The Ultimate Guide To Hoshin Kanri

Hoshin Kanri is a strategic planning process whereby strategic goals are communicated and translated into action.

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.

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.

What you need to know about their application of Hoshin Kanri and Lean Management

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.

How Hoshin Kanri helps Danaher

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.

What we can learn from Danaher’s evolution of Hoshin Kanri

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