Lean times at Toyota

So what has gone wrong at Toyota?  For the past couple of decades Toyota has been held up as the paragon of quality control and their Lean process has been copied and applied to many, many industries and not just in manufacturing.   Toyota has become the number one car manufacturer and their profits returned in the final quarter of 2009 despite tough global trading conditions.

Now, while we are relatively big fans of Lean methodology (provided it is applied appropriately and kept in context),  we do recognize that it is not a silver bullet for all business ills.  Having said that it’s clear that great gains can be achieved by focusing on quality and removing waste, re-work and non value add activity. But if the inventors of this philosophy have got it horribly wrong with their current recalls and now the concerns regarding Prius brakes, what does this mean for the rest of industry?

Four months ago the President and CEO of Toyota, Mr. Aki Toyoda, stated that Toyota was “on the verge of capitulation to irrelevance or death” – prophetic words as it turns out with over 8 million vehicles currently subject to recall notices.  I suspect that this is not what Mr. Toyoda quite in mind when he was making his point about becoming complacent.  It will be interesting to see how this damaging blow to their reputation as a quality car manufacturer impacts their fortunes going forward.

Quality control is a bit like communication – everybody recognizes and acknowledges its importance but in practical terms it is often overlooked or under resourced in the pursuit of short term profit and margin targets.

We have seen, in this global downturn, that many companies have been found wanting – anyone can look good during times of growth and expansion but the real test for leaders, managers and the core business processes is when the going gets tough and frankly many have failed the test.  The good news is that the more progressive companies are looking to invest time in developing their people and amending their core processes to fare better when the chips are down.

For Toyota perhaps the issue is complacency – the fact that they had become number one, the best.  It’s a good lesson for all of us to stay humble and keep focused on the basics regardless of our success, avoiding the dangers of complacency and believing our own press.  Toyota is too big to fail because of this current crisis but that hard won reputation will take some restoring.

The Scrap Trap

With the impending end of the various car scrappage schemes in Europe and other countries of the world, comes the question of what car sales will look like in 2010.

First, let us accept that the scrappage scheme did exactly as intended and drew buyers back to the showrooms to help manufacturers and retailers through the recession.  Certainly those countries with scrap schemes appear to have faired much better than those without, even though the best figures were seen toward the end of the year and would fail to entirely compensate for the dire start to the year.  So, no problem – government policy that works?

Actually, the fact that it worked doesn’t mean that there are no consequences or that vehicle sales are likely to recover more quickly outside of Europe…

The scrap schemes drew buyers that would not necessarily have bought at that time into a market to take advantage of the cash incentive.  Clearly a large number of these purchasers would have had to buy in 2010 but, instead, chose to buy earlier to take advantage of the scheme.

Despite the millions spent by manufacturers on commercials, the reality is that those buyers will not be back in the showrooms any time soon and so a big slice of the 2010 market has already gone.  In Europe sales are set to fall by more than 10% and it is entirely possible that those manufacturers who saw the greatest gains from the scrappage schemes are likely to take the biggest hits during 2010.

It’s not all doom and gloom though, as many fleet operators have held on to their fleets during the recessionary times and may well be now looking to start replacing aging vehicles.  Clearly fleet buyers will not deliver the same margins as retail buyers but, in the continuing tough economic conditions, as least something is better than nothing.

Elsewhere, demand in countries like China, India and Brazil will help manufacturers with their exports and financing costs for cars in North America is currently less than half the prevailing rate in 2008.  Furthermore, the average age of a vehicle in the US is a record 9.4 years with nearly half of the 250 million cars and trucks on the road at least ten years old.  There is therefore pent up replacement demand and this should see vehicle sales recover into 2011.

Scrappage is still a key driver for sales in Canada but probably more so is the economic confidence being displayed in the average Canadian home – 50% up from the late-2008’s low.

So, the car sales markets in Europe will struggle during 2010, making export an even greater imperative.  The scrappage schemes did as they were intended but now it’s back to business for the European manufacturers in their efforts to compete in the global market.

All the more reason to understand GM’s lack of willingness to sell its Opel brand and it’s willingness to close Saab!

Freedom, no compromise

Google’s announcement that it is considering pulling out of China raises some interesting questions and no easy answers.

Some background – in 2006 when Google entered China it was roundly criticized in many quarters for enabling China’s repressive control of the media but Google stated that by entering the market it could effect change.  Clearly with the fastest growing and largest internet user population in the world, it also made great commercial sense.  So what has changed and why is Google about to make such an about turn?

