Without the correct methodology, organizational culture and systems in place, most strategies fail in their execution.
For a number of highly successful organizations, Hoshin Kanri is the Strategy Execution methodology underpinning success.
Originating in Japan in the 1950s and widely adopted as the de facto Strategy Execution methodology, Hoshin Kanri means ‘compass management’ and serves to align the entire organization’s resources and actions with management’s strategic goals.
Investing in a Strategy Execution methodology such as Hoshin Kanri allows your business to:
– Drive rigor into the way top-level strategic goals are cascaded throughout the organization.
– Ensure that these goals, and the strategic initiatives that relate to them, are aligned and understood across the organization.
– Ensure that progress and results can be regularly reviewed.
Hoshin Kanri is recognized as one of the most rigorous methods of Strategy Execution that can yield considerable business benefit in the mid-to-long-term.
But what does Hoshin Kanri entail? Is Hoshin Kanri different from Policy Deployment, Goal Deployment and Strategy Deployment? What are the principles you need to know, and how can your organization replicate the success of Strategy Execution masters such as Danaher and Ingersoll Rand?
This is your guide to Hoshin Kanri and how it can help your organization turn strategy into operational reality.
Annual Objectives: What is required this year to meet the three to five breakthrough objectives / goals.
Bowling Chart: A visual summary of performance in key strategic metrics based on expected vs. actual performance, which can be used on a monthly or weekly basis.
Breakthrough Objectives: Significant transformations that the organization must make and needs to be achieved in the next three to five years.
Catchball Process: A negotiation between organizational layers and across functions as to which area will contribute what to the higher-level goals based on the current state of performance and the change / improvement support on offer.
Digital X-Matrix: The digital X-Matrix gives your company, divisions and departments a connected and accurate view of how their actions support your strategy.
Hoshin Kanri: Sometimes known as Hoshin Planning, Policy, Goal or Strategy Deployment – is a strategic planning process whereby strategic goals are communicated and translated into action.
Hoshin Facilitator: The facilitator validates and updates strategy, translates strategy into a robust strategic plan, uses the X-Matrix and catchball process to align the strategic plan with the entire organization.
Improvement Priorities: A list of executable improvements that leverage the most appropriate problem-solving approach to achieve the aligned annual objective / goal.
PDCA: Plan-Do-Check-Act is a four-step business management method to continuously improve processes and products.
Strategic Planning: A process of documenting and defining your organization’s direction by assessing your current and desired future state.
Targets to Improve: Also known as ultimate metrics, the means by which you are measuring success.
The Seven Steps of Hoshin Planning: The systematic approach to delivering Hoshin Kanri.
True North: The idea that your entire organization should align to achieving its vision, or True North.
X-Matrix: A visual planning tool that allows you to decompose your Vision into the Breakthrough Objectives, Annual Objectives, Improvement Priorities, Targets and Accountable Owners.
While Hoshin Kanri is the term commonly used to refer to this methodology, adaptations have been made to the process, and in turn this has led to the growth of many other phrases used across the world.
In its evolution from a Japanese strategic management theory to a process used in Western organizations, Hoshin Kanri has taken on these different names:
Set your company’s True North, its long-term vision for the future – where do you want the business to be and what will it look like?
2. Developing Breakthrough Objectives
These are 3-5 year objectives driven by your vision which cannot be reached without significant change in product, processes or people.
3. Developing Annual Objectives
Here you set annual objectives to support each breakthrough objective, with focus, accountability and clear metrics key details to be agreed.
4. Deploying Annual Objectives
The Catchball Process ensures all accountable owners of objectives understand their role, required resources and consult their teams.
5. Implementing Annual Objectives
Having defined objectives and projects to achieve these targets, this is where your business executes the defined activity.
6. Monthly (and Quarterly) Reviews
Monthly reviews check where the Hoshin plan is off track, with countermeasures to correct this, and quarterly reviews asking if the projects are the right ones to achieve the annual objectives.
