Keyword: Toyota

Here’s a quiz for you: who has more retail outlets — Starbucks or General Motors (GM)?

If you listen to all the late night comics with their shtick on Starbucks and how there’s one on every corner, you think you know the answer.  Well, you’d be wrong.  Starbucks has about 6,300 company-owned stores and GM has almost 7,000 dealerships.  Wow…

Now this is just a little unfair, Starbucks has another couple thousand franchise locations inside places like grocery stores and theme parks.  And GM owns virtually none of their stores.  But the fact that the numbers are even in the same ball park is stunning to me.

I wrote a couple of months ago about what a terrible experience buying a car is, and the toll it takes on the people who have to do it for a living (see that piece here).  And about how the differences between the retail experiences can be easily seen here.

Simply put, buying a car is the worst shopping experience that you can have.  Bar none.  And people with any scruples find it impossible to work in the business for very long.  It’s a sick business that someone needs to change.

I don’t mean to pick on GM just for the excess of dealers.  A piece in the Wall Street Journal today (subscription-only link here) points out that none of the US automakers are immune from this issue.  All the “big three” have well over 2-1/2 times the number of dealers per point of market share of Toyota, for example.  Perhaps that (and this) explains why Toyota is doing so well, and eating Detroit’s lunch.

I think this excess of dealers is one good reason for the problem.  Too many dealers chasing too few customers.  And it leads to a fetid culture of sleeze-ball sales tactics, terrible service, and lousy margins.  It’s little more than vultures preying on the few customers there are.

Starbucks has nothing in their store that costs over $250, and the vast majority of sales are under $10.  I don’t know for certain, but I would have to imagine that their average transaction is in the $5 range.  This just begs for a lot of outlets, to make the impulse purchase easy.

GM, on the other hand, probably has an average transaction around $10,000.  I don’t know many people who decide on a whim to just drop by the Cadillac store and pop for a new $60,000 Escalade.  Or stop in for a quick brake job.  Why on earth do they need so many stores (or brands, but that’s another story)?

If the new purchasers of Chrysler, Cerberus Capital Management LP, want to really make an impact on the car business, they could start here.  And rumor has it, they are going to — by combining all the Dodge, Chrysler, and Jeep dealers together.  It’s a good start.

The New York Times Magazine had a wonderful cover story yesterday about Toyota and their path to world dominance.  This is a great read for most of corporate America, a modern day tale of the tortoise and the hare.

There are many interesting parts of this wonderful article, from the discussion about the creation of the new Tundra full-sized pickup to the parade of companies that try to learn from Toyota’s methods.  But to me the most interesting part is the discussion of the company culture and how their consistent drive for improvement (kaizen) is pervasive.

It seems to me that most of the truly great stories of organizational success are not ones of meteoric rise, they are the result of long slow burns that finally pay off.  As in the world of Hollywood, it seems to me that most “overnight successes” really have decades long histories of pain, tribulation, and persistence.

Even in the rocket-ship ride of the .com era, where most rockets tumbled into the sea, or exploded on the pad, and yet a few hung on to achieve greatness, I can’t think of a truly successful example that didn’t have a long, painful gestation.  The two most oft cited examples of Amazon and Google in fact had their rough childhoods, and painful adolescences, and neither has yet existed long enough to know whether adulthood will suit them well.

In my own experience at Microsoft, the best and most venerable products were ones that were definitively not successes in their first iterations.  Be it Windows, Excel, Word, Internet Explorer, or SQL Server, virtually all Microsoft products of any note were born of a desire to patiently chase down the competition and do what they did better.  The dogged and relentless pursuit of the competition was a key aspect of the company culture, and resulted in version 3 (or 4, or 6…) eventually overtaking the rival.  This happened so much that we used to refer to ourselves as the world’s best “tail-light chasers”.

Which gets me back to Toyota.  The company recognizes, like few do, that developing and nurturing a culture is a key part of making an organization hum.  I talk a lot about mission statements, and how valuable they (and visions) are to organizational success.  Toyota sees that almost instinctively.  To wit:

Toyota’s overarching principle, Press told me, is “to enrich society through the building of cars and trucks.” This phrase should be cause for skepticism, especially coming from a company so adept at marketing and public relations.  I lost count of how many times Toyota executives, during the course of my reporting, repeated it and how often I had to keep from recoiling at its hollow peculiarity.  And yet, the catch phrase — to enrich and serve society — was not intended, at least originally, to function as a P.R. motto.  Historically the idea has meant offering car customers reliability and mobility while investing profits in new plants, technologies and employees.  It has also captured an obsessive obligation to build better cars, which reflects the Toyota belief in kaizen, or continuous improvement.  Finally, the phrase carries with it the responsibility to plan for the long term — financially, technically, imaginatively. “The company thinks in years and decades,” Michael Robinet, a vice president at CSM Worldwide, a consulting firm that focuses on the global auto industry, told me. “They don’t think in months or quarters.”

I love their mission statement (“to enrich society through the building of cars and trucks.”), and will discuss that more soon, but what strikes me most is that last part: “they don’t think in months or quarters”.  Neither do most successful organizations.  They think in terms of what’s right in the long term, and let the current quarter and stock price fall where it may.

