Q4- How Toyota Beat(?) GM in Sensing Customer Needs

“Quality” in “Quality Management” or QM has a specific meaning in the business sector. Quality of a service or product is what satisfies a customer, and makes him or her want to buy the service or product again, or even recommend it to others. We saw in the previous blog Q3 (“The Customer is King”; But the King is Blind!?) that “the customer is king” (or queen). Customer satisfaction is paramount in business for it means more sales and revenue growth or in short, value creation. It drives everything from the micro (e.g. business process improvement, Six Sigma, Lean Production and other QM tools) to the macro (e.g. the market economy).

The QM cause-and-effect chain goes like this:

      Continuous improvement of business process => high quality service or product => satisfied customers => more sales => greater value creation

The purpose of Six Sigma (a popular QM tool invented by Motorola) is to reduce occurrence of the following chain by identifying and correcting the cause(s):

      Cause(s) => a characteristic of a service/product deviates from standard => dissatisfied customers => less repeat customers

Another popular QM tool, Lean Production invented by Toyota Motors, looks into greater detail at customer preferences:

Before using Lean principles:

      Expenditure to produce a feature of a product/service => the customer is not excited about the feature (non-value adding) => customer buys the product/service anyway because he/she likes the rest of the product

Using Lean principles:

      Identify unwanted feature (“muda” or waste or non-value adding) => stop producing the feature => LEANER production and lower price of product/service => customer buys the product/service at lower price => customer is happier => more sales revenues, outsell higher-priced competition => lower production cost => higher net revenues overall

Now you see an important secret why Toyota almost wiped out American car manufacturers like Ford and GM! Well, the secret was discovered later by Toyota competitors and now Lean Production is used all over the world.

It is about doing a better job of sensing customer needs. It is about knowing intimately how the customer sees and values things. It is taking the customer’s perspective. The Japanese word “muda” is often translated into English as “waste” but something is lost in translation. “Muda” is not factory waste, for example. Muda is waste from the customer’s perspective; it is any part or feature in a product that does not add value to the customer.

Another often misunderstood Japanese word in KM is “ba” popularized by KM guru Ikujiro Nonaka. For example, “customer ba” is the interpersonal space shared between the customer and seller that facilitates communication of knowledge, meanings and values. In Tagalog we have a word “suki” which is the special relationship developed over many years between a buyer and a seller who have come to trust one another. The closest Western term I can find is “container” for dialogue used by Peter Senge and William Isaacs. When trainors re-arrange chairs to facilitate workshops they are trying to create “ba.” The “Knowledge Hallway” of Price WaterhouseCoopers is a similar example – where office layout, furniture and spaces are arranged to facilitate interaction and knowledge sharing.

Wars and conflicts is the end result of a grand-scale failure to communicate and understand each other’s meanings and values. In my opinion, “ba” can lead us to a solution for people to better sense each other’s meanings and values. If only we see the value of sensing the meaning and values of our “enemies” the same way some Japanese companies do “customer ba” then the world, in my opinion, could be a far more peaceful world.

What is your opinion?


Five months after I posted this blog, faculty members of the Harvard Business School contributed to an article entitled “GM: What Went Wrong and What’s Next”. Here are some excerpts:

    “…management’s consistent failure to… pay close attention to what is happening to consumers’ lives in the context of the larger environment…” — Nancy F. Koehn, James E. Robison Professor of Business Administration

    “GM will be left with engineering competencies almost exclusively in those same large vehicles likely to be made obsolete by a new 35.5 MPG standard the Administration has promised to implement by 2016.” — Daniel Snow, Assistant Professor of Business Administration

    “Did the [GM] marketers not see what Toyota was doing with the Camry and Lexus?” — Joseph L. Bower, Baker Foundation Professor of Business Administration

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5 Responses to “Q4- How Toyota Beat(?) GM in Sensing Customer Needs”

  1. A. Paulino Says:

    Anyways – my $0.02 on how Toyota beat GM regarding customer needs (albeit a bit of a superficial thought):

    Toyota didn’t really beat out GM. GM was just “not immediately failing” by selling higher margin, poorer quality truck-based products to ignorant, image-conscious North American markets for a certain amount of time (the 80’s upto recent years). This was and is not a sustainable market / business model – particularly within the limits of an oil-based economy. I’ll point to Ford who is pretty much the king of the truck market in North America; Ford’s not doing as poorly (business model-wise) as GM since Ford Europe’s business model is keeping them afloat as they are focused more like the rest of the world (and Toyotas): smaller efficient quality cars.

    Anyways – I guess my point is – Toyota perhaps hadn’t out-sensed GM in discovering customer needs. More likely stockholders for GM sensed crappy trucks make the most money – they milked it for all it was worth. And since it wasn’t sustainable – they’re now in the mess they made.

    Anyways – just my two cents.

  2. apintalisayon Says:

    I hear you: GM was stuck on their business model. In KM language I call that “imprisoned in their self-constructed mental box” – which acts like a (usually unconscious) blindfold that prevents them from seeing certain things in the real world.

    Thanks for your contribution!

  3. ian aguirre Says:

    What you are doing here is amazing, my school’s club loves reading your stuff and discussing it! Keep it up we need more.

  4. royce castillo Says:

    I absolutely adore what you have done with this post. You make me want to read more and more. Definately coming back and definately telling people to check it out!

  5. apintalisayon Says:

    Thank you Ian and Royce.

    Download the Clickable Master Index, so you can more conveniently select and click any topic you want.


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