Hoshin vs. Chaos
In my article “Hoshin Deployment”, written in 2018, when the world seemed a more stable place, I tried to illustrate how Toyota deploys the hoshin from the highest levels of the company down to the base, where the work that actually creates value is done.
The article was based on a visit to a Toyota plant in Japan, in the summer of 2018, where frontline workers were committed to achieving their deployed hoshin objectives: reducing costs to free up the financial resources needed to face a “once-in-a-century cyclical disruption” in the automotive industry. That disruption was (and still is) the combination of the transition to low- or zero-carbon-emission vehicles, autonomy, vehicle sharing (made possible by autonomy and needed to reduce the cost of electric and autonomous vehicles) and hyperconnectivity of information among companies, vehicles and users in this new era of mobility.
A three-month kaizen was carried out on the front line (in one section of an assembly line) to reduce costs and, at the same time, increase production capacity and meet the hoshin target. The results were very impressive, and my plan was to return in a year or two to follow up on the progress. But then came the pandemic (which postponed my return indefinitely), along with the slowdown in the introduction of autonomy (in which robotaxis were supposed to pay owners back for the cost of autonomy), a dramatic leap in automakers' pledges to adopt electric vehicles (EVs), continuous changes in the CO₂ emission rules imposed by governments and, more recently, a customer response to electric vehicles much weaker than expected.
In short, the disruption continues, but accompanied by great chaos in the implementation of the new technologies needed in an industry with massive investment requirements and product development cycles with new technologies that last a decade.
How does hoshin planning work amid so much chaos? Toyota has the answer: always work with a portfolio of countermeasures up to the point where they can be tested by consumers, before settling on a single solution. (Developing a minimum viable product in the social media sector is something small — see the book The Lean Startup for examples, but developing a minimum viable product in the automotive industry is something enormous.) Thus, Toyota went as far as considering the development of 28 new electric vehicles for launch in the following years, while the rest of the industry was heading en masse toward the “EV cliff”. But it quickly pulled back when the initial customer response was negative. (I myself own one of the first models — the Toyota bZ4X — and was one of the critical voices: a price that was too high, the result of a still immature and costly design, and insufficient range... although, otherwise, the car is truly brilliant!)
Instead of jumping to a single solution (EVs), Toyota continued its work on developing a variety of minimum viable products: hydrogen fuel cell vehicles; traditional hybrids; plug-in hybrids; hydrogen-powered internal combustion engine (ICE) vehicles and second-generation EVs with a wide range of battery technologies, including solid-state lithium batteries. Meanwhile, its competitors in North America and Europe are pulling back from their massive investments in EVs and new battery plants to defend their position with hybrids and plug-in hybrids, technologies in which they have little experience. (The Chinese market is different from North America and Europe: the government has deep geopolitical concerns about large oil imports due to the rapid growth of the motor vehicle fleet and has decided that the automotive industry will be electrified as quickly as possible. There, there is no confusion about the hoshin objectives: any company that wants to compete in the Chinese market needs to offer a full line of electric vehicles).
The most important point is that Toyota's hoshin planning correctly identified the one factor needed, regardless of which countermeasure proved most promising: a lot of money to fund expensive experiments. And the deployment process of its capital-generating hoshin, as I explained in “Hoshin Deployment”, has not changed at all. A robust hoshin, with disciplined deployment from top to bottom (top-to-bottom), can navigate even in the midst of chaos.
