For the last several weeks, I have been reading comments about the Toyota quality issue and about the US congressional committee grilling. Where I share Paul Teague’s unease, as he points it out in his “The right questions to be asking about Toyota” in his blog entry, I am looking for the long term impacts of this crisis to Toyota as a company.
For the time being it is still the largest automotive company in the world, but for how much longer. It is clear that this crisis will help Volkswagen in its ambitions to take over that spot. But there is more. First, did you look at the stock price? Well Yahoo! Finance tells the story in no uncertain terms. Actually, in an article dating December 2000, Vinod Singhal predicts that quality related issues reduces the average shareholder return by 8.26%. In this particular case we seem at least in the same ballpark figure. In an Sloan management Review article, titled “A Supply Chain View of the Resilient Enterprise” Yossi Sheffi and James B. Rice Jr. point to the long term impact of such issues.
So, is Toyota dead, by far not, but it will take them a long term to regain the brand image they had before this crisis. So, could they have avoided the problem? Well, there is a debate ongoing since when they knew there was a problem looming. Some sources speak about some months, others about a couple years, others even trace the first signs back to 2002. I realize it’s easy to point to things after the fact, but some of the questions raised by Paul Teague are absolutely valid.
Things bring me to another point. Individuals and companies take insurances to avoid crisis situations. Shouldn’t Toyota have done the same? But what means taking an insurance when it’s related to quality and customer perceptions? In my mind, putting the right tools in place to continuously listen to the market and investigate any possible issue. On the one hand, the internet has given consumers many ways to point out their satisfaction/dissatisfaction about a given product. They can use forums, blogs, Twitter, Facebook and many others to do so. How many companies are scanning those tools today to listen to the feedback on their products? And further, how many are taking actions? Using tools that analyse unstructured data, companies can identify correlations that highlight potential problems. Combining this information with complaints voiced in dealerships, repair centers, and e-mail sent to the company, often give early indications of potential issues that are worth investigating.
Unfortunately, most companies do not take the internet phenomena serious on the one hand, and lack the integration and analysis tools on the other. Well, it may be time to invest in the proper insurance tools to avoid a “Toyota-like” disaster.