Hoshin deployment

For many years, I have watched organizations try to implement hoshin planning (or strategy deployment, if you prefer). First, they choose a few big issues that are important to the organization's long-term success — a leap in quality, a drastic drop in costs, a reduction in lead time to better meet customer demand, or a fundamental reassessment of the kind of value it creates for customers. Then they try to deploy initiatives to address these issues through every level of the organization. But even when they limit the initiatives to a small, manageable number, they rarely succeed.

What starts as the strong voice of the CEO at the top becomes an almost inaudible whisper by the time it reaches the front line, the place where value is actually created and where improvement becomes real. At that level, managers are absorbed by the day-to-day chaos and, even when the hoshin objectives are clear and prioritized, they lack a practical method for addressing them.

How Toyota deploys Hoshin

Recently, I had the opportunity to observe up close hoshin planning at Toyota, which has developed management mechanisms capable of translating high-level strategic plans into sustainable results on the shop floor. Let me describe what I saw.

“Toyota has developed the management mechanisms needed to translate high-level hoshin plans into sustainable results on the front line.”

Toyota president Akio Toyoda and the senior leadership team have concluded that the combination of autonomy, alternative energy, shared assets and hyperconnectivity is creating a “once-in-a-century disruption” in the automotive industry, as it turns into a mobility industry, commonly called Mobility 2.0. (Whether or not this is true is a separate discussion, although all the major automakers have reached the same conclusion. My focus here is the successful deployment of hoshin, not the validity of the vision itself.) Recently, Toyota has had to add a new dimension to the challenge: uncertainty about global trade rules, which may require a substantial relocation of existing production, with lost revenue and higher costs.

Because so many things are changing at once, and the right path for each dimension of Mobility 2.0 (in addition to the changes in trade rules) is impossible to predict, Toyota is responding by extending its principles of concurrent engineering with set-based design from individual vehicles to complete mobility systems. For example, it is experimenting with:

• Level 4 autonomy, in which vehicles drive themselves, and the Guardian system, which keeps control with the driver but prevents dangerous errors;
• Electric vehicles with innovative solid-state batteries and hydrogen fuel cell vehicles;
• Partnerships with ride-hailing (ride-hailing) companies and logistics companies such as Uber and Amazon, and experiments with Toyota fleets of shared, autonomous vehicles (showcased at the Tokyo 2020 Olympics);
• Toyota Connected for connectivity between vehicles, passengers and their environments, and partnerships with other connectivity providers.

And, perhaps most interesting of all, they have launched a major effort to apply the principles of the Toyota Production System (TPS) to the development of the enormous software packages needed for each of these innovations.

“So the primary strategic hoshin — ‘address the once-in-a-century disruption of the auto industry’ — needs a complementary operational hoshin: ‘create the financial resources to sustain the response to the disruption’.”

Many of these experiments may fail. Even among those that succeed, Toyota needs to invest enormous sums now in long trials to determine which work best, while protecting its current employees, which is always a core principle of the company. Therefore, the primary strategic hoshin of “addressing the industry's disruption” must be accompanied by an operational hoshin: create the financial resources to sustain this response. This deployment of the strategic hoshin into an operational hoshin on the front lines of value creation provides the critical link between strategy and execution — this is hoshin done the right way.

The specific means of achieving this deployment became visible to me on the shop floor of Toyota Kyushu's assembly plant in Miyata, located on the Japanese island of Kyushu (this plant assembles Lexus vehicles). The hoshin objective handed down to the plant for that year was to substantially reduce costs while accommodating a greater variety of models, shortening the takt time to meet growing demand (with practically no capital investment) and maintaining assembly quality at its current level, which, according to J.D. Power and Associates, is the highest in the world.

To be clear: this objective meant increasing the production rate without additional investment, while maintaining world-class quality and reducing the number of workers on the line (I will say more about this later). The savings generated would then be used to fund the Mobility 2.0 experiments — which, in turn, will allow Toyota to remain competitive and protect jobs in the long term. Wow. That is something big. And complex. So how exactly do you do it?

