Wednesday, February 6, 2013

Theory of unintended consequences

Toyota President Akio Toyoda’s apology was supposed to firefight the recall controversy – it made it worse! Welcome to the world of unintended consequences

Circa 2000: When Ford Explorers equipped with Firestone tyres began toppling over on highways, John T. Lampe, the then Firestone chief went on television to assure consumers that his company will provide them with new and reliable tyres and ensure such incidents will not happen in future. The apology worked. Lampe saved the day by ensuring the negative impact on sales was much reduced. Compare that to how Toyota’s response to the recent recall is unravelling into an unexpected PR and sales disaster. At the centre of all this is Akio Toyoda, President, Toyota Motor Corporation, whose response – critics point out – came weeks after the recall started; and that too, when a reporter cornered him in Davos. “We have heard concerns from customers about this issue, and we are recalling the cars in question to resolve the problem completely. We are determined to ensure that our customers can feel absolutely at ease with their vehicles,” Toyoda had said.

In fact, in managing this apology, Akio Toyoda today faces the most critical challenge of his career, with the recall controversy becoming a b-school case study of what a CEO should (or should not) do when faced with a quality control disaster; and each move of his working exponentially towards (or against) saving the company from an unenviable moment in corporate history. Unfortunately, going by all that he seems to be doing, it’s quite clear that Toyoda never bargained for becoming the global spokesperson for his company, and that too during a crisis.

For the records, Toyoda underwent a long grooming period before he got his hands on the top job and became the first member of the founding family in the last 14 years to take the reins of the company founded by this grandfather. He came into the picture in 1984, became a board member in 2000 and was made an executive vice president in 2005, taking charge of Japanese sales and overseas operations before finally taking charge of the automaker in 2009. Experts believe that his ability to put the brakes on Toyota’s rapid expansion had empowered the Japanese automaker to focus back on quality and overtake General Motors as the world’s largest automaker. The company reported a record annual net loss of $4.4 billion in May 2009, most of it due to recessionary winds. However, amidst all this, Toyota’s image of high quality and commitment to consumers didn’t take a hit. JD Power auto surveys globally had ranked Toyota regularly at the top in various countries. ‘The Toyota Way’, as it is widely known, has become an aspiration to companies across the world in 73 years of the company’s existence. Up until now one guesses. Toyota has so far recalled more than 8 million vehicles, including the iconic Prius, Camry and Corolla.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
Posted by at
Labels: , , , , , , , , , ,