Will Toyota’s solid-state battery shake up the auto industry?
“It is in Toyota's DNA that mistakes made once will not be repeated.” – Akio Toyoda
Like many business books that turn into global bestsellers, The Innovator’s Dilemma followed a familiar arc. Published in 1997 by famed business academician and former Rhodes Scholar Clayton Christensen, the book’s sales took off on the strength of its novel way of understanding a pressing innovation challenge facing many senior executives. As its popularity grew, CEOs started handing out copies at leadership team meetings, and those leaders dutifully handed out copies to their staff upon returning from such ritual gatherings. With practically everyone in industry having read the book, many business challenges were reframed using Christensen’s model—some even appropriately so.
The essence of Clayton’s book is that big companies are necessarily very good at serving their existing customers (that’s how they got big!), but this cultural wiring makes them less able to properly respond to disruptive innovations in their sector. During the early phases of breakthrough product development, customers often suffer from shaky prototypes entering the field. This mode is unacceptable to the incumbents who have much to lose. Unencumbered by such constraints, startups drive a process of iterative improvement using real-world feedback, an exponential explosion in value is realized, and the new entrants begin gaining market share. Late to the game and unable to pivot internally, even the most powerful incumbents fall by the wayside.
Few current companies stand accused of succumbing to the innovator’s dilemma more than Toyota Motors. For more than a decade, the company has stood idly by and watched as the electric vehicle (EV) mania unfolded. Despite being a clear market leader in developing fuel-efficient vehicles—its iconic Prius model is probably responsible for abating more carbon emissions than any consumer product in history—Toyota has slow-rolled the development of full battery electric vehicles (BEVs). In the eyes of the company’s many critics, Toyota’s relentless focus on quality and continuous improvement make it incapable of taking the risks needed to maintain its position as one of the world’s largest automakers. Its “Kaizen” culture, with an emphasis on delighting every customer and never repeating mistakes, is a quintessential example of Christensen’s view that such cherished strengths can serve as the proximate cause of long-term weakness.
An alternative interpretation—one that Toyota executives have signaled both directly and indirectly over the years—is that the company has long been deeply skeptical of contemporary lithium-ion batteries as the correct long-term solution for EVs. These batteries use highly flammable liquid electrolytes, something Toyota suspected would condemn the technology to unacceptable fire risk, lower recharging speeds, and insufficient range. Moreover, the company was convinced it was sitting on a game-changing innovation that would make current batteries obsolete. Counting on a careful application of slow and steady improvements to an alternative development of solid-state batteries, it would overcome the shortcomings of existing lithium-ion technology, quiet its critics, and position the company for another generation of global leadership. Earlier this month, Toyota staked a bold claim on success in this regard (emphasis added throughout):
“Toyota has struck a deal with fellow Japanese company Idemitsu Kosan to mass produce ultra-high-range EVs with solid-state batteries.
It's the first major update on the company's plans to be the first to offer these next-gen batteries. Toyota says the new technology will eventually enable EVs to go 932 miles on a single charge and power up in just 10 minutes, due to the higher energy density.
Idemitsu Kosan, Japan's second-largest oil refiner, may seem like an unlikely partner for the EV space. But Toyota says Idemitsu has been working on developing the ‘elemental technologies’ for the batteries since 2001, five years before Toyota began pursuing them in 2006.”
The news has understandably triggered a wave of articles repeating these amazing claims. What are we to make of this announcement? Is the automotive industry about to be upended by super batteries with incredible range and minimal fire risk? Longtime readers of Doomberg will know that we apply a simple five-question framework to assess technology claims that go viral, an approach we recently applied to alleged breakthroughs in room-temperature superconductors and a new cancer wonder drug. You know the drill – let’s head to Tokyo and separate hype from reality.