TOYOTA vs RISK

Trent sent me this article talking about how much risk the Toyota accelerator issue increases, written by a CMU professor.


As a driver and a non-stat-expert person, I really didn't get it. To me, comparing the risk of driving a recalled Toyota with that of driving while talking on the phone, is totally not practical. I mean, they are totally different risk factors in nature - I can discipline myself with rules not to talk on the phone while driving, but I can't tell or control my accelerator if it's defective and doing crazy things. This is fatal/life-threatening matter, and it really doesn't make any sense to me by calculating the "general riskiness of driving a recalled Toyota" from a holistic view.

But, I do think this is a great topic for here, in terms of how Toyota reacts to the crisis and what kind of efforts they've taken to minimize their brand damage - (post) CRISIS MANAGEMENT

First things first - Communication.

Toyota in late Feb. set up a Business Reform Kaizen ("Improvement") Department improve their corporate communication both for internally and externally. According an WSJ article, the head of this division will report directly to Mr. Toyoda. Japanese firms are known for their top-down, vertical management structure, and communication is a very big issue. Some firms like Sony have set up a time frame requirement for reporting to top management any public issues related to product deficiency. Think of "IT Service Management", this is sort of like an SLA type of requirement.

For external communication, there are some lessons learnt from historic events/failures:

Face the stakeholders:

• Modern global brands and companies do not operate in isolation.
• Stakeholders are deeply involved with brands and bond with them during all times.
• Management must step up and reach out immediately.
• At this early stage, few people in the company would have the big overview and may lack insights. But communicating early builds trust and open lines of dialogue - which may in most cases be very useful later.

Act fast:

• The sooner the management can establish a dialogue with stakeholders, the better the outcome.
• The company has to show that it moves fast, is agile and is on top of the subject matter.
• It will prove that the brand is still in control and has not lost confidence in itself.
• This early move will also allow the brand to better control the messages and help to galvanise the company's support networks.

And sadly, Toyota didn't manage all these activities very well. Stakeholders are obviously very mad about their slow reaction to the issue, on which 50+ law suits are along the way as well.

Besides, a stronger quality control mechanism is definitely needed in place. I haven't seen any details regarding this issue from Toyota, but another Japanese Giant, SONY, has set up some example in the past. So apparently SONY experienced a lithium ion battery recall in 2006, in which it replaced nearly 10 million battery packs in a voluntary replacement program, after some laptop batteries were found to overheat and catch fire. (why haven't I heard of this??)  After this crisis, Sony enhanced their quality control process and established the "escalation procedure and requirement", as I mentioned earlier in this post.

I'm not going to talk about preventative actions here since that kind of falls into the Business Continuity Planning arena, and maybe some other events would happen in the future so that I'll then learn some stuff from it. *evil smile*