice chute with twists and turns with gravitational forces approaching 4Gs is simply unbelievable. How do they do it?

Following Team USAs Gold Medal victory, NBC had a “Return to Bobsledding” story about Steve. It appears that Steve had been suffering from a degenerative eye condition and in 2009 he informed his coach that he would have to give up the sport he loved, and had excelled at. He could no longer see the track well enough to pilot his sled safely or competitively. His coach gave Steve some advice and encouraged him to consider a not-yet-approved by the FDA procedure that might correct Steve’s condition. Steve had the operation and his eyesight was restored to 20-20. Obviously, this was an important element in USAs Gold Medal victory, or was it?

And now for the rest of the story. Following Steve’s return, it appears that his now perfect 20-20 vision was an asset and a liability. In the past, Steve would compensate for his poor eyesight with “the feel” of the sled and the track. It was the feel that guided him to smoothly transition between the various physical characteristics of a course at 90 mph. But now with perfect eyesight, Steve became more dependent on his eyesight. He found himself crashing more often, because he was losing the ”feel” component of being a successful bobsled driver. His solution? He scratches the visor on his helmet to slightly distort his vision, which in turn forces him to “feel” his way through the course. The end of the story - a Gold Medal.

As an executive coach and business consultant, I’m convinced that business leaders at times are too dependant on sight (what they see), and not enough on the “feel” of an organization. In turn, they miss some of the important signals that their organization is sending their direction. They miss those subtle nuances that help create the picture. The net result - they at times expose their organizations to risks that could have been avoided. Here are a couple of suggestions to help you reestablish the feel of your organization.

Listen for weak signals: They may be the subtle cues you’re really looking for.
Ask insightful questions and then shut-up: People love to talk if you just let them. You may have to sit through some painful prose, yet in the middle some insightful words of wisdom often emerges.
Management by walking around: Close your eyes - what do you really see?
Shadow employees: Does it make as much sense on paper as it does in real life?
Create a culture of candor: Let your employees tell you what they’re feeling and what is really going on.

“Feel” is one attribute leaders need to possess. So go out there, scratch up you lenses, and get a feel for your organization.

Yes at times, 20-20 vision is part of the problem, because it only delivers part of the picture.

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Silent Problems Being Revealed

February 27th, 2010

Do you wish the Toyota story would finally come to an end? Do you wish that Toyota would simply get back to the business of making great cars? Do wish that Toyota would simply come clean, take care of their problems, and move on? As much as I want to say “Yes” to each of these questions, the likelihood of it happening appears to be miniscule. The magnitude of Toyota’s problems is simply too great.

Over the past month, Toyota’s drive to fix its problems is being challenged at every intersection as new allegations, new lawsuits, and fresh dirty laundry come into the open. And from what I’ve seen, it appears that the tsunami has more destruction in its path. Because the problems that Toyota has evidently been hiding for years are now beginning to surface, and will be fodder for front page news around the globe for the foreseeable future. And this is where Toyota’s quality and safety image is taking it on the chin.

In a Bloomberg story, Toyota Recall Crisis Said To Lie In Cost Cuts, Growth Ambitions, the authors investigate the “What went wrong” side of the story. And from the story, it’s apparent that cost cutting and corporate profits were Job 1, not quality or safety. For instance the article states, The company also had been too fixated on achieving a goal, set by Watanabe, of raising its operating margin to 10 percent to keep profit growing, the person described Toyoda as saying… At a 2006 investor conference in London Watanabe and former Executive Vice President Kazuo Okamoto discussed plans to “exceed the cost-reduction results achieved in CCC21” by eliminating vehicle parts and pushing suppliers to adopt lighter, cheaper materials. While the programs brought development advances, they may have inadvertently triggered quality glitches, said current and former company officials who asked not to be named because the information isn’t public.

Over at the Washington Post, Lawmaker accuses Toyota of withholding evidence reveals Toyota’s secretive “Book of Knowledge.”

Toyota withheld documents it was legally required to turn over in liability lawsuits the company faced and it paid higher settlements to plaintiffs to avoid revealing information contained in Toyota’s secret “Books of Knowledge,” a congressional committee chairman said Friday.

As I’ve been following and blogging about this story for over a month now, there appears to be several sides to the Toyota story now emerging.

The Why Story: Why did Toyota pursue a path that was built on a deck of cards. Didn’t they realize it would eventually crumble?
The How Story: How did Toyota go from being a company that was respected, to one that is being questioned and challenged? How did a company whose founding principles of quality and safety become a company of average quality and mediocre safety?
The Where Story: Where were the corporate secrets held? This story is just now being told - i.e. The Book of Knowledge . Where did all of the quality and safety issues actually go - were they simply throw into a big black hole?
The What Story: What can we anticipate will surface in the future? What will Toyota attempt to do to diffuse the story and regain its fleeing customer base?
The Money Story: How big will the final bill be once all of the lawsuits, recalls and reduced value of the company and future earning potential be? My guess - its much bigger than most are willing to fathom - $50 Billion?

