24 May 2011

Engineers vs. Snake Oil Salesmen

I was sent this interesting piece of news today (Thanks, Anusha).

It seems...

"Toyota has teamed up with salesforce.com to create Toyota Friend, a private social network for owners of Toyota cars.

The network will be accessible through PCs, tablets and smartphones, giving Toyota customers the ability to connect with their dealerships, cars and Toyota itself. For example, your car could send you an alert when its battery needs recharging, and you would be able to connect to your dealership to get maintenance tips and service information.

Toyota Friend will primarily be a private network for Toyota car owners, but customers will be able to connect and expand the experience through public social networks such as Facebook and Twitter.

On the financial side, Salesforce.com will invest 223 million yen ($2.7 million) and Toyota Motor Company will invest 442 million yen ($5.4 million) in Toyota Media Service, which oversees Toyota’s global cloud platform development. Microsoft, which entered a strategic partnership with TMC in April, aiming to bring internet services to Toyota vehicles, will invest 350 million yen ($4.3 million) in the platform."


Firstly, aren’t social media devices totally incompatible with Toyota products' core use: Driving?

Secondly, according to Mr Toyoda, “Despite negative factors such as a rapid rise in the yen and the earthquake, our profit sharply rose, thanks to massive cost-cutting and sales efforts.”

Let's decrypt that statement: Toyota is skimping on production and quality (i.e. cost-cutting), while spending more on marketing (i.e. sales efforts). So possibly, they now have a higher profit ‘margin’ with an inferior product!

Toyota’s recent ‘recall’ fiasco affected 14 million vehicles worldwide and battered the company’s reputation for quality. But hey, investors care more about Q-on-Q profits than reputation – so, $12.4 million spent on a marketing gimmick makes more sense than improving the actual product!

It makes one wonder though, if Mr Toyoda (who family name is at stake) doesn't see the pitfalls, why would ANY company management care for a sustainable long-term Brand Strategy?

Are account books blinkering the vision of corporate decision-makers? Is the focus on numbers leading into a unacceptably myopic view?

I posted once before on how inordinate focus on short-term profits can erode equity and actually stand in the way of long-term growth.

To me it seems that somehow, across the corporate world - up and down the line - the wrong set of behaviours are being incentiviced.

No comments: