Economic Knowledge Sphere
The economic knowledge sphere concerns the production, development and management of income and wealth. Focus is on the production and distribution of goods and services. Primary emphasis is on business management, financial management, and social systems economic development.
The Economist Magazine (December 12th-18th) headlines that: "Toyota Slips Up: Where the world’s biggest carmaker went wrong, and what it is learning from other corporate turnarounds." The foundation for their assessment is author Jim Collins latest book entitled: "How the Mighty Fall." In it Collins describes the five stages through which a proud and thriving company passes on its way to becoming a basket-case. The stages are: (1) Hubris born of success, (2) Undisciplined pursuit of more, (3) Denial of risk and perils, (4) Grasping for salvation, and (5) Capitulation to irrelevance or death.
As the story goes, two years ago Toyota passed GM to become the world’s biggest carmaker. However, the grandson of Toyota’s founder, Akio Toyota, noted that the firm could be locked in a spiral of decline due, in part, to a decline in the company’s commitment to "Lean Techniques" in manufacturing. Toyota’s market-share has either fallen flat or declined in all regions; its American operations have been embarrassing due to recalls and safety questions. Additionally, its hybrid technology is under threat as other carmakers strive to compete for the low emissions market, and their rival’s ability to offer more than the dull vehicles for which Toyota has been known.
Mr. Toyota acknowledged that their firm may have fallen into the fourth stage in Collins book. The mistakes that were made include big acquisitions, radical change, use of unproven strategies, and hiring visionary leaders – all examples that Collins used to illustrate his five stages of failure. Collins, for his part, advocates the old-fashioned management virtues such as determination, discipline, calmness under pressure and strategic decision making on careful sifting of the evidence. Additionally, Collins provided examples of how some American firms (e.g., HP and IBM) have corrected their downward spiral and maintained their market competitiveness.
Toyota has a good chance of correcting their situation. It has a leader who understands what has gone wrong and is beginning to sort out its problems. Its reputation for stellar quality and for focusing on its customers will remain a core value. However, it does need to make more exciting and innovative cars like some of its current competitors. Mr. Toyota’s approach needs to be not so much visionary, but needs to pay greater attention to what its current customers now want through an incremental strategy. This has been Toyota’s virtue all along.
[Editor’s Note: The ALF management consulting model stresses organizational leadership, customer focused business and marketing strategy, continuous process improvement, workforce knowledge management, and overall system quality and performance measurement. Almost all enterprises can benefit from these integrated and incremental techniques.]