Live by Quality, Die by Quality, Live by Price, Die by Price

It hasn’t been fun watching the demise of Toyota in recent months, or maybe it’s been years.  Once able to command a premium of over $2,000 per car and sitting on a cost advantage of at least that, Toyota was the largest, and most successful Japanese company and one of the best in the world.  They based that position on a reputation of rock solid quality. Boy have they fallen hard.   The current story on unintended acceleration goes much deeper.  It is a story of cost cutting to the point of diminishing the brand.  It is a story of using delay tactics and limiting the flow of important crash data to limit the damage of bad press.  All of these things are things that a firm that wants to live by quality should not do.

One a personal note, for decades, I was a loyal Toyota customer. I read the crash and reliability data in Consumer Reports and reached the same conclusion that many global buyers did–Toyota was the best decision if you were going to hold the car more than a few years.  When my daughter bought her first car, I insisted that it be a Toyota.  That darn thing was still running when my son sold it 8 years later with close to 200,000 miles on the odometer.  Several years ago, when I was buying a new truck, the data said that Ford was starting to catch up and move ahead in quality.  After a run in with a lousy Toyota salesperson, I decided to give Ford my business, a decision that has proven to be a good one.  When my son wanted to buy a car, he showed us that there were other cars that had quality that was better than some Toyota cars and his first car was a Mazda.  Toyota, once the preferred vehicle in our house, has lost it’s position.  It’s been like that in a lot of American households, as it well should be.

If you are going to live by quality, quality has to be the driving factor in how you run your business–all of your business.  If you are going to sacrifice something, it can’t be quality.  And, that quality has to be not only in your products, it’s got to be in how you position and how your salespeople sell those products.  They’ve got to have confidence in that quality.  And, you’ve got to be able to price to the quality.  You see, quality is something that most customers want.  Even in a BTB environment, quality is something that small and large customers alike want and are willing to pay for.  How do you accommodate for all of these procurement people who drive prices down?  They’re just trying to keep you honest.  They want to make sure that the prices they get are fair.  And, if you are willing to drop those prices, then all the better.

If you don’t have compelling quality in your products, services and selling, chances are you are going to have to live by price.  If you are going to have to live by price, you had darn well better have the low cost position in your business.  Even if you do, chances are there is a competitor out there that is willing to cut their costs or change their technologies to reduce costs and try to take that position over.  Ergo, chances are, if you live by price, you’ll die by price.  That’s what most other Japanese companies discovered in the 1990’s when they bought their way to dominance in several industries (think semiconductors and consumer electronics).  Their dominance only lasted until the Koreans and then the Chinese did the same thing.  The companies that really succeeded were the ones like Toyota and Sony.  That is,  the ones that decided to live by Quality were the ones that survived.

So, I guess the real title of this should be if you want to live in business, live by quality.  If you want to die, die by price–it really is that simple.  While it is hard to see the once might fall, the least we can do is learn the important lessons

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