China has laws and rules that any business operating in China needs to respect and comply with and these include the filtering of internet content.   The usual knee jerk response to China’s insistence on maintaining its filtering policy is to cry foul – advocating the ‘western’ promise of freedom of the media.  In our view, this is frankly a bit naïve and actually rather ‘one-eyed’.

The most popular criticism is almost always supported by the Tiananmen Square scenario where, if you were to ‘google’ for that in China, you will get quite a different response to the one you would get in the western environment.   Unsurprisingly, in China you won’t actually receive any pictures of the cruel suppression of the student revolt – the search response is filtered.

Now, are commentators actually saying that such filtering doesn’t go on here in the West?  Clearly Google does have to implement filtering policies elsewhere in the world, which it uses to comply with local rules and regulation.  Child pornography is perhaps the most obvious example and quite rightly so.   However, this is where the basis of the ‘indignation’ from the West (and Google) around China’s own desires to control the internet content needs to be considered.  China would simply say that they agree that some internet content undermines the fabric of their values.  Therefore, in real terms, it is the political interpretation over what ‘content’ is appropriate for mass consumption where the West clashes with China.

Google also states that the recent hacking of Gmail accounts by third parties of human rights activists makes their position untenable (the implication that the Chinese Government is behind these attacks is clear).  However, in the US there is the Patriot Act and in the UK there is the Regulation of Investigatory Powers Act both of which provide the framework for governments to spy on and intercept intelligence from potential anti-state activists… the difference here of course is the West’s view on what is acceptable as ‘anti-state’.

Perhaps the surprise is that the Chinese government has actually responded to Google’s potential departure.  Whilst Google has a little over 30% of the market why does it consider itself able to ask the Chinese government to be exempt from local laws – particularly the laws it agreed to abide by when it entered the market in the first place?

From history we know that regardless of your size and influence (as a corporate or country) holding a gun to China’s head and threatening it has never been a successful strategy.

In our view, if Google is solely acting on the basis of a political stance, it should stay where it is and continue to try and effect change from within.  In addition it should perhaps be a little circumspect on how it defines filtering.

The flip side, of course, is that if they feel that agreeing to stay in China undermines its core values and brand then perhaps Google is right to leave.  But thinking that leaving will change China’s view on what constitutes anti-state demonstrates a quite staggering corporate ego…

Banking Madness

In 1953 President Eisenhower suggested that the then Superpowers of the US and Russia put aside some uranium from their respective stockpiles for “the good of humanity” in other words to fuel the nuclear power stations of those countries that could not afford the facilities to produce their own.  Of course in the 50’s the pursuit centred around MAD (mutual assured destruction) which looking back now seems quite ridiculous – “better we both lose than one of us win”.

Eisenhower was way ahead of his time with his proposal but it went nowhere.

So here we are in the second decade of the new century and Iran arrives on the scene, enriching its own uranium and consequently facilitating the potential production of nuclear weapons.  This makes the rest of the world slightly less comfortable despite Iran’s protestations about the innocence of its behaviour.  Now, if President Eisenhower’s proposal had been implemented, Iran and other developing countries like it could have been applying to Eisenhower’s Nuclear Stockpile Bank for enriched uranium for its power stations – without either the cost of investment in their own facilities which runs into the billions.  Of course the ability to be able to develop nuclear weapons of mass destruction would also not be possible.

Where, then, does the accountability lie for the control of enriched uranium globally and should we be concerned with controlling such a potentially lethal force?  Is it a global issue?  If the climate conference can at least get countries together discussing plans to save the planet should there not be equal motivation to ‘regulate’ the use of energy that could wipe out vast swathes of the world and humanity with it?

Clearly many of the concerns of countries like Syria, the United Arab Emirates, Jordan, Turkey, Vietnam and Indonesia (along with the current hotly criticized countries of North Korea and Iran) is that once again the control of energy sources will be outside of their sovereignty and therefore put the wellbeing of their own people at a disadvantage.

The Uranium Bank seems a good idea in principle but it may be some time before any workable agreement could be reached and in the meantime many governments (some deemed as ‘hostile’) could be enriching their own uranium offering them the potential to create nuclear weapons.  In some developing countries the diversion of tens of billions of dollars to build facilities to enrich uranium seems almost surreal when many other parts of their welfare support and infrastructure are in dire need of investment.

