Most organizations strive to be No. 1. It is the coveted spot. The position where success is realized. The position where trophies for excellence are offered. The position where power is garnered. However, it is also a very lonely and dangerous position to reside, because being No. 1 often breeds complacency and risky behavior.
A case in point is Toyota, a firm I’ve written about several times. Last weeks Economist, the front cover title was, “Toyota slips up - Where the world’s biggest carmaker went wrong, and what it is learning from other corporate turnarounds.”
The article points out numerous areas where Toyota has become vulnerable while being in the No. 1 slot.
- Quality: “Toyota was a byword for quality and reliability. A few years ago its crown slipped when a number of qulity problems surfaced… For years Toyota has been the quality benchmark for every carmaker, but at the very moment it faltered, others were finally catching up”
- Style: “As Car Magazine observed recently: ‘Excepting the small cars and the Prius, Toyota’s European range is as appetizing as an all you can eat tofu buffet.”
- Safety: “Last month Toyota’s standing was dealt a further blow. The Insurance Institute for Highway Safety… announced its highest rated cars and SUVs for 2010… Not one of the 27 vehicles it chose was a Toyota.”
- Silent Problems: “In another class action suit, triggered by a former employee, a corporate lawyer named Dimitrios Biller. Toyota is accused of trying to cover up evidence that it knew some of its vehicles could be deadly in roll-over accidents… The suggestion that squeaky-clean Toyota’s behavior may have resembled that of Ford and GM, which in the distant past covered up problems with the Pinto and Corvair, is especially wounding.”
- The Test: The test will be to keep the ingredients that have made Toyota great - the dependability and affordability - while adding the spice and the flavours that customers now demand. It will not be easy, and the competition has never looked more formidable. But by recognising the scale of Toyota’s problems, by proclaiming their urgency and then drawing on the firm’s strengths to fix them, Mr. Toyoda has already taken the first, vitally important step towards salvation.
Over the past 18 months, numerous companies that once held the coveted No. 1 slot have fallen. Consider the likes of CitiGroup, GM, Circuit City, Lehman Brothers and Washington Mutal. And of course, we can’t for forget Tiger Woods, and his fall from high. Each were at the top of the their game - then something happened. Simply, they lost their competitive edge, partly by being Number 1.
Today, Toyota is in a dangerous position. It has lost momentum. It’s reputation has been tarnished. And, many of its customers are finding attractive alternatives. Yes, Number 1 is a dangerous and lonely position from which to lead.
The “Too Big To Fail” debate has been rampant for well over a year now as institutions like GM, CitiGroup, AIG,Chrysler and numerous others have essentially failed, only to be rescued by the US Government. Lack of leadership. Ineffective risk management. Rogue teams with few controls. Bloated cost structures. These are a few of the reasons why they failed. But what isn’t being offered up as a reason is this: