What’s driving Toyota Canada’s success? – CIO reveals all

“The best way to provide prosperity and security is to do things right.” Ray Tanguay, President of Toyota Motor Manufacturing Canada

The phrases ‘Genchi Genbutsu’ and ‘Kaizen’ would probably mean nothing to most Canadian knowledge workers.

However, at Toyota Canada the two terms signify a great deal.

They epitomize what employees at the company call The Toyota Way – the management philosophy that’s behind the the auto manufacturer’s phenomenal business success.

The Toyota Way – described as “a system designed to provide tools for people to continually improve their work” – includes 14 principles organized in four sections.

But for Hao Tien, chief information officer (CIO) at Toyota Canada Inc. those two Japanese phrases – Genchi Genbutsu (go and see) and Kaizen (continuous improvement) really capture it all.

The IT department at Toyota Canada Inc., he says, uses these principles to create a culture of innovation and in doing so, to generate tremendous value for the business.

Tien was speaking at The CIO Peer Forum, a two-day conference organized in Toronto by the CIO Association of Canada.

Tien described how – as CIO of Canada’s single largest vendor of passenger cars – he has had occasion to implement these two principles day after day, and to motivate his employees to do the same.

“We apply Genchi Genbutsu (go and see) by encouraging our people to get out into the field and witness first hand customers’ needs and problems.”

Tien said he himself spends a fair amount deal of time visiting Toyota dealers (“who are our [first line] of customers”), talking to them, to the sales people … and understanding their pain points.

“I also sit in on customer focus groups to learn how customers see Toyota and how to influence that perception – as that would lead to further sales.”

Insights and information gleaned from such frequent interaction with stakeholders help Tien and his team with the practice of the second principle – Kaizen or continuous improvement.

Paradigm shifting changes are usually few and far between, Tien notes.

But he’s a big believer impact of incremental changes. “Ours isn’t a big bang approach. Of course we want 1,000 per cent improvement, but we get it by improving one per cent a thousand times.”

Given the size and scope of the Toyota Canada organization, Genchi Genbutsu – may seem a bit of a tall order.

For instance, there’s one apparent obstacle to regular interaction with the broad network of Toyota dealerships and other supply chain partners – there are so many of them.

“We have 228 Toyota Dealers and 30 Lexus Dealers across Canada,” Tien noted.

“We have offices in Vancouver, Calgary, Toronto, Montreal and Halifax. We also have two distribution centres for our service parts – one in Vancouver serving Western Canada, and one in Toronto serving eastern Canada. And then we have our financial services sister company located in Toronto as well.”

And Go and See doesn’t just cover Toyota Canada dealerships – but all customer touch points – including Toyota’s call centres, the Web site, the company’s lease and loan processes, its recall and safety campaigns, direct marketing, inquiries, problem resolution – the works.

“We asked: Are there problems at any of these touch points?  How can we do better than we did yesterday?”

CustomerOne

These probing questions – asked across the organization – led to some interesting discoveries.

For instance, the poor information flow between various branches of the Toyota organization was identified as being a source of much frustration to customers.

“Previously, if a customer had a problem with dealer and called the Toyota Canada head office, they would expect the head office to know about this. And visa-versa. But just a few years ago this wasn’t the case.”

To resolve this problem, in 2004, Toyota Canada Inc. (TCI) decided to setup a single “nerve system” for customers, dealers, TCI, finance factory and engineering.

The initiative was dubbed CustomerOne and it established collaboration between Toyota Canada, its financial arm, and the company’s dealers. The goal was to provide customers with an exceptional ownership experience that – it was hoped – would lead to lifelong brand loyalty.

In addition to information gleaned from existing customer touch points Toyota Canada held surveys and focus groups to identify customer impact areas.

Fourteen of these were identified, and they formed the basis of around 20 initiatives to be undertaken over a three to five year period.

Tien said there was nothing exceptional about the tools used by Toyota Canada’s IT department to create the free flow of information between various sections of the company.

“We used common technology to create that customer relationship management offering.”

He said the innovation wasn’t in the technology, but in the way the various partners were brought together to agree upon processes, which were then consistently executed.

CustomerOne is only project of its kind in the Toyota empire. The initiative captured the Diamond Award for Excellence – the top prize in the ‘For Profit’ category, at the Canadian Information Productivity Awards gala in Toronto last November.

A computer system links activities across multiple customer touch points,  and analyzes data from the more than 13,000 daily service visits to Toyota dealers across the country.

The system flags major repeat problems and Toyota Motor Corp. head office in Japan is informed so engineers can be assigned to make repairs to designs or manufacturing, if necessary.

The most significant impact of CustomerOne is free flow or information between various groups in the Toyota Canada organization.

Today customers have a consistent experience regardless of which group in the organization they are interacting with, said Tien.

“For instance if a call comes into us at Toyota Canada, the dealer knows about it. So if they go back to the dealer for services, everyone offers the same resolution of the problem.”

In the four years since its launch CustomerOne was has been a runaway success. Tien cites some of the more tangible benefits this initiative has brought about. They include:

  • Cutting down the customer problem resolution from  weeks to an average of three days through this initiative alone;
  • Early detection of customer dissatisfaction in services
  • Reducing detection of product defects (from months to days).

The Toyota Canada CIO talks about the tremendous business benefits from this seamless freeflow of information.

“When a defect is detected at the dealership, the next day it would up to our engineering department.”

The speed at which information traverses is of immense value – especially when new vehicles are launched. Tien cited an example.

“We recently launched a new Toyota Corolla [model]. If there were a problem with a door knob of the vehicle, the plant would know about it and a fix would be put in place.”

Such a system could produce huge cost savings, Tien said, and citing an example.

“Every 30 – 40 seconds a new Corolla comes off the line. The cost of one bolt is around 10 cents for the supplier; when it comes to Toyota at the plant it cosuts us about $1. But once it goes to the dealership and then to the customer – if a recall happens, it would cost $50 to fix.

What’s more the customer would be dissatisfied because they have to make the time to come in and have it fixed.”

Today, he said, as every single day the plant knows of (and rectifies) any defect in time, the cost savings to the company could be mind-boggling.

CustomerOne – which has won the Diamond Award of Excellence at the Canadian Information Productivity Awards last year – is a textbook case of IT being used effectively to promote business goals.

Winning new customers and keeping existing ones – what Tien calls conquest and retention – were key goals of the program.

And in doing this the company hoped and expected to increase it’s marketshare as well.

In 2004, when the CustomerOne initative was launched Toyota’s marketshare, globally, was around 10 per cent. “We set ourselves an aggressive target of 15 per cent marketshare by 2010,” Tien recalled.

“It was something that Toyota Canada too had to shoot for – and this is really tough to do in a completive market.”

And Toyota Canada is well on its way to achieving this goal.
By the end of 2006 – a couple of years after the program was launched – the auto maker was on track to sell 195,000 cars, trucks, minivans and sport utility vehicles.

This worked out to more than 12 per cent of the Canadian market.

For Tien himself the entire experience has been an eye-opener.

“It taught me a great deal about innovation and the role of the CIO in fostering it,” he said. One of his most important learnings, he said, has to do with setting challenging goals that force employees to think outside the box.

He said this goes against conventional business management principles that tell you goals should be realistic.

At Toyota Canada, Tien said, “we often set the goal before we look at the details. Then we ask the team to come up with ways to achieve it. This forces them to think outside the box.”

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