There are many ways a company’s long-term strategy can fail.

The problem may be execution. Or perhaps continually shifting the plan aka moving the goal posts (*cough* … Hewlett-Packard). Another common downfall is expanding too fast (*cough* … Toyota). Sometimes companies fall victim to their own success, deluding themselves into believing they can thrive in areas in which they aren’t suited to succeed (*cough* … Bank of America buying Countrywide) or emerging areas they simply don’t understand (*cough* … AIG insuring mortgage-backed securities). Or companies can fail via the inverse: resting on their laurels and failing to change as the world around the does (*cough* … Blockbuster).

In short, there are eight millions ways to die.

There may only be one, however, that predestines a company to fail: starting with a flawed plan. Or, to play on the cliché: failing to plan may be planning to fail — but planning poorly might be just as bad.

To that end, Forbes has compiled a “top ten ways strategic plans fail.” Head over there for the full list but these are the five I consider to be the most insightful lessons.

1. Having a plan simply for plans sake. Some organizations go through the motions of developing a plan simply because common sense says every good organization must have a plan. Don’t do this. Just like most everything in life, you get out of a plan what you put in. If you’re going to take the time to do it, do it right.

3. Partial commitment. Business owners/CEOs/presidents must be fully committed and fully understand how a strategic plan can improve their enterprise. Without this knowledge, it’s tough to stay committed to the process.

7. Having the wrong people in leadership positions. Management must be willing to make the tough decisions to ensure the right individuals are in the right leadership positions. The “right” individuals include those who will advocate for and champion the strategic plan and keep the company on track.

8. Ignoring marketplace reality, facts, and assumptions. Don’t bury your head in the sand when it comes to marketplace realities, and don’t discount potential problems because they have not had an immediate impact on your business yet. Plan in advance and you’ll be ready when the tide comes in.

10. Unrealistic goals or lack of focus and resources. Strategic plans must be focused and include a manageable number of goals, objectives, and programs. Fewer and focused is better than numerous and nebulous. Also be prepared to assign adequate resources to accomplish those goals and objectives outlined in the plan.

1. Toyota — It seems as though any natural disaster affects this automotive manufacturer. Toyota announced today that it will suspend production at its plants in North American on Saturday, citing an interruption in the supply chain of some Thai-made components. Toyota plants in Indiana, Kentucky and Ontario, Canada, will be shut down until the situation in Thailand improves. As of last Friday, the floods had resulted in an output loss of 37,500 vehicles in the Southeast Asian country since Toyota idled three plants there October 10th. That number could potentially climb to 250,000 by mid-November. If that happens, it is estimated that operating profit could be reduced by $1.6 billion.
2. Ford — On a conference call yesterday, Ford Chief Financial Officer Lewis Booth stated that the carmaker may lose production of 30,000 vehicles. Though Ford’s assembly plant is not affected, their supply chain is. The company said the Thai floods have cut fourth-quarter production so far by 17,000 vehicles due to supplier issues. That number could climb to 30,000. Ford said it is “working closely with its affected suppliers to return to production as quickly as possible and to minimize any potential impact in other regions.”
3. Lenovo — The Chinese computer maker said yesterday that it expects its supply of hard disk drives to tighten “through the first quarter of next year.” Thailand supplies approximately 40% of the global output of hard disk data storage devices, meaning Lenovo is not the only company within the industry experiencing interruption issues. Western Digital and Seagate Technology have both said they expect to face a shortage of parts soon. Because of this, Apple announced they expect a shortage in the coming months of disk drives for their products, specifically the company’s Mac lines, according to Apple CEO Tim Cook .
4. Canon – The Tokyo-based company has recently revised its full-year financial outlook based on concerns about the impact of flooding in Thailand. The company said the Thai flooding will lower its sales and operating profit by Y50 billion ($660,000) and Y20 billion ($264,000), respectively, in the fourth quarter.
5. Sharp — Having recently announced that the company is almost fully recovered from the business interruption it experienced after the Japan earthquake in March, Japan’s number one liquid-crystal display maker is now stating that the Thai floods may affect revenue.
   

   Although Sharp’s manufacturing facilities in Thailand weren’t damaged, the company’s inability to secure certain parts from suppliers hit by the flooding may result in tens of billions of yen in lost revenue, said Sharp Executive Vice President Toshio Adachi at a press conference.

As companies scramble to obtain parts from other regions of the world, we are reminded that supply chain risk management is an often-overlooked segment of the discipline…until disaster strikes.

Today, the car company announced another massive global recall of close to 1.7 million cars due to fuel leak problems. The car models in question affecting the U.S. are the Lexus IS and GS sedans. And though Toyota says it has received no reports of accidents or deaths due to the malfunction, it has had numerous complaints from North American, European and Japanese customers.

