Dr. Maccoby participates in a Weekly Forum on Washington Post.com called "On Leadership". I am compiling all of his responses to the weekly questions here.
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DATE: Feb 11, 2010 Toyota: The mighty falling? Toyota, the company renown for its quality control and continuous improvement, now finds itself having to recall millions of cars for defects. In your experience, what are the common mistakes leaders make that cause their organizations to lose their key competitive advantage? |
Forgetting greatness
The fatal mistake I have seen leaders make in the companies I've studied or worked with is that they have lost the clear purpose that made them great.
After the break-up of the Bell System in 1984, AT&T leadership discarded the purpose of service to try to compete with IBM on computers. It was the beginning of a steep decline. Furthermore, managers and technicians proud of their role in providing universal telephone service were less enthusiastic when the purpose was just making money.
I was invited to teach leadership to Ford executives a few years after the company had moved into the black with the Taurus. But Ford failed to recognize that the basis of its success was the collaboration of designers and engineers, using inputs from customers and workers to build a popular car. Instead, flush with profit, executives huddled to strategize how they could increase revenue by fifteen percent a year and raise the stock price.
Peter Drucker, the wise philosopher of business, liked to say that the purpose of business is not profit, just as the purpose of life is not breathing, but without either there can be no other purpose. The only legitimate purpose of business, he believed, is to gain and retain customers. To do that, leaders need to focus on what is valuable enough to people that they are willing to part with their money.
Toyota exchanged this focus on delighting customers to cutting costs each year while increasing market share and becoming number one. One result seems to have been to substitute a part in the acceleration system of some cars for a cheaper part engineers decided would work just as well but which in fact caused the accelerator to stick.
There is no indication that there was anything wrong with Toyota's renowned production system. But even a great organization will be undermined when it loses the purpose, the raison d'etre, that made it great.
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