Implementing Hoshin Kanri

How to Manage Strategy Through Policy Deployment and Continuous Improvement

Anders Melander, David Andersson, Fredrik Elgh, Fredrik Fjellstedt, Malin Löfving

• Editorial: Productivity Press
• Año: 2021
• ISBN:
  9781000479898
• Edición: 1
• Categoría: Betriebswirtschaft
• Categoría: Unternehmensstrategie

This book focuses on the implementation of Hoshin Kanri. It is a response to most books on strategic planning that tend to downplay the implementation and only describe the fully implemented planning process. The power of this book originates from a project in which a team of five professionals over a period of three years implemented Hoshin Kanri in 14 companies; results were drawn from 130 workshops with leadership teams. The project team subsequently ran several accelerators inside large and small companies as well as public institutions. All these experiences together form the implementation focus of the book.

Moreover, the organization of the book mirrors the message of its scientific thinking, which is also the basic principle of Hoshin Kanri:

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• Chapter 1 focuses on the basic analysis—Is Hoshin Kanri something for your organization?

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• Chapter 2 addresses the ambition—What is the vision for strategy work in your organization?

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• Chapter 3 presents the conditions needed for effective strategic work.

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• Chapter 4 discusses the choice of implementation strategy and your role as the change agent.

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• Chapter 5 describes how Hoshin Kanri works when implemented.

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• Chapter 6 addresses coaching/mentoring and the Kata philosophy.

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• Chapter 7 presents important analytical tools.

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• Appendix 1 describes the journey made by a medium-sized construction company.

Essentially, this book describes in a concrete and structured way how you—the change agent—can use Hoshin Kanri in your organization to tackle large and complex challenges.

Chapter 1

Why Work with Strategy According to Hoshin Kanri?

DOI: 10.4324/9781003194811-1

Having a strategy suggests an ability to look up from the short term and the trivial, to view the long term and the essential, to address causes rather than symptoms, to see woods rather than trees.

(Freedman 2013 p. ix)

Lawrence Freedman wrote about the history of strategy in a book of more than 600 pages, but the preceding quote neatly sums up what strategy is all about. At the heart of strategy is a desire to combine the work of addressing everyday challenges with an ability to raise one’s perspective and identify the overall way forward. The ability to balance short-term problem solving (operational level) with a long-term idea regarding the future (strategic level) has always been important, and there are many arguments for working systematically to maintain a productive balance between these two tasks.

Unfortunately, this balance is lacking in many organizations. Daily problem solving has taken over and long-term strategic work has been neglected. There are many reasons why this imbalance needs to be addressed and why the relationship between day-to-day issues and long-term strategic questions needs to be more productive. Here, we briefly address two reasons that it is becoming increasingly important to work systematically with strategy: value to customers¹ and engaged employees. We argue that these reasons are absolutely crucial for all organizations.

The fact that all organizations need to deliver something of value to their customers is obvious. However, the ongoing digitalization of society means that satisfying customers has become more challenging. Digitalization is making it increasingly easier for people to identify and evaluate alternatives. When buying products, customers are now able to sit in their office or on their couch and compare prices from a wide range of providers worldwide, while those utilizing health services, for instance, can choose between going to a primary care clinic or using a digital healthcare service when they become sick. If you are to survive as a provider of products or services in a situation where your customers have more and more choices, you obviously need to develop more valuable offerings to your customer than your competitors do. So, how are you going to achieve this? Wouldn’t it be great to have a well-considered and structured strategy process utilizing the creativity of the entire organization to develop innovative solutions?

“The creativity of the entire organization” can be translated into employee engagement, the second reason that you should work with strategy. In this area, you’re lucky! Current employees want to be more involved, they want to be able to influence their daily work, they want to understand how their organization can contribute to a better world and how they themselves may contribute in their work. This is a very positive development. Many brains think better than a single brain does. But things will get even better since there is great potential. Gallup’s recurring “State of the Global Workplace” reported in 2017 that the average portion of engaged employees in the 155 countries surveyed was 15 percent (see Box 1.2 at the end of the chapter). So, the potential is enormous. And, if we agree that activities in the organization must be organized so they can benefit from the willingness of employees to contribute to overall growth, then the “only” question is: How do we achieve this?

We are not the first to reflect upon whether the traditional way of working with strategy is in line with our current society. In his 2018 book Opening Strategy, Professor Richard Whittington discusses how strategy work has developed since the 1960s. He argues that the traditional way of working with strategy, known as strategic planning, faced competition in the 1980s from a more learning-oriented approach, known as strategic management, and that a third alternative, known as open strategy, emerged in the 2000s. Whittington uses two terms to discuss the level of openness in strategy work: inclusion and transparency. These concern the number of people in the organization being included in the strategy work and management’s level of transparency in strategic issues. We return to Whittington’s reasoning later.