Understanding the context of the “How”

The Miyata plant has a highly mature lean production system that has created a foundation of operational stability: the production line runs more than 98% of the time, with about 1,000 Andon pulls per day in final assembly. Almost all of these calls are resolved by team leaders within the takt time, ensuring the continuous production of high-quality vehicles with very little rework. This stability, in turn, means that managers are not bogged down in “firefighting” and have time available to think about improvements in the context of the hoshin goals.

The plant faces a labor shortage that is likely to worsen every year, due to the steady decline in Japan's population and the country's reluctance to rely on temporary workers (guest workers). That is why eliminating positions on the line without laying anyone off is as necessary as it is easily achieved by not hiring replacements for retirees.

In addition, the stable workforce — including the front-line operators — has been trained for many years in immediate fault resolution (to keep production running with short-term countermeasures), problem solving (to eliminate recurring problems), kaizen (to raise the production standard) and Jishuken (to learn by doing). The latter is a special kind of hands-on, “learn by doing” kaizen workshop, designed to develop the skills — especially those of the Toyota Production System and of problem solving — of employees within an entire production activity, such as a value stream, production line or department, over an extended period (perhaps three months). The goal of any jishuken is to learn by doing and by improving an area of operations. In the context of hoshin, managers lead their teams through this process of rethinking and solving problems in every aspect of the work, seeking to achieve the hoshin objective.

Now let me introduce the Jishuken team I recently met, working on one part of Miyata's final assembly line — one of several similar teams in each part of the line and in other areas of the plant. The group leader and his four direct team leaders worked for three months to redesign every job and improve many pieces of equipment using the principles of Karakuri. (See Matt Savas's article in the Lean Post, “Developing People Not Robots Through Karakuri.”) Their objective was to achieve their hoshin goal, which had been clearly stated.

(I would love to be able to share the details — the substantial reduction in takt time, the minimal capital investment, the positive effects on quality, all truly impressive. I would also love to show photos of the many ingenious karakuri devices built by the team. But I was in Miyata as a guest to learn, not as a journalist to broadcast details of their business plans to the world.)

The explanation of what they had done made for a great presentation in the team room. But the jishuken team's work really came to life when I visited the part of the line where they worked to see in detail what they had accomplished. I had never observed detailed kaizen at this level of intensity — especially in a production process that was already one of the best in the world.

Even more impressive was the fact that the work had been led by the first two levels of line leadership — team leaders and the group leader —, and not by staff specialists, in collaboration with about twenty production operators, demonstrating an extraordinary level of engagement. They could hardly stop talking about what they had achieved and showing off the ingenious, low-cost tools, devices and material racks they had built and installed.

This kind of effort has been under way at Toyota sites around the world for several years, as the company continues to build up its “war chest” to face the challenge of disruption.
(See the remarks by CEO Akio Toyoda that accompanied the release of the financial results on May 9, 2018. They are a remarkably sober and focused discussion of Toyota's circumstances and hoshin plans, despite its record sales, profits and cash balance.)

Is this cost-reduction effort, which makes an extraordinary range of experiments possible, enough for a large traditional company to survive a “once-in-a-century” disruption? Or is this supposed disruption just a misreading of the situation, a mirage? Who knows.

What I do know is that the methods I observed in Miyata, in deploying hoshin all the way to the front line, offer an important lesson for all of us in the lean community: how to make our own hoshin plans actually reach the point of value creation, where they become truly useful.

P.S. A brief glossary of terms used in this piece:

Andon – A visual management tool that highlights the status of operations in an area at a single glance and that signals whenever an abnormality occurs (from the Lean Lexicon).

Karakuri – A kaizen method that employs simple devices, such as pulleys and counterweights, while prohibiting the use of hydraulics, robotics and electricity. 

Jishuken – A management-driven, hands-on, “learn by doing” type of kaizen workshop, designed to develop the skills — especially those of the Toyota Production System and of problem solving — of employees within an entire production activity, such as a value stream, production line or department, over an extended period (perhaps three months). The goal of any jishuken is to learn by doing while improving an area of operations. The term “jishuken” translated into English means “self-study”.