The recent failures of Toyota in quality control, leading to massive recalls and closed assembly lines, have global implications, and make the point that, in today's world, ignoring intangible assets like risk to reputation carries real costs for business.
Yesterday, when we read the text of the testimony of Toyota President Akio Toyoda before the Committee on Oversight and Government Reform of the U.S. House of Representatives, we were struck first by the contrast in approach taken by a Japanese CEO compared with American CEOs of the great Wall Street financial houses after the recent collapse of credit markets.
Toyota President Toyoda said: "... in the past few months our customers have started to feel uncertain about the safety of Toyota's vehicles, and I take full responsibility for that."
Second, Mr. Akio Toyoda confirmed the value of adhering to a business approach similar to that recommended by the CRT in its Principles for Business. He continued: "First, I want to discuss the philosophy of Toyota's quality control. I, myself, as well as Toyota, am not perfect. At times, we do find defects. But in such situations, we always stop, strive to understand the problem, and make changes to improve further." By making continuous improvement, we aim to continue offering even better products for society. This is the core value we have kept closest to our hearts since the founding of the company."
Here is a commitment at the level of principle by the CEO of a major global company to a standard that resonates with the CRT Principles for Business, a recognition that business has an office to serve society.
Next, Mr. Toyoda affirms the importance of a key intangible moral asset for Toyota. He said: "At Toyota, we believe the key to making quality products is to develop quality people." "Each employee thinks about what he or she should do, continuously making improvements, and by doing so, makes even better cars."
So what went wrong at Toyota?
Here is the answer from Mr. Toyoda: "I would like to point out that Toyota's priority has traditionally been the following: First, safety; second, quality; third, volume. These priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before, and our basic stance to listen to customers' voices to make better products has weakened somewhat. We pursued growth over the speed at which we were able to develop our people and our organization, and we should be sincerely mindful of that."
In short, he admits that Toyota fell off from alignment with the core vision of the CRT Principles for Business. Short-term focus on revenue from sales diverted attention away from more important strategic requirements.
A common failing of business owners and managers, yes?