The cost of Toyota’s silent problems is immense. Toyota’s future is uncertain. The Toyota brand has been exposed. And unfortunately, Toyota has no one to blame but itself. They brought this on, and now owners of Toyota vehicles are suffering and Toyota’s employees exposed. I expect that next week will turn up some new information.

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Probability

February 24th, 2010

Let’s assume I offered to sell you a house in an area known for its street crime. And to assure you that it was a good deal, I informed you that the probability is slim that you will have any problems. Would you buy the house? Probably not. Why? Because there are some risks you simply want to avoid.

If I was attempting to sell you a car and told you, “there is a slim probability that you might experience uncontrollable acceleration” - would you buy it? Probably not. Because you likely enjoy life, and want to feel safe in your car. But what if you already own the car and find out that there is a slim probability that you might experience uncontrollable acceleration - does this make you feel better?

Well in the congressional panel yesterday, Jim Lentz, Toyota’s top U.S. sales executive essentially told Toyota owners to feel good about their Toyota investment because there was only a slim probability that you might experience uncontrollable acceleration. Jim Lentz, stated that Toyota plans to install an electronic program that allows the brake to override the throttle on some vehicles. And for those that don’t qualify,Lentz stated, ”the probability is slim” that they would have any problems. Furthermore, Lentz inferred that electronics could still be at the root of some unintended acceleration problems.

Toyota has a huge credibility and trust challenge going forward. Everyday, Toyota is making things worse and they can’t figure out how to overcome it. When Mr. Lentz was asked why Toyota had moved away from a business model that prized quality and openness, he offered a simple explanation: “We lost sight of our customers.”

And maybe this is the simple and heart wrenching challenge facing many companies today. “We simply lost sight of our customers.”

The answer going forward is simple Mr Lentz, isn’t it?

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Safety, Quality & Transparency

February 23rd, 2010

Mr. Akio Toyoda, President of the Toyota Motor Company has been embroiled in controversy and fingerpointing for several months now. Today he sits in front of a U.S. Congressional hearing to defend his company and protect its future. As a prelim to this event, Mr. Toyoda had an Op-Ed piece published in the Wall Street Journal yesterday, titled Back to Basics for Toyota - it’s worth reading. If you’ve read my blog before and its numerous articles, its worth delving into Mr. Toyota’s position.

Mr. Toyoda’s Op-Ed piece is telling, because it gives us a peek into what he is thinking, and how Toyota will attempt to reinvent itself going forward. Therefore, I went through the article and did a simple word count for the words Safety, Quality and Transparency. This is what I found.

Safety: 10 times
Quality: 6 times
Transparency: 2 times

From this, it’s apparent that Safety is what is on the mind of Toyota’s customers and repairing the safety issue is “Job 1.” And the way to solving the safety issue (rebuilding trust) is through quality, which has historically been a core strength of Toyota. However the means to addressing the safety issue is by creating a culture of transparency. This is the feedback loop that enables Toyota’s engineers to design safer systems. Yet transparency is only listed twice. They are:

1st mention - 2nd paragraph: The first step is taking care of vehicles on the road today. But it also means making even safer vehicles in the future—and being more open and transparent about any safety issues that arise.

2nd mention - next to last paragraph: In short, I pledge that Toyota will set a new standard for transparency and speed of response on safety issues.

This Op-Ed piece focuses on safety and quality, and only touches on the issue of transparency. Yet as recent reports have implicated, its the transparency issue that is at the heart of the Toyota Safety and Quality problem. And the lack of transparency is directly tied to the Japanese culture, which it doesn’t address. How will Mr. Toyoda create a culture of transparency? What does this mean? What systems will be put in place? Without a culture of transparency, it suggests that Toyota is ripe for silent problems (problems that are being avoided, neglected, go about unnoticed or are being intentionally silenced) into the future.

Bottom Line: Toyota needs to implement processes and procedures to deal with the silent problems inside the Toyota organization. It’s interesting, they have the system in place in their manufacturing plants today, and is core to their historical strength in quality and safety. Now they need to implement a similar process inside the management and leadership ranks at Toyota. And as I noted in my book, silent problems can be the most destructive problems of all.

What do you think? Can Akio Toyoda do better?

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Toyota Intentionally Silenced Problems

February 22nd, 2010

The news is out. Not necessarily a surprise though. Yes, Toyota has been caught intentionally silencing problems. In my book, I refer to the avenue Toyota pursued as the Icebox Silent Problem approach. The book states, “These problems aren’t being resolved. They’re simply being micromanaged inside an icebox where anyone threatening to leak them are frozen out.” Well yesterday, it was confirmed that Toyota had intentionally silenced problems - i.e. an Icebox Silent Problem.

