Two of the most celebrated brands in the world this past decade have certainly been Dell and Toyota and the companies were so good in fact that universities used them as models other companies should aspire to. We are talking about legends here. Dell’s supply chain and Toyota’s emphasis on quality. Any other company would give anything to be compared to these guys.
But for Toyota it is as if the success went to the company’s head as it loosened up the reins on quality control in favor of cost containment. According to an article in the New York Times, Dell too saw its supply chain collapse as it struggled to deal with faulty capacitors which were shipped on motherboards by the millions between 2003 and 2005.
To make matters worse, Dell knew about the problems and replaced faulty motherboards with well – faulty motherboards.
Here is an excerpt:
But the hundreds of Dell internal documents produced in the lawsuit show a company whose supply chain had collapsed as it failed to find working motherboards for its customers, including the firm representing Dell in the lawsuit, Alston & Bird.
According to a person who saw Dell’s 2005 internal communications, company executives carefully devised a public relations policy around the OptiPlex situation. Mr. Dell and Kevin B. Rollins, then Dell’s chief executive, were told that the news media would be informed of Dell’s commitment to fix any systems that failed, that Dell was working with customers to resolve problems in the most effective manner possible and that the problems posed no safety or data loss risk.
Carey Holzman, a computer expert who investigated the capacitor problems and collected photos from people with broken motherboards, had a different take on the safety situation.
“Of course it’s dangerous,” Mr. Holzman said. “Having leaking capacitors is a huge problem.” He found that the capacitor problems could cause computers to catch fire.
As late as 2008, after Mr. Dell had replaced Mr. Rollins and returned as chief executive, Dell continued to circulate internal memorandums trying to deal with the fallout from the capacitor situation. Dell salespeople, according to the lawsuit, fretted that technology directors at companies who used to buy from Dell could “justify their job” by advising their companies of Dell’s PC failures and recommending the purchase of H.P. and Lenovo computers.
It is obviously not easy to run companies which make sophisticated automotive or computerized products but what is crucial to be aware of us building a good reputation can take decades. Public trust and confidence is more valuable than diamonds and losing this trust is like throwing your valuable corporate jewels into the dumpster.
So the next time an engineer mutters – well it’s just a braking system, what could go wrong? Or – a capacitor is a capacitor – we’ve never seen them cause problems in the past. Or how about – c’mon we have hundreds of rigs operating in oceans all over the world, why should one fail now? Understand the action you could be about to take (or not take in the above instances) could be destroying years of hard work and reputation building.
The prevailing wisdom is companies are in business to make profit and while this is true let’s be sure that as corporate stewards we realize that serving customers and exceeding their expectations while making a profit is what will keep you in business for the long haul.
Remember, sometimes a reputation just can’t be repaired.