The Toyota Parable

Bill Saporito at TIME.com (4 Feb 2010) provides the story from which this 'digest' version comes:

Toyota built its reputation and market share through its renowned "continuous improvement" method. The Toyota mantra was "Quality First" because it led to lower costs, and hence to higher market share.

But in the '90s, Toyota set out to become the world's top auto company. Being the best and being the biggest created a tension that Toyota couldn't resolve, says MIT operations expert Steven Spear: "If quality is first, it drives a certain set of behaviors. If market share is the goal, it drives a different set of behaviors."

Even as Toyota was catching up to the global No. 1, General Motors, the reputation of its cars was slipping. Spear, who has apprenticed in Toyota factories, says the problem was that the "Toyota way" — in which knowledge accumulated by élite cadres of engineers and assembly workers over many years is shared across the company — was diluted by the demands of production. "In the late '90s, people in Toyota would say, 'This is going to bite us in the ass,' " says Spear. "They just didn't know when."

Now they do. "We have to strengthen quality control," says Shinichi Sasaki, executive vice president for quality. It's a startling admission from a company that made reliability its quest. Toyota will fix its manufacturing problem. Restoring its reputation is going to take a lot longer.

This reminds me a lot of the Old Place. You can see how 'the demands of production' are leading to the dispersion of the knowledge assets of the corporate body, the loss of quality as quantity production is ramped up. He who has ears to hear, let him hear.