Once again we see skewed priorities all in the name of sovereignty.

The Future Starts Here…

Charles F. Kettering once said, “We should all be concerned about the future because we will have to spend the rest of our lives there”.

As we head into the next decade what should we be concerned about?  Well, the economy is still shrouded in a great deal of uncertainty – with mind numbing levels of debt that somehow need to be reduced without snuffing out the weak shoots of growth that we are beginning to see.

And then, just when we thought it was getting safer to travel, a fanatical student is stopped a few seconds away from causing an airborne catastrophe – resulting in severe restrictions once again on hand luggage and an increase in security delays at our major airports.

And, sadly, the death toll in Afghanistan continues to rise and stability in the Middle East seems some way off yet.

But these are global issues – what should we be concerned about closer to home?  Hands up those of you that have formally or informally set out some New Year’s resolutions – perhaps to lose weight after the Christmas festivities, to give up something, to run a marathon or to invest time in a new hobby or activity?  And what about our working choices?  Will this year be the same as last year with a simple change in the last two digits of the date or are we looking to do things differently this year?

Certainly, if you work on an annual performance basis, all the figures have just been reset to zero and those targets and budgets will be looming large.  Don’t however fall into the trap of thinking that at this stage you have a year to hit those budgets – rather think more about what you can achieve in this first quarter to make the targets and budgets achievable.  If you miss the first quarter or even first month then you will be playing catch up for the rest of the year.

If you haven’t done it already, spend time now developing a plan of action for 2010.  If you don’t have a plan your strategy must be hope and, frankly, hope is not an effective strategy.

Take some time to plan for the year ahead, don’t just leap into action and assume this year will be the same as last year or need the same activity as last year.  Figure out what numbers you need to change – to improve, to reduce, to increase…..  Set out a plan of action and then move to execution.  Get ahead of the game and identify your priorities and keep them to a manageable number – do a few things really well.

So, we would like to wish all our readers a Happy and Prosperous 2010 and we look forward to sharing some more musings with you throughout the year.

Climate for Change

As we hear again today that police and protestors have clashed at the Copenhagen Summit, it is clear that global warming still arouses passions – although a protestor being subdued with a baton is unlikely to influence the debate taking place between delegates of the 192 nations represented at the summit.

The good news, of course, is that there at least seems to be some acceptance of the global warming issue and its impact on the sustainability of the earth and those of us reliant on it being around and habitable for some time to come.  Regardless of whether you believe the issue is a consequence man’s industrialization or simply a normal pattern in the earth’s climate change trends, the warming of the globe is having a significant impact.  Furthermore, whilst there is little that can be done to halt the damage already being felt, the desire to slow down future temperature increases and to provide support for areas already damaged seems to be a sensible strategy and a good use of world leader’s time.

At Zeitgeist we view the politics around the summit of particular interest too.  The Danish coming to terms with their inter government department struggles, Friends of the Earth turning up only to find their passes invalid, China displaying real resentment and the African nations looking for technology transfer to be speeded up.  The sub plots are intriguing.

However, ultimately it comes down to the economics – the costs and competitiveness of countries in the global economy.  Whilst the EU, Japan, New Zealand and Australia have all declared what they are prepared to deliver by 2020 there is much to be discussed before any form of legally binding treaty can be reached.  Developing nations blame the developed nations for causing the problem in the first place and are therefore expecting them to pay for it.

Even here though,  amongst those countries apparently committed to the climate change cause, the sub-plots are complex and acceptance of the causes of global warming are not universal.  In Australia, for example, Malcolm Turnbull  recently lost his job as the head of the oppositional Liberal party, for supporting the government’s revised Emissions Trading Scheme.  Many within his party absolutely reject the scientific case for man contributing to global warming and, as he lost their support (amid mass resignations), he lost his chance of ever becoming Australia’s Prime Minister.  Few regard Tony ‘The Mad Monk’ Abbott as a credible replacement – but he does passionately subscribe to the climate change sceptics’ view.

So, what price to ‘save the earth’?  Well, developed countries are looking at 100’s of billions of dollars each year to mitigate some of the current problems and the World Bank prepared a study which suggests that a further $100bn per year is required on top of the $100bn already provided by the richer nations in overseas aid to poorer, developing nations.  The solution is not cheap.