It’s been a horrible two years for the world’s largest car manufacturer. Last February I wrote about the Prius recall and the numerous questions that followed regarding the company’s totalitarian business environment.

The “Toyota Way” is the company’s long-standing philosophy that, among other things, places an extreme emphasis on maximizing efficiency by minimizing waste. Some have even said it acts almost like a religion amongst Toyota’s 316,000 employees. There is even a Toyota-approved way of turning corners when walking around the company’s numerous hallways (you must do say at a 90 degree angle). Think that’s bad? Toyota also demands that their employees never walk around the office with their hands in their pockets.

Now if only they could be that vigilant and careful with their car manufacturing process. Does Toyota value waste-cutting and efficiency more than product quality and customer safety? It’s a question that has been asked more than once.

Paice founder Alex Severinsky, who had claimed that Toyota infringed on his 1994 patent, was pleased with the result.

“Finally people understand the merits of what I invented and give it the proper value,” Severinsky said. “Toyota is the leading technology company and finally appreciates the value of the invention.”

Toyota had insisted that, while its technology was similar to Paice patent, its hyrib vehicles were the result of its own independent research. Evidently, both parties were in agreement.

“The parties agree that, although certain Toyota vehicles have been found to be equivalent to a Paice patent, Toyota invented, designed and developed the Prius and Toyota’s hybrid technology independent of any inventions of Dr. Severinsky and Paice as part of Toyota’s long history of innovation,” both companies said in separate statements.

With this issue out of the way, Toyota can now concentrate on its latest round of subpeonas. This time, a federal grand jury in New York is investigating whether or not Toyota notified the NHTSA in a timely fashion about faulty steering rods.

For Toyota, a bad year just keeps getting worse.

This patent fight originally began in 2004, when Paice LLC, a Florida-based hybrid technology company, sued Toyota for using its patented technology in second-generation Prius vehicles. The court ruled that Toyota had infringed on Paice’s patent and Toyota filed multiple appeals, losing each time. According to Forbes, Toyota has paid $5 million in damages and a small fraction of the court-ordered license fee of $98 a car while it challenges future royalties. In the latest case, Paice is claiming that Toyota’s third-generation hybrids are also infringing on its patents and that Toyota is not paying enough in royalties. Paice is ultimately hoping to get the International Trade Commission to ban Toyota hybrids altogether. Toyota has fought to get the case dismissed but to no avail.

According to one expert, who commented on the case last year, a ban is unlikely. But if it does happen, Toyota would be looking at production delays, the inability to sell hybrid vehicles in the United States and millions of dollars in lost revenue while it inevitably tries to work out a licensing agreement.

When taken with the ongoing recall fiasco, this patent infringement mess is further evidence of the difference a year can make in business. This time last year, Toyota was seen as the industry gold standard. But their ongoing troubles paint a picture of a car company that seems to have gotten caught up in believing its own press and lost sight of key details, like safety and technology, that helped make it great. A company that once was the model for quality is quickly becoming a textbook example of the dangers of complacency.

There is no insurance that can fix the problem and even where coverage is available to fund a “PR swat team” to come to the rescue, the short-term damage is already done, and the brand will always be tied to the negative press. In the long term, the reputation smear may prove survivable, but it sure never seems that way in the initial hours, days, weeks and sometimes even months and years following the calamity.

In recent years, the most oft-repeated mantra for avoiding irreparable harm to the brand is to “get out in front of the story.” Basically, after a mishap occurs, be honest, transparent and don’t let your CEO wake up to be blind-sided with an unwanted Wall Street Journal headline. Tell the public that something went wrong and that you’re now doing everything in your power to fix the situation.

That certainly makes sense, and recent examples of companies who were criticized for their delayed response include Toyota, Massey Energy and BP. The fact that all three companies seemed to bury their heads in the sand — for years — when it came to safety issues still would have come out, but the instant backlash perhaps could have been different if the companies took charge of the situation sooner — at least with Toyota anyway. I’m not sure there is anything BP could have done differently in the first week or two that would have made people feel much differently about the oil giant than they do today.

But, in trying to be honest and transparent, should the company’s executives go so far as to say “I was wrong” and “I’m sorry”?

Logic says yes.

As journalist and author Kathryn Shultz pointed out today in a guest post on the New York Times‘ Freakonomics blog, however, those who have admitted the error of their ways have not always been greeted with forgiveness.

Quite the opposite, in fact.

