Toyota — Crisis Management at its Worst

The annals of crisis management are full of examples of many blatant failure — and a few notable successes.

Toyota clearly belongs in the team picture of the worst of failures  — and will probably  pay dearly in the end.   However, making the mistake is not the biggest problem , it is how the crisis is managed  that transcends the crisis and transforms a mere crisis into a marketing disaster.

Harvard Prof. William W. George, writing in Working Knowledge, Harvard Business School’s weekly (free) on-line magazine calls Toyota’s problems a “tragic case study on how not to lead a crisis.”  In an article entitled “Tragedy at Toyota: How Not to Lead a Crisis,” George points out how Toyota CEO Akio Toyoda “went into hiding” and sent  American CEO Jim Lentz to take the media heat. George accuses the Japanese CEO of letting “serious quality issues spiral out of control by understating safety risks and product problems.”

It is interesting that George compared the Toyota situation to one of the best examples of crisis management — the Johnson & Johnson Tylenol poisoning crisis in the mid-1980s, when tainted extra strength Tylenol capsules were found to be responsible for a number of deaths in the Chicago area.  Johnson & Johnson’s response was quick and  effective.  Although not a fault, J&J recalled every Tylenol product from the market and quickly began creating “tamper-proof” packaging before coming back to the market.

George also cites how effectively Lee Iococca restored public confidence in Chrysler when beset by a crises spurred by faulty brakes and accelerators during  the 1980s or how GM just recently and successfully emerged from bankruptcy with Chairman Ed Whitacre taking the role as the “trustworthy, determined face of the company’s comeback.”

Strategically, the crisis can be used as a positive means of showing the marketplace a company’s sensitivity to the needs of its stakeholders.   Unlike the cowards at Toyota and Exxon (during the Exxon Valdes oil spill), the intelligent customer-focused company will face its crises squarely and honestly and use the crisis to show its stakeholders that it is a responsible corporate citizen.

George, the author “7 Lessons for Leading in Crisis”  (published by Jossey-Bass, 2009): offers the following advice to corporate leaders faced with a crisis:

1. Face reality.  Applying this to Toyota, George writes: “Toyota blamed the problems on stuck floor matts and panicky drivers.  Instead, Toyota should acknowledge that its vaunted quality system failed.”
2. Don’t be Atlas; get the world off your shoulders.  George writes that Chairman Akio Toyoda couldn’t expect to fix the problem by himself and needed a crisis management team working 24/7.
3. Dig Deep for the root cause.  George points out that rather than  blaming the crisis on loose floor mats, Toyota should have quickly assigned its top engineers to get to the root cause of the problem.  “This is basic engineering and quality discipline,” he writes.
4. Get ready for the long haul.  George points out that crises need more than a “quick fix.”  He mentions that because it has taken 10 years for the crisis to unfold, it will take a long time –with perhaps more flaws to be uncovered – before the crisis is fully resolved.  “Toyota must invest heavily in corrective actions while its sales shrink and profits implode, requiring major cash resources until its reputation can be restored.”
5. Never waste a good crisis.  He points out that all the pain offers Toyota a unique opportunity to make fundamental changes required to restoreToyota’s quality.
6. You’re in the spotlight: follow True North.  Now that he is in the spotlight, “(Chairman) Toyoda must come out of hiding, take personal responsibility and subject himself to intense questioning by regulators and media.”
7. 7. Go on offense; focus on winning now. George writes:  “Toyota cannot wait until all its quality issues are resolved.  It must play defense and offense simultaneously.   To win, Toyota has to offer advanced features and superior quality, better value for consumers, greater safety, and improved fuel efficiency.”

George is optimistic about Toyota, he writes: “I believe this is a great company that will resurrect its reputation and restore its leadership.”

The Bible of Marketing Mistakes and Successes

Toyota’s crisis  recalls one of the most interesting  books ever written on the successes and failures of marketing strategy.  It is “Marketing Mistakes and Successes,” by Robert F. Hartley  which is now in its 11^th (2009) edition. Publisher is John Wiley & Sons.

In my 27 years of teaching strategic marketing, this is a book that I have used time and again to illustrate  the right and wrong ways to create and implement marketing strategies.   This newest edition is 416 pages in length and has 24 chapters.

Notable chapter headings include:

• Google: An Entrepreneurial Juggernault
• Cola Wars:  Coca-Cola vs. Pepsi
• McDonald’s: Rebirth Though Moderation
• Borden: Letting Brands With
• DaimlerChrysler: A Merger Made in Hades.
• Ford Explorers with Firestone Tires: A Killer Scenario Ill Handled
• Southwest Airlines: Success Is Finally Contested