Like any strategy it comes down to trade-offs and the bottom line.  What do we need to do to succeed and what are we prepared to live with, sacrifice or change?  These are questions any business asks itself, or should ask itself, on a frequent and regular basis.  The difference of course is that the stakes being discussed in Copenhagen are significantly higher and affect us all…

The True Cost of Christmas?

As we battle with each other in Malls and shopping centres to secure those final few Christmas presents for our family and friends it’s probably just worth pausing for a few moments to reflect on the true cost of Christmas.

Recent studies by ‘Canadian Social Trends’ found that the average Canadian now spends 45 minutes less per day with their family than they did just 2 decades ago.  Doesn’t sound much? Well, assuming a 260 day work year, that means they are spending 195 hours less per year together… the equivalent of almost five 40 hour weeks!  Despite the recession the desire for aspirational goods, general materialism and a society which defines success by wealth (or apparent wealth), means that the pressure to own bigger houses and newer cars etc is profound.  So we work harder (and many families now have 2 working parents also, both working harder) to provide ‘more’.

The recession just adds to the pressure as people work ever harder to try to ensure that they are not the next to receive their redundancy or lay off notice. Of course our younger children don’t really grasp the concept of recession and belt tightening so their expectations this year are no less than previous years.

Increased workloads and hours of work, and the way that technology allows us to take work home after hours are imposing a different set of expectations on people and a greater proportion of workers are experiencing greater challenges in balancing their role of employee, parent and spouse.

But what about the ‘good old days’ – that time when we all spent more hours with our family?  Is it a reasonable aspiration that we will regain those times or actually do the new toys and gadgets, the better cars and the bigger houses compensate for the time no longer spent outside of work?  The key issue is that it should be your choice but the economic climate makes that choice a lot less easy to make.

So as you stand in line waiting to give that final credit card once last bashing, take a minute to reflect on the year that has passed and the choices that you made.  Reassess your priorities and boundaries and try and evaluate the return on your sacrifices.  If you are comfortable with your choices you can look forward to 2010 without fear.  If you are uncomfortable with your choices start thinking now about the things that will need to change.  We’re not talking New Year Resolutions – those intentions that never make it to February 1^st, but rather serious work-life choices.  Resolve to take action; put in place some new boundaries and make sure you stick to them.

Here at Zeitgeist we’re looking forward to what 2010 will bring and we hope that you are too…

Saving the “General”

Those of you following the Zeitgeist blog will know that we’ve been keeping an eye on General Motors and their attempts to rescue the ailing giant.  The news this week that Fritz Henderson has “stepped down” from the top role was a little surprising but perhaps indicates just what the level of influence is from those in the Government.  Now, ignoring the Facebook rant of an alleged family member which took up way too many column inches, this decision is one that should concern many companies that were rescued by public funds and the very real impact on attracting and retaining talent at the senior level.

Reports suggest that the replacement individual is likely to have to work for as much as a third of what the current chief was working for with limited opportunities for a bonus.  How realistic is it then to expect to secure a high performing executive capable of returning the former giant back to a solid financial footing?

Upsetting the Russian and German governments would have been a price that a large corporate was willing to pay in pursuit of a viable and sustainable global car strategy but it appears this was not viewed in the same way by the US government stakeholder and consequently Mr Henderson paid the price.  Does this mean that GM has little hope of recruiting anything other than a puppet figurehead to deliver the results required?

The same question must be asked of those other companies like the banks and insurers who too have the issue of hemorrhaging talent.  If you hire mediocre performers you will mostly get mediocre results.  If you pay mediocre compensation you will get mediocre leaders.  No wonder the banks are doing everything they can to pay back the debts owed to the central coffers.

Outside of these executive recruitment issues it seems to be that a number of companies are failing to recognize talent and using the excuse of the recession to not reward talented people.  Leveraging the luxury of limited external job opportunities may be viable now and we certainly understand that companies need to manage costs and not pay bonuses that they cannot afford.  However, having disengaged employees results in a real drag on the performance of the organization so the company is going to pay anyway as productivity will suffer.  In addition, as soon as the job market picks up, the talent will have long enough memories to remember how they have been treated and inevitably will leave for pastures new.  The companies that are mortgaging their future in the short terms will reap the impact of those decisions over the coming few years.

Retaining and attracting talent will be a hot topic for some time to come with continued rhetoric around control over bonuses and pay.  Here at Zeitgeist we would like to see more companies actually understand what talent looks like and more companies rewarding talent rather than lumping them in with the mediocre or even poor performers within the organization.

