Toyota might have been a customer-centric company for parts of the 80s and 90s, or it may never have been customer-centric, which I now suspect.  Toyota thought that understanding what customers wanted to drive; converting that understanding to car design; and then superbly manufacturing cars that fit customers tastes; made it customer-centric – and bulletproof. But two fundamentally flawed asuumption have stripped Toyota of its body armour.  

First, Toyota got caught breathing its own fumes – believing its vaunted Toyota Production System was so scalable the company could grow at will. As stuck accelerator pedals and failing brake systems demonstrate, bad assumption. And these maladies follow a string of other problems that had already stripped Toyota of its top quality ranking.

But second, and I believe much more important long-term, Toyota failed to realize there’s more to customer-centricity than excellent products (which it can no longer claim). Research that David Mangen Ph.D. and I conducted several years ago identifies that customers now consider product excellence and service excellence two halves of the same coin. Without one, companies have neither. And even if it grasped this fundamental truth, Toyota failed to realize that “service” was about far more than fixing cars.

Going back 10-years, Toyota started failing to deliver one of the most important service components – honesty. I won’t go into the whole litany of Toyota subterfuge here. I’m saving it for a full article I’ll write once I’m confident all the major discoveries are discovered. But turns out Toyota has been hiding serious defects from customers and government agencies for years. The company’s behavior has been outright smarmy, going back to 2002 when it tried to pawn off sludge collection in engines to drivers failing to change oil. And even after the U.S. DOT forced them to extend engine warranties to 8 years, they tried to obstruct customer filings. And today, they continue obfuscating like mad. Fortunately, the DOT and perhaps even more so the Japanese Ministry of Transportation, are up to their tricks.

I’ve read many comments from Toyota loyalists (most of whom don’t yet know what Toyota’s been doing, unless they’re reading the excellent investigative reporting in the New York Times), to the effect that “Toyota will snap right back.” From mechanical problems, perhaps. But from deeceptive business practices, I seriously doubt it.

And as a sidebar for process folks reading, Toyota has provided living proof that neither the Toyota Production System nor Toyota’s Lean culture created a customer-centric company – one that puts honesty and integrity with customers on a pedestal, towering above business instincts to put profits first - especially when that means putting customer lives at risk.

BusinessInsider.com just released this list of abusers – not only of customers but of stakeholders, employees and the general public. While the selection process factored in data from Consumer Reports, JD Power, the MSN/Zogby poll, Vanno, and the University of Michigan American Customer Satisfaction Index plus indexes reflecting public perception, obviously some subjectivity crept in, but the list resonates very strongly with me.

 I’ve included links to this list and two other relevant compilations at the end of the post, but before sending you off I’d like to offer several observations.

• Customer relations played a key role:  12 of the 15 companies were cited for poor customer relations.
• So did employee relations:  the same 12 of 15 companies were cited for poor employee relations. While 12 out of 12 is not a bulletproof statistic, the inference is too strong to ignore.
• Stakeholder approval was on a par:  10 of the 15 were cited for providing poor shareholder returns, but three of the 15 are private companies. What I believe is so important here is that the Ross School’s ACSI has clearly demonstrated that companies with high CSAT numbers perform financially better than competitors with standard or lower scores.

I also cross-referenced this list against MS Money’s “Customer Service Hall of Shame” nominees for 2009. Three companies made both lists, but the “Hall of Shame” list focused heavily on financial services whereas the “15 most hated” included only Citi.

What struck me after reviewing both lists is the 22 separate companies named all operating “inside-out” by putting company interests ahead of company interests. In fact, several of these outfits are frequently cited for showing the futility of trying to operate inside-out in today’s marketplace. In contrast, when I reviewed MS Money’s “10 Companies That Treat You Right” selections, all 10 are commonly cited as examples of how “Outside-In” thinking produces successful customer and business outcomes both. For more information on Outside-In visit: http://tinyurl.com/yd6rrdf

Here are the links:

15 Most Hated Companies:  http://tinyurl.com/yzkn6cm

2009 Customer Service Hall of Shame:   http://tinyurl.com/larogw    

10 Companies That Treat Your Right:  http://tinyurl.com/ml57oj

Have you been clenching your fists because our large banks got bailed out and are getting away scot-free with being shamelessly greedy?  Are you gnashing your teeth because they appear to be going right back to their old ways? And are you starting to think they have so much control they can get away with total customer-insensitivity?

You can relax. They got a reprieve, but it’s only temporary.

Round two of their troubles is, as they say in the movies, “coming soon.”

·         Thanks in part to consumer (voter) pressure, the Consumer Financial Protection Act looks likely not just good to pass―but withe sharp teeth.

·         Thanks again to consumer pressure, regulation of derivatives and the other “exotic” instruments is also on the way.

·         Even compensation regulation for banks not holding TARP money is a possibility.

·         All the large banks have loan portfolios overstuffed with bad commercial loans, which will start hammering them in 2010.

·         “Too big to fail” legislation to prevent future bailouts without exposing our financial system to major disruption from major failure is also on track.

·         Reinstatement of the separation of investment banks from commercial banks is getting support from none other than Goldman Sachs (which would love less investment banking competition).

·         The shame the large banks are bringing on themselves has cut into the percentage of graduate students prepping for Wall Street. A whole lotta young people don’t want to be associated with these bad actors. Would you like to go to a party and respond to the “what do you do?” question by saying, “I’m in investment banking?”

As good as things look right now for major banks, the combined factors above will give many consumers (and small businesses) the pound of flesh they’re after. And through a combination of raw, consumer political power and legislative guilt for letting banks trash our economy, the balance of power is swinging in the other direction. That will be hard to reverse.

Best of all, consumers are rearing up in other markets as well, including influencing the health care debate. Customer empowerment is real and long-term. Companies that go Outside-In and adopt the credo of, “Adding new value to customers is the only sustainable manner of adding new value to the company,” will thrive in all this. So many companies continuing to resist customer empowerment will help them thrive.

And I also boldly predict that at least one large bank, perhaps from the second tier, will get customer religion and go Outside-In. They’ll be welcomed by customers with open arms.