Earlier this year, former Assistant Education Secretary Diane Ravitch published The Death and Life of the Great American School System, which denounced a series of school reforms (including educational testing, school choice, charter schools, and No Child Left Behind) that she herself had advocated for years.  When I interviewed Ravitch for Slate, the comments section lit up with the familiar charges: “Why is Diane Ravitch Making a Bundle Saying She Was Wrong All Along?” “Wow! Thanks Diane! It’s only taken you ten years to see the blindingly obvious.” “We’re supposed to be impressed by her contrition?”

And that is the central question: what are we supposed to do about the sincere contrition of those who err?

Schultz, who just wrote a whole book on the topic that looks interesting but I have yet to read called Being Wrong, says that the answer is a lot easier in our personal lives than it is in the public sphere. In our private lives — with relatives, friends or colleagues — the answer is usually forgiveness. People make mistakes and, often, when they are willing to admit and own up to their errors, they should be granted at least some level of reprieve.

But that courtesy is rarely extended to public officials (which is who she is really speaking about here) or corporate representatives (which is who I believe this concept may also apply to)/

When our public officials make mistakes, the costs (which are often not borne directly by them) can be horrifying. It seems reasonable to demand not just an acknowledgment of error but some effort at ameliorating the consequences.  Sometimes, though, this is simply impossible.  No one can bring back the war dead; no one can unspill the oil; no one can compensate a child for twelve years of bad schooling. All that truly contrite leaders can do in such a situation is work off their public debt the best way they know how – and live with the torments of their own conscience.

But are those torments real?  Many people doubt it, and therefore find the idea of forgiveness galling.  As one commenter observed after listening to a conversation about wrongness over at The Takeaway, “A lot of people’s admitting to being wrong is little more than a PR ploy.  Public apologies do not impress me.”  In the acid bath of cynicism that is contemporary American politics, it is all but impossible for public figures to convincingly establish their sincerity.  And fair enough: sometimes, political changes of mind really are craven or self-interested or simply for show.  But sometimes, presumably, they are not.

Ultimately, her short post doesn’t offer any concrete solutions. It certainly does present a good amount of evidence that, publicly, forgiveness — especially when the act leads to death or major destruction — is tough to come by. Former Secretary of Defense Robert McNamara is cited as a prime example.

Regardless, I have to believe that, in this day and age, corporate honesty and admission of guilt will better resonate with the public than anything else. But the alternative perspectives raised here sure do lead us to one indisputable conclusion: executives are right to be concerned with reputation risk.

When executives admit “I was wrong,” does it help the company’s reputation? Or does the public just see it as yet another insincere public relations memo?

“Someone has to go through each and every auto claim, and then try to make a determination if it involved unwarranted acceleration,” Bunim says. “It could take months.”

This is not the first time State Farm has been at the forefront of action regarding Toyota. Back in 2007, State Farm warned the automaker and the NHTSA about an increase in unintended acceleration reports involving Toyota vehicles. While this warning adds further fuel to the argument that both Toyota and regulators were asleep at the switch, Department of Transportation Secretary Ray LaHood pointed out on his blog that the NHTSA was looking into the problem as early as 2003.

The point is that our safety officials have been looking at this issue from all angles for quite some time.

So the idea that NHTSA is in the business of ignoring information–valuable or otherwise–from automobile insurers, safety organizations, or consumers is just plain wrong.

Of course, this still doesn’t answer why it took them six years to act. Perhaps they were just being diligent.

For risk managers and others looking at the Toyota recalls as an ongoing lesson in corporate crisis response, seeing the daily headlines about the automaker’s woes is — both figuratively and literally — like watching a car crash.

Sure, in some ways, Toyota has handled the situation adequately, and its rebounding stock price and recent sales suggest that the immediate damage could have been worse. Then again, the company dragged its feet in addressing safety concerns publicly, and all the fines, recalls, class-action lawsuits, Congressional hearings and public scorn suggest that the long-term reputational damage could very well be lasting. This isn’t something that consumers will ever forget.

Especially not now.

Because on Monday, the National Highway Traffic Safety Administration hit Toyota with a record $16.4 million fine, which is more than an order of magnitude larger than the watchdog’s previous highest penalty, a $1 million slap on the wrist to GM for faulty windshield wipers. The $16.4 million figure is also the largest allowed under civil law, according to NHTSA.

Said Transportation Secretary Ray LaHood:

“We now have proof that Toyota failed to live up to its legal obligations,” said Secretary LaHood. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families. For those reasons, we are seeking the maximum penalty possible under current laws.”

On Forbes.com, Ned Douthat advises Toyota to just pay the fine rather than try to fight the regulator’s decision.