TOKYO (MarketWatch) — A U.S. congressional investigation into Toyota Motor Corp. has turned up documents revealing that the auto maker saved more than $100 million through negotiations with U.S. safety regulators that helped limit an equipment recall in 2007, according to news reports Monday.

The more than $100 million in savings touted by Toyota officials were listed under the title of “Wins for Toyota-Safety Group,” and Toyota officials highlighted them as a key company achievement in 2009, the reports said, citing documents obtained by U.S. congressional investigators.

To Toyota’s dismay, they find themselves with some nefarious company in the icebox. For instance, Peanut Corporation of America, Enron, Worldcom, and Bernie Madoff being just a few.

Toyota is losing ground in their ability to regain their credibility and sales momentum. Almost everyday a new, more damaging revelation is hitting the front page of the news. And my best guess is, Toyota is not going to recover from this anytime soon - if ever. Inside Toyota, fingerpointing, blame and accusations are likely an everyday occurrence. They’re imploding from the outside - in. Moral and productivity is likely dismal. The true cost of Toyota’s silent problem debacle will likely exceed $50 Billion before its over (cost of recalls, lost sales, stock price erosion, lawsuit liability…).

Bottom Line: Don’t be surprised if Toyota is forced to file for bankruptcy before its all said and done. This story is likely to get worse from here.

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Toyota and the Fish

February 16th, 2010

There is an old saying that ”A fish rots from the head down.” This saying gets to the heart of why and where many organizations fail. This of course being leadership. As the Toyota story continues to unfold, I’ve been pondering from where is the Toyota fish rotting? From the head (corporate & leadership), from the tail (dealers), or from the midsection (manufacturing & engineering)? Let’s take a brief look at some of these areas.

Without a doubt, Toyota’s manufacturing system has been untouched. It continues to be the crown jewel.
In most respects, even engineering hasn’t been implicated. Granted, Toyota’s problems have ties to engineering, but engineering doesn’t appear to be at fault. The reason being, engineering is dependent on continuous and timely feedback so it can adjust, refine and improve the system. It’s apparent that engineering has been every bit as much in the dark about Toyota’s problems as is the customer.
And what about Toyota’s dealers? Although there have been stories of arrogance (Toyota is the best…), it doesn’t appear that dealers have been at the source of the problem. Maybe somewhat complacent, but not the source.

So where does the root of Toyota’s problems lie? Here I started to compress every news article I’ve read over the past couple of months (and believe me, it is a long list). After a few days of pondering the answer, problem identification is becoming clear, it’s the corporate mothership and its leadership. Yes, a fish rots from the head down seems to apply. Let me present a few of the scenarios at play here.

In today’s Wall Street Journal, they have a story titled “Toyota Woes Put Focus On Black Box.” The story delves into the black box (similar to the black box of an airplane) that sits inside every car and how Toyota defies releasing the information that lies within. The WSJ goes on to state, “U.S. auto makers General Motors Co., Ford Motor Co. and Chrysler Group LLC have provided their black-box data formats to Bosch Diagnostics, a unit of German auto supplier Robert Bosch GmbH that makes tools that download crash logs from vehicles made by those auto makers. Those tools are widely used by police, crash investigators and attorneys, and the auto makers don’t question the accuracy of the data retrieved with them.”
Toyota has been dragging their feet. “Toyota’s relationship with industry regulators, as The New York Times, was a “kabuki dance” that even involved an unprecedented trip to Japan by National Highway Traffic Safety Administration Secretary Ray LaHood. Toyota execs were reportedly “dragging things out” and “offering excuses that didn’t make any sense.”
Another WSJ article discusses the Japanese culture and its relation to the problem. “In Japan there is a proverb, “If it stinks, put a lid on it.” Alas, this seems to have been Toyota’s approach to its burgeoning safety crisis, initially denying, minimizing and mitigating the problems involving brakes that don’t brake and accelerators that have a mind of their own. President Akio Toyoda, grandson of the founder, was MIA for two weeks and the company has appeared less than forthcoming about critical safety issues, risking the trust of its customers world-wide.”

As stated earlier, the where does the fish rot scenario is an important question to answer, because it is the starting point from which change must occur. My analysis points to Toyota corporate and its leadership team as the problem, since they’ve been the willing agents that have embraced silent problems along the way. And this creates a significant challenge to Toyota, and their recovery. How can an organization change, now that the rules of the game are quickly changing. How can a culture or secrecy be transformed to one of transparency overnight? How can an organization of complexity be transformed into one of simplicity? How can an organization that conforms evolve into an organization that is agile and willing to speak up?

These are the issues facing Toyota and is why Toyota’s future is so uncertain.

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