7. Annual Reviews
Hoshin Kanri entails a review of the year and Breakthrough Objectives, with adjustments made before the process begins again.
Learn more about Hoshin in our free eBook, including two business system case studies, the X-Matrix explained, and how to digitalize your Hoshin Kanri.
The Catchball Process is a negotiation between organizational layers and across functions as to which area will contribute what to the higher-level goals based on the current state of performance and the change / improvement support on offer.
Catchball comes down to collective agreement. but this must first be established by a process design, which can be created through a Ringi system, social judgement or Delphi.
Unlike in other strategy cascades, all accountable owners at every level must be part of the process at the earliest stage so that they understand their role, consult with their teams, calculate resource requirements, recommend changes, and then commit to its delivery.
The process of creating alignment and commitment across all involved in delivering the plan means that when the time for execution comes, it can be swift, efficient, and well-coordinated.
The X-Matrix is a visual planning tool that allows you to decompose your Vision into Breakthrough Objectives, Annual Objectives, Improvement Priorities, Targets and Accountable Owners.
This tool takes time to learn but is unparalleled in its ability to quickly see if the plan holds together down through the planning levels.
The power of the X-Matrix is that at a top level you can ensure rigorous alignment across all these components – but it doesn’t stop there. This is only the top-level matrix.
There is limited value in having alignment at the highest level in the organization, only to mysteriously lose it as it cascades through the organization.
Therefore, there will be X-Matrices at lower levels in the organization that align to those above. These provide any leader, function, or team with their own set of improvement priorities, projects, measures and allocated resources which underpin the top level Breakthrough Goals, Annual Objectives and Improvement Priorities.
A Bowling / Bowler Chart / Performance Dashboard is a visual summary of performance in key strategic metrics based on expected vs. actual performance, which can be used on a monthly or weekly basis.
The Bowling Chart is the most effective way to measure the progress and activity of the initiatives and projects which flow from your detailed X-Matrix.
Often there will be a visual management aspect to this chart which shows the distinction between red, amber and green actual performance to allow focus on exception management.
Red status: Indicates the KPI is at a level worse than the previous period and the target set.
Amber status: Indicates the KPI is at a level of performance which is better than the previous period but not on target.
Green status: Indicates the KPI is at a level of performance which meets the target set.
The bowling metaphor is adopted due to the similarities of the chart to a classic bowling scorecard, and is regarded as an effective tool in the arsenal of organizations who want to instill a measurement culture and lay the foundations for Operational Excellence.
Hoshin Kanri is one of many methodologies that has arisen from Peter Drucker’s Management by Objectives (MBO).
These varying methodologies include:
– OKRs (Objectives and Key Results) which is popular in tech circles
– OGSM (Objectives, Goals, Strategies and Metrics) which is popular in retail, leisure and entertainment, and
– Hoshin Kanri, which is popular in manufacturing and in large conglomerates, where both central coordination and unit autonomy are prized.
Hoshin Kanri is recognized as the most structured of the MBO methodologies, and has several characteristics which make it unique:
– It requires planning in multiple timeframes, from long-term to immediate actions, with direct links between each timeframe
– It enables coordinated planning across organizational boundaries
– Planning is both top-down and bottom-up, building both company-wide and individual commitment to the plans
– It requires measurement of success using both lagging and leading metrics
– Where difficulties arise in meeting targets, it provides a framework for resolving them.
Common challenges with Hoshin Kanri include:
1. Resistance to accountability
At any level of an organization you might find a senior executive, middle manager or team member who is resistant to hard and fast targets. Senior sponsorship is vital to overcoming opposition.
2. Process and commitment conflicts
Budgeting, senior leadership meetings and company-wide conferences are all interfaces with the Hoshin Kanri planning and execution cycle. Taking the time to ‘make it fit’ will alleviate unnecessary conflicts.
3. Fear of failure In many companies, failure to meet target is career limiting
In Hoshin, it is considered a learning opportunity – unmet targets need countermeasures, not criticism.
It takes considerable senior leadership to build a culture of trust in an organization that is rife with fear of failure.
