The Significance of Sigma: Toyota’s Lessons in Corporate Decision Making

With the massive recall due to sudden acceleration problems, Toyota’s reputation for superior quality has suffered a black eye – if not more.  The future will tell how serious this injury is and whether it represents the tip of an ominous iceberg.  Sprinkled amongst the news coverage are hints that Toyota has known about accelerator problems for some time.  From an outsider’s perspective this raises several questions about corporate decision making, including this one:

  • How does one differentiate between the “voice of the customer” and the “noise of the customer?”

VOC or “Voice of the Customer” is a key concept in Six Sigma, the quality methodology used by Toyota and many other companies.  Needless to say that with millions of customers, there are millions of opportunities for feedback – hence the potential for noise.

Wordplay aside, any communication from a customer contains some useful information, but not all feedback carries the same weight.  For example, a broken radio most likely has less impact on car safety than a stuck gas pedal – but we can’t be sure until we have more information: the broken radio may be a symptom of an electrical problem that also affects the accelerator.

Therein lies the problem: how do we assign the “appropriate” value to the information we receive?  How much effort and money do we put into researching the (hypothetical) “radio problem” versus other problems?  How can we quickly assess whether the “radio problem” can turn into a “safety problem” that requires thorough attention?  With the myriad of active and passive ways in which we can listen to customers, we need a good triaging system to help us separate critical information from information clutter.

While everyone can agree that data needs to be used “appropriately,” it is much more difficult to agree on what “appropriate use” actually means.  Assuming for the moment that we can collect accurate data, what do we need to know in order to elevate an incident from “routine” to “requires immediate attention?” Here are several key factors that influence appropriate use:

  • The ability to recognize the potential for significant harm
  • The ability to draw a correlation between the incident and significant harm
  • The ability to develop a solution to the problem
  • The ability to implement a solution to the problem
  • The ability to make that solution pay off in the long run

Each of these bullet points shares two characteristics: to accomplish them, we need good information as well as sound judgment – neither of which comes easily.  This applies to all types of corporate decisions – whether we are dealing with product safety issues or the most profitable allocation of sales and marketing resources.  The major differences between types of decisions typically revolve around their scale and the level of detail required to make a decision.

It is impractical to go through all the possible ways in which we can identify “appropriate” information.  Instead, here are a few guidelines:

  • Assess the potential harm
  • Identify actionable information
  • Prioritize timeliness, accuracy and budget
  • Identify who needs to know what and when
  • Incorporate the means to review requirements from time to time

Keeping these bullets in mind goes a long way toward selecting the tools and resources needed to supply appropriate information.

Additional Reading

Toyota knew of accelerator pedal problem in UK a year ago
From The Times
February 2, 2010

Unintended Acceleration: Toyota Addresses the Issues
November 06, 2009 by Irv Miller

Wikipedia entry for Six Sigma, the quality control methodology used by Toyota and many other companies.  Voice of the Customer (VOC) is a key concept of the Six Sigma methodology.

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