When Microsoft was most successful (under Bill Gates and Frank Gaudette’s leadership) it did too, offering essentially no “guidance” to the market.  It seems they may have strayed lately from this view, when a comment from Steve Ballmer sends the stock reeling, and that’s a shame.

The point here is that Toyota and most other great companies, didn’t get there overnight but over decades, don’t plan for tomorrow but forever, and don’t try to justify their actions but rather their philosophies.  This seems to be an anachronism in this go-go, always rushing, instant gratification world.  Bummer.

I’ve had a busy week for interactions with the service industry.  Three different cars spent time in the shop, and a beloved family pet spent his final days in a pair of vet clinics.  I’ve had far too many chances to see what makes these businesses tick.

Last things first, late Tuesday night we rushed my son’s pet rat, a remarkably cute, friendly, and lovable guy, to the vet emergency room for his final bout with chronic lung disease. The emergency room, although quite a drive away, was a beautiful facility, with consummately professional people.  It was breathtakingly expensive, but the care was great as they stabilized him.

Rocky

The next morning I rushed him to his regular vet for what turned out to be his last time.  That vet’s office is more what you envision, a tired little building with worn fixtures and plenty of old pictures of patients everywhere.  The people, however, were just amazing, and they offered the best possible experience for us in this amazingly difficult time.  Two very different experiences, but with similar results — great service from people who really cared.  Although I wish the latter clinic was as nice and up to date as the specialty center, clearly the people didn’t let that effect their attitude in the least.

With the cars, however, it was a very different story, offering stark contrasts.  The three cars are literally from around the world: a German sport sedan (BMW), a Japanese small SUV (Lexus), and an American monster SUV (GMC).  A pretty interesting cross section of the car business, and this week, it offered me a great chance to see their customer service experience in close-up.

The BMW was in for service a week or two ago, but it needed to return on Monday.  It needed new tires (after all of 20,000 miles) so I went to Discount Tire, and was in an out at a respectable price in just over an hour.  Not bad.  The car however, was nagging about “service due”.  It had just been in for service.  As I was near, I stopped in to ask the dealer for assistance. The dealership is being completely reconstructed from the ground up, and it is a mess.  The service department is in portable buildings.  There is construction activity and confusion everywhere.  But the service guy promptly looked it up, turns out one of the many “resets” that should’ve been done on my last service wasn’t, and it was handled cheerily and in less than 10 minutes.

But the original service episode was a different story.  These new cars don’t go in on a regular basis, every 5,000 miles would be too easy.  No, they tell you when to bring it in.  So one day, it started saying “service due”.  Great, I promptly called for an appointment — which they could only do three weeks out.  When I arrived I received a minor chastising for being overdue on my service…  After I defended myself they explained that the dealership overhaul was largely to expand the service department and this would no longer be an issue.

The GMC experience was from a different planet.  I have always maintained that car well, and now that it is getting long in the tooth (~100k miles) I wanted to get it fully up to shape.  Over the last couple of months I have thrown plenty of good money at this car: thousands for extensive bodywork and paint (to make up for years of abuse by teenagers), and at least four trips and $7,000 to the dealer for a variety of ills.  They didn’t get one fixed the last time, so I was in again on Thursday for another shot at that issue.

The dealer is an old-fashioned car dealer, on the row of car dealers that so many towns have.  It is a cramped, ugly, and tired building with carpet that is five years past “worn”, fixtures that were outdated from day one, and a crew of employees who seemed to want to be anywhere but there.  My service rep is a fine young man who tries exceptionally hard to make due in these surroundings and tried hard to make the experience as painless as the fourth trip in a month to a car repair facility could be.  But the promised rental car was not there (I was stuck) and nothing much softens the blow of a second try at fixing the same problem — out of warranty.  I arranged a pick-up and was glad to be gone.

Then, today, the Lexus went in for it’s 60,000 mile checkup.  The service facility is a mile or so from the dealership, a temporary measure as they build the Taj Ma-Dealership, an almost unbelievable structure being built on the site of the former city hall.  And yet the service facility isn’t temporary buildings, no, it’s a beautiful, fully Lexus-branded edifice.  It has tile floors, great lighting, and a row of clean, windowed offices facing the service drive.  I was greeted promptly by a pair of smiling young men, one to take the car, and one to help me.  We decided on the service regimen in his private office, where he genteelly tried to upsell me to over $1000 in service.  I declined, but he took it well, and I was promptly off and being whisked away in a private shuttle for me — back to the GMC dealer to pick up the truck.

It was then that the contrast was so clear.  The broken down GMC dealership with last year’s Buick Rainier (small SUV) sporting a $5000 mark down sticker on display, a crew beaten into submission by their environment, and customers who seemed just as depressed vs. the clean, efficient, and service-heavy Lexus dealership nearly beating customers away with a stick.

People in the car business (an industry I’m quite familiar with) say time and again it’s about the products.  But it’s not that simple.  For the money the GMC is a fine product, I’d buy another and be pleased with the cost-value equation.  No, it’s about investment, organizational culture, and attention to detail.

Toyota (the Lexus parent company) makes these investments, hones the culture, and sweats the details.  BMW wants to do the same, but never seems to measure up.  And GM just further calcifies.  For me this contrast was drawn ever so vividly this past week Never was it so clear why Toyota is taking the world by storm and Rick Wagoner of GM is trying to keep his job and that of 325,000+ of his employees.