4. Inconsistent, incorrect data
Targets need to be measured against clean, real-time data in your organization sourced from multiple systems, and progress needs to be measured in a clear, consistent way.
Organizations with Programme / Project Management Offices or Continuous Improvement Centres of Excellence may already have clean data sources and standards in place, but for those that do not, building this capability is paramount.
As with most methodologies, advancements are made and customizations to fit circumstance and different environments, and a shining example of that is Danaher and their Danaher Business System which mixes the principles of Hoshin Kanri and Lean Management.
Danaher is a global science and technology innovator with multi-billion-dollar businesses in life sciences, diagnostics, environmental and applied solutions, and dental markets.
In the last three decades they have bought, integrated and improved the performance of hundreds of acquisitions.
Originally known as the Danaher Production System, Danaher’s system was based on the best Lean practices that were coming out of Toyota in Japan in the mid 1980s. The focus was to build competence in Lean for the next 15
years, driving waste out of the system, and implementing a toolbox of continuous improvements for every facet of the production environment.
In 2001, the logic of the Lean approach extended to growth opportunities, and Danaher built a similar toolbox to enable the company to be just as rigorous in sales and marketing as they had previously been in production. The toolbox was not a static one and was continuously refined and improved over the years as part of the Kaizen philosophy.
In 2009 a third area was added – Leadership. The combination of Lean, Growth and Leadership provided Danaher with a complete business system.
It is through Hoshin Kanri that Danaher converts their top-level strategy into execution using the X-Matrix as part of the toolset.
Annually, each of the Danaher operating companies creates a strategic plan that identifies opportunities along two tracks: improvement opportunities that exist around running the business day to day, and the more challenging
opportunities that involve larger or breakthrough transformation.
These translate into improvement priorities and, depending upon the nature of improvement priorities, a decision is taken on which toolsets across Lean, Growth and Leadership will be used. Progress on the various programs, projects and action plans will then be measured monthly, or more frequently, against the relevant KPIs.
The combination of using this annual process to cascade, align and manage the vast array of initiatives, and measure the outputs to a regular drumbeat has delivered stellar performance for Danaher.
When examining 25 years of Danaher’s total shareholder return vs. S&P, the years 2001 and 2009 hold significance. It isn’t coincidental that the share price dramatically increased as Lean methodology grew into functions and
areas beyond the production environment. It is the Hoshin deployment planning process that ensures that planned improvement will drive commercial performance in its broadest sense in the most efficient way.
From jargon busters and case studies to methodology comparisons, this is the home of Hoshin Kanri knowledge.
eBook
Download this eBook to discover how Hoshin Kanri (policy / goal deployment) is helping the world’s most successful organizations deliver breakthrough performance, and the steps you can take to leverage this methodology in your business.
A comprehensive definition of Hoshin Kanri
The ultimate guide to Hoshin Kanri terminology
Learn how to effectively cascade goals
The resources you need to support your Hoshin Kanri
Are spreadsheets enough for your deployment?
See how Hoshin Kanri compares to OGSM and OKR
See how Hoshin Kanri compares to BSC
See how Hoshin Kanri compares to 4DX and MBO
See how Hoshin Kanri compares to Lean and PDCA
X-Matrix explained
Action Plans explained
Bowling Charts explained
Download an X-Matrix Excel template
Download an Action Plan Excel template
Download a Bowling Chart template
Watch how to identify Breakthrough Initiatives
Watch how to deploy Breakthrough Initiatives
Watch how to measure Breakthrough Initiatives
5 ways to overcome Hoshin's challenges
Use our model to assess your Hoshin Kanri maturity
Explore our Hoshin Kanri software
Hoshin Case Study
i-nexus’ Hoshin Kanri software helped to align all business units with divisional strategic goals, and a single source of the truth for project and KPI data.
From multiple digital X-Matrices to a robust feature set of planning, executing and tracking tools, explore how i-nexus digitalizes Hoshin Kanri in its Strategy Execution platform.