A conclusion from this overview is that strategy work can be designed in many different ways, and to open up your strategy work, you don’t necessarily have to work according to Hoshin Kanri. But why should you reinvent the wheel? Hoshin Kanri has been tested in large organizations for almost 60 years. A company often referred to when discussing Hoshin Kanri is one of the largest car manufacturers in the world: Toyota. Toyota is a role model in lean philosophy and is almost always referred to in discussions on developing the area of production. A less-well-known fact is that Toyota uses the same basic principles when working with strategy:

Hoshin (Kanri) is a key component of the Toyota Management Framework. It connects leadership’s vision, values and philosophies (the Toyota Way) to the daily activities on the floor (developing people in problem solving to reach business goals).

(Liker & Hoseus 2008 p. 429)

Hoshin Kanri is sometimes translated as a management compass in the Anglo-American literature since it concerns the ability of the entire organization to contribute to its overall objective and direction (Figure 1.1).

Figure 1.1 Meaning of the Term Hoshin Kanri

These words can also be interpreted as Hoshin addressing the planning phase, and Kanri addressing the execution and evaluation phase.

The basic principles of Hoshin Kanri and lean are the same: a conviction that correctly executing the method leads to the desired result. Management is here responsible for developing and continuously improving the method together with the employees. This focus on the method is frequently lacking in the strategy work of many current organizations.

However, there are important differences between Hoshin Kanri and lean. In the latter, the focus is on continuous improvement efforts, and development efforts are driven by deviations from an established standard (Figure 1.2). The basis of this approach is that you should always work according to a defined standard and identify opportunities for continuous development within the framework of the current standard. In Hoshin Kanri, on the other hand, it is about taking a bigger leap and overcoming the obstacles preventing the organization from moving from the current condition to the target condition. In other words, this concerns a vision for the future. This vision is formulated by someone (owner, management), after which it is broken down into short-term target conditions. The obstacles that make up the gap between the vision and the current condition are often referred to as the organization’s strategic challenges, or “hoshins.” The ways of overcoming these obstacles are developed in discussions within the organization in a process of breaking these down into objectives. The literature on Hoshin Kanri often refers to terms such as catchball and deployment.²

Figure 1.2 Hoshin Kanri and Continuous Improvements

But even if there are differences between Hoshin Kanri and lean, surely an organization with established, continuous improvement efforts according to lean would be in a better position to introduce Hoshin Kanri? No, according to our experience, it is not obvious that effective and continuous improvement efforts simplify the process of working with Hoshin Kanri. This is because continuous improvement efforts often are applied only in relation to production, whereas management has not adopted these values and methods. In Hoshin Kanri, management plays a crucial role.

Hoshin Kanri is thus a system for developing the entire organization in terms of strategy. As stated by Whittington (2018), the dominant system for developing organizations remains strategic planning. Initially, the difference between Hoshin Kanri and traditional strategic planning is not very significant. Both are based on performing a thorough analysis of the current condition, followed by defining a target condition/vision.

The difference between Hoshin Kanri and strategic planning becomes clearer in the next phase. The basis of Hoshin Kanri is that based on the vision, management identifies a few overall challenges that are crucial for realizing the vision. These are then broken down in the organization in the annual planning cycle. Hoshin Kanri thus assumes that management formulates what is to be achieved, but also that it, together with the employees in the organization, determines how it is to be carried out. In classic strategic planning, management decides both what to do and how to carry it out (i.e., the actual action plan). Only then is the remainder of the organization involved in terms of implementing the decisions made by management. To be honest, how stimulating is it to simply do what you are told without having any impact and without really understanding why it should be done?

BOX 1.1 VISIONARY STRATEGY WORK

One of our courses included representatives from the management team of Saab Training & Simulation, a business unit within the Saab Group. Within the course they launched a project to develop their strategy work according to Hoshin Kanri. They formulated the following vision:

Vision for the Strategy Work

We are a strategy-driven company, where every employee understands the company’s strategy and uses it actively in their daily decisions.

It is worth noting that they were quite ambitious when formulating their vision. Every employee was included in the vision. The goal is that everyone understands the strategy so that they use it actively in their daily work. In other words, they need to understand in order to translate the strategic phrases into their work. This represents a significant step away from the traditional approach, where employees only need to understand how they are to implement what has been decided by management.

The rest of this book is about how you can introduce Hoshin Kanri in your organization. How do you identify a visionary target condition for the strategy work in your organization? How do you create a systematic approach for breaking down a vision together with your employees at different levels? How do you come to an agreement with your employees in terms of what to do over the next year? How do you follow up the different elements of Hoshin? How do you create a way of learning in order to develop the system?

The basic notion in the answers to all these questions is that when you introduce Hoshin Kanri, you must apply the principles of Hoshin Kanri. This may seem obvious. Still, it is often a forgotten principle in change work. Practicing what you preach is not always easy, but it is absolutely necessary for the credibility of the change efforts. In other words, it concerns gradually creating an understanding and engagement with regard to the approach. You can’t order your org...