We await the new appointment at GM with interest.

Is Santa Canadian?

As a citizen of the North Pole Santa is probably a little confused about who he should be paying his taxes to.

Sovereignty has never really been an issue in the past not least because there’s actually no land to speak of – the North Pole is a shifting piece of ice and only defined as an imaginary point where the lines of longitude cross.  Indeed back in 1920 when two Eskimos confessed to killing a member of the Peary expedition ten years previously, the case was dropped due to the inability of anyone to prove jurisdiction.

Canada and Denmark have the closest landmasses and just this week we saw Canada once again staking a claim for sovereignty over the North West Passage as well as some robust statements from various politicians over Canada’s rights to the Arctic interest.

Canada, of course, has some form here.  In 2000 they threatened to charge a pilot with ‘littering’ when he abandoned his plane due to engine failure near the North Pole.  He eventually returned to fix it and recovered the errant aircraft.  At the time no other countries sought to challenge Canada’s intent or legal right to do so.

Since then, however, things have changed and the catalyst is the potentially massive quantities of natural resources that sit below the ice pack.  Estimates vary but oil and gas reserves alone could be vast, albeit extremely expensive to recover.

Russia has regularly tested Canada’s patience with their military flights crossing into disputed Canadian territorial waters.  The odd US submarine pops up at the North Pole from time to time too, whilst the Russian navy went so far as to plant a flag on the sea bed at the North Pole.  I think it is fair to assume that this discussion is far from over.

How it will all be resolved or, indeed, if it ever will be resolved are difficult questions to answer.  Would a country actually be prepared to invade the North Pole? Would Canada or Denmark take military steps to defend such an act?  If the answer to either of these questions is actually no, then why bother debating or passing motions around sovereignty?

It’s a bit like hedging your bets – “we’ll keep posturing so no one forgets that we think it’s ours”.  Ultimately we suspect that words will not be enough but, with the price of oil and gas in particular relatively depressed at the moment,  this issue will be a news sub-plot for some time to come.

In the meantime perhaps Santa should just accrue his potential tax liability and make sure his records are accurate.  I guess at this time of year he probably has other things on his mind…

Do fat smokers make poor consultants?

The latest megabucks lawsuit against the tobacco giant Phillip Morris ($300m which they are going to challenge) reminded me about a guy who was a candidate on one of our leadership courses.

Early on in the program he loudly shared his view that as far as he was concerned “Leadership is all just common sense”.  Now, whilst I might have been mildly disappointed by his dismissive tone, the truth is that I couldn’t agree with him more.

However, if Leadership really is merely common sense, then the application of common sense is the issue.   By way of illustration, if the application of common sense was simple and routine, there would be no fat smokers in the world.

The analogy of the fat smoker is not new but it gave me a timely reminder that so often ‘common sense’ is anything but common.

One of the qualities of a good management consultant is to take common sense and help the client to apply it.  Whilst ‘common sense’ is by default simple in nature, it is far harder to actually apply in real life.   For the smoker who knows that the habit is highly likely to be doing major damage to his or her health, wouldn’t it be just common sense to give up or not take it up in the first place?

Of course life is much more complicated than that and the young smoker in particular will find a range of ‘reasons’ why they smoke – it’s ‘cool’, “I’ll give up before it does me any real damage” or even that they know someone who smoked all their life and who never got lung cancer… there are always plenty of arguments that get in the way of common sense.

In the business world take the issue of communication.   It is common sense that communicating with your team and your peers is a good thing to do.   It keeps people engaged, we find out quickly if there are issues and concerns and we can sign up to some team goals.   The reality of course is that ’stuff’ gets in the way and, despite it being common sense, we find ourselves spending nowhere near enough time communicating effectively with others.

Improving our communication takes practice, discipline and effort – we need to work at it.   The fact that it is common sense doesn’t mean that it will happen naturally.

Ultimately, like the smoker who will have little chance to enjoy this potential pay out from the manufacturer, we must not leave common sense until it is too late.   As in our decisions around health, so our decisions in business need to have some immediacy – we need to start applying common sense now and not just leave things to chance.

Trying to compensate for common sense decisions that should have been made some time in the past can be costly – and compensating for errors made doesn’t appear to be a compelling strategy.

So the next time you see something that is common sense, try making it a little more common…