Now, Toyota is faced with the choice of contesting the fine in court or simply paying the fine in order to get the episode behind in.  In comparison to the potentially lengthy and expensive legal battle, the nominal $16.4 million fine may be an attractive option.  However, in paying the fine the prestige of the Toyota brand may be forever damaged, as they would be admitting fault in hiding a very serious safety issue in their vehicles and thus endangering millions of drivers.  The number of incidences of stuck accelerators is still relatively small, but the recalls have affected some 8.5 million vehicles.  Furthermore, if Toyota admits fault and accepts this fine, it may open the litigation flood gates to hundreds of class action and personal injury lawsuits related to the stuck accelerator issue.

Amanda Bronstod of Law.com delves deeper into the idea that accepting the fine as handed down will be troublesome for Toyota, as it factually “validates the legitimacy of our allegations that Toyota has been misleading the federal government and consumers.”

With that damned-if-you-do, damned-if-you-don’t decision looming, Toyota also announced on Tuesday that it would extend its sales discount program. The program was successful in March and finally gave the company some positive headlines, but at least one industry expert seems skeptical that even this price-cutting measure will continue to push vehicles under the once-impeccable-but-now-tainted Toyota banner.

Last month’s incentive program helped Toyota “scoop up bargain hunters and loyalists” to achieve a 41% gain in sales over March 2009, said James Bell, an analyst with auto information company Kelley Blue Book.

But the increase was not as robust as it might seem, as results were tempered by the low sales in the same month a year earlier, he said.

“The question now is how many of those bargain hunters and loyalists are left. You have a finite number of people in the auto market at any one time,” Bell said.

Historically, Toyota has been among the stingiest automakers when offering incentives, helped by its historically high resale values and a reputation for building reliable cars, he said.

Last week at the International Auto Show, a Toyota rep spoke on the situation, specifically noting his thoughts that “people don’t buy a car they don’t trust just because you give them a good price.”

We’ll see, I guess.

For more on the risk management angle of the Toyota troubles, check out our past coverage. Morgan also covered “Toyota’s Total Recall” in the April issue of Risk Management.

In Minnesota, a man imprisoned for vehicular homicide in a fatal Toyota crash sought a new trial, claiming that, in light of the unintended acceleration recalls, he was wrongly convicted for a mechanical malfunction that wasn’t his fault. A prisoner in Portland, Oregon has made similar claims in what is sure to be new trend in courts around the country.

Meanwhile, lawyers have begun to jockey for position in what is assumed to be a lucrative, and perhaps historic, class action lawsuit for all involved (J.P. Morgan recently put the total recall price tag for Toyota at $5.5 billion), internal company documents revealed that Toyota was aware of the unintended acceleration problem in 2002, when Camry owners began to complain about the issue.

The technical service bulletin went to every U.S. Toyota dealership in late August 2002 after some customers reported their vehicles were speeding up unexpectedly.

“Some 2002 model year Camry vehicles may exhibit a surging during light throttle input at speeds between 38-42 mph,” the bulletin states. “The Engine Control Module (ECM) calibration has been revised to correct this condition.”

Since the National Highway Traffic Safety Administration (NHTSA) was apparently aware of the issue as well, some critics, including Clarence Ditlow, the head of the nonprofit Center for Auto Safety, have suggested that both Toyota and the NHTSA are guilty of a coverup.

“The government is really hiding this information from the consumer,” Ditlow told CNN. “They’re in a conspiracy with the auto industry to keep these out of the public’s sight.”

Some analysts have questioned the seriousness of this document, however. Matt Hardigree of the automotive blog Jalopnik wrote that the CNN article may be misleading.

[The document] just shows there was a problem with electronics on one year of the Camry, which Toyota identified and repaired. The engine affected, the 1MZ-FE, isn’t even offered in the Camry anymore. The change to a new platform and new engine lineup would have drastically changed the ECM between the sixth-gen Camry and the current seventh-generation 2007-2010 Camry. Claiming the 2002 TSB [technical service bulletin] is related to Toyota’s current sudden unintended acceleration problems is sort of like claiming a screen recall on an iPhone is related to a recall on a first-generation iPod click-wheel.

While lawyers to try to figure what what Toyota knew and when, the recall problems continue to plague the automaker’s business and have been blamed for plant shutdowns in France and the UK. In February, Toyota’s sales in the European Union fell 20% as compared to the same time last year, despite the fact that overall auto sales in the EU were up 3%.

Finally (for now), Toyota was also forced to respond to owner complaints that recalled cars were still experiencing acceleration problems after they had been repaired by dealers. The company pledged to replace the pedals free of charge at the owner’s request. The operative phrase being “at the owner’s request”  as an internal memo cautioned dealers “not to solicit pedal replacement.”

As the crisis at Toyota rages on, stay tuned to the Monitor for the latest news and updates.

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