If you read this blog, you could have seen Toyota’s problems coming…

Does anyone remember this post from nearly 3 years ago?

Toyota: The Inevitable Decline Starts Now
18 Feb 2007

It’s Toyota’s PR person’s dream: a front-page story in the Sunday New York Times magazine (by Jon Gertner), depicting your company as a comic-book superhero, slaying its competitors amid exclamatory sound effects (VVRRRMM!). And the article’s teaser hailing your company as not only “not only the best automaker in the world but also maybe the best corporation.”

The PR dream is the executive’s nightmare. Not only is it difficult to build from the pinnacle Toyota has reached; it’s impossible. The life cycle of industry titans lasts decades, but a life cycle it is. Ask NCR, Kodak, Xerox, Western Union, Sony.

Ask General Motors.

Forces beyond those under the control of any corporation conspire to bring it down, once it’s reached such an apex. The forces are shifts in demographics, culture, science–more than technology. Somewhere out there, those forces are at work, humming below the range of hearing, undermining the business model that Toyota has perfected over the past fifty years.

And, no, it won’t be a combined GM-Chrysler that eventually humbles Toyota. The US auto companies are deader than dead as far as the future’s concerned. Instead it will be a new company, perhaps born in a rural area not unlike Toyota’s home, failing humbly, learning lessons, remaining persistent, getting better, creating a vision for the far future, a vision far beyond the passenger automobile. Not unlike what Toyota itself once did.

Who are they? We’ll know in twenty years’ time.

(Illustration by Nathan Fox for the New York Times)

strategy, innovation, Toyota, automobiles, New York Times

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This entry was posted on Thursday, February 4th, 2010 at 8:24 am and is filed under automobiles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Wally Bock

Good call, John. I've just completed a book that looks, in part, at that lifecycle you describe. There's bound to be an ending, but some companies have held on (and are holding on) for a very long time.

One of the companies we profiled was Toyota and one of the characteristics of the company has been the ability to learn from mistakes and survive big crisis, much like the national self-story of Japan itself. We know that this is a huge crisis for them and perhaps the beginning of the final, long slide. Or, like a very few companies, they may come back from it.

Another thing we found, though, relates to the core point of the post, that as soon as you start thinking you can do no wrong, you've just done the first deadly wrong thing. The Greeks had it right, Hubris is followed by Nemesis.

jmcaddell

Very interesting, Wally, I look forward to looking at the book when it comes
out. One thing I would say about Toyota is, about 5 years ago or so they
became obsessed with being the world #1 automaker (an overrated honor--it
didn't do GM any favors). At some, perhaps unconscious, level, Toyota turned
away from its historic focus on quality and continuous improvement and
instead looked at growth as a be-all and end-all. That story rarely turns
out happily, as you say.

Wally Bock

That would actually conform to the premise of the book, which is that companies that create long term competitive advantage and profitability choose and ruthlessly focus on a single core strategy until that strategy stops working. Bad things happen when you abandon a core strategy that works.

You and other knowledgeable commentators have suggested that's exactly what Toyota did. Almost exactly like one of our key examples, they decided that the normal rules didn't apply and that the goal of bigness was more important than the focus on quality and incremental innovation.