- Hoshin Kanri is a visual strategic planning tool that drives strategy execution through company-wide alignment and continuous improvement.
- Usually used by manufacturing and technology companies with complex processes, but can be used in any industry.
- Best for companies with a serious commitment to aligning their efforts and prioritizing transparency
- Pros: Simple to use and easy to understand, has the ability to engage individuals at all levels of the organization.
- Cons: Can create resistance to change if your organization lacks accountability and transparency.
What is Hoshin Kanri?
Hoshin Kanri, also known as Policy Deployment, is a 7-step process of planning a company-wide strategy that is easily distributed to ensure strategy execution. It connects the long-term vision of top leadership with the projects implemented on the frontline or shop floor.
Hoshin Kanri method was developed in post-war Japan by Professor Yoji Akao as a management technique with a heavy focus on continuous improvement. Today, the Hoshin Kanri process of strategic planning is used by larger organizations with lots of management levels. Some popular examples include Toyota and HP.
What are the benefits and drawbacks of Hoshin Kanri Planning?
Every strategy framework has its pros and cons, including Hoshin Kanri:
Benefits of Hoshin Kanri Planning
- Develops a systematic approach to tackling long-term strategic goals through day-to-day operations
- Helps you to visualize the entire organization on a single page from any perspective or level
- Maintains alignment between every project and the organization's top-level goals
- Helps everyone to identify priorities and what’s causing bottlenecks in strategy execution
Drawbacks of Hoshin Kanri Planning
- It doesn’t work in organizations where strategic planning is limited to boardrooms, leadership team, and senior management. Communication and engagement from all key stakeholders are vital for growth and continuous improvement
- You need a clear vision of where the organization wants to go in the future. If it doesn't exist, everyone will run in different directions, prioritize misaligned strategic initiatives, and invest resources in strategies that don't pay off
- Hoshin Kanri methodology can’t reach its full potential in a siloed organization where team leaders compete for resources and have conflicting priorities
- The approach relies on regular reviews and transparency, which may result in resistance to change if your workforce isn’t used to this way of working
The 7-Step Hoshin Kanri Process
The Hoshin planning is an iterative approach to developing your company’s strategy. We describe its seven processes below but keep in mind that this is a high-level overview of a process that takes a lot of work and time to be implemented.
With this being said, let’s dive into each step of the process:
1. Establish Organizational Vision
Your vision defines your company.
It’s part of its identity. Every objective, metric, and activity within the company should contribute to your vision. That’s why it’s the starting point in Hoshin Kanri Planning Process.
Your goal is to make it clear and inspiring. Every person that works in your company should know the vision and understand how they contribute to it. So, how can they do that if they don’t understand it in the first place?
Once you’ve clarified and established your company’s vision, you must communicate it to everyone in the company.
Recommended reading: How to Write a Vision Statement (With Examples, Tips, and Formulas)
2. Develop Breakthrough Objectives
Breakthrough objectives give an idea of the company's goals and aspirations. They explain how the company will achieve its vision.
A breakthrough objective is also known as a stretch goal or a stretch target. These are ambitious goals that seem almost impossible to accomplish. That's why you should be careful how you approach them. If you keep them mediocre, you will never achieve your vision. If you set too aggressive, unhealthy goals, you might never reach them, and this can have a negative impact on your company's performance and individual behavior.
You should also consider breakthrough objectives as the pillars of the company’s strategy. They help you to define focus, make strategic trade-offs, and identify where most of the company’s resources will go. They’re the outline of the company’s path for the next three to five years in the future. Depending on your organization’s strategic planning cycle.
Tip: Limit yourself to only a few pillars. If you have too many of those pillars, you risk deluding your focus and scattering your resources. Three to four are ideal but never go beyond 6. They are very similar to, what we call at Cascade, Strategic Focus Areas.
Extra tip: You can use the Ansoff Matrix which will help you identify and evaluate key growth strategies your organization should focus on.
Hoshin Kanri Examples
- Be the best provider of [product]
- Achieve world-class quality production
- Create a continuous improvement culture
- Increase market share by 30% until 2028
- Innovate by launching 3 new product lines
3. Develop Annual Objectives
At this point, you inject more specificity into your strategy. What does it take to move toward breakthrough objectives on annual basis?
The Hoshin Kanri process guides you through building your strategic plan backward. First, you identify your end goal and then walk backward to develop your plan step-by-step until you reach your current state.
Break down the long-term goals (your breakthrough objectives) into annual goals. Make them specific and measurable. Determine the success you need to accomplish prior to achieving your breakthrough objectives.
In this way, you can keep your five-year goals realistic and avoid taking overly ambitious leaps that will strain your resources.
Recommended reading: What are Strategic Objectives? How to write them + Examples
4. Deploy Annual Objectives
Deployment is another word for cascading.
Your annual objectives break down into regional and departmental goals. As a next step, each team and its members develop their goals, key performance indicators (KPIs), and projects. This stage is crucial to building company-wide alignment.
Tip: This process needs to be ongoing and requires a collaborative approach. Objectives and aspirations are communicated top-down to provide clear intentions and directions. Feedback, capacity to execute, and reality-based objections are communicated bottom up.
Extra tip: Deploy annual objectives by using the Catchball method. This approach uses two-way feedback loops between managers and their direct reports to generate consensus about how objectives will be met.
5. Implement Annual Objectives
This is the execution stage. Every team has set its objectives and KPIs along with the projects that will drive progress and start implementing.
The Hoshin Kanri approach of execution is iterative and it goes hand in hand with the last two steps of the Hoshin Kanri planning process. Implementation of annual objectives is driven through:
- Measuring performance with the right KPI tracking tools
- Scheduling regular reviews which can be set on a weekly, monthly, quarterly and annual basis
- Establishing a continuous improvement process
However, every company chooses its own method and frequency to inform itself on the effectiveness of the current strategy.
6. Monthly Reviews
Improvement without reviewing is a fairytale.
The Hoshin Kanri method fosters the organizational habit of monthly reports on the strategy progress. It has a bottom-up direction, where teams assess their progress and build accountability. Management tries to get a high-level view of the progress. For example, in Cascade, you can build customizable dashboards and reports that will give your real-time insights into performance against set objectives and targets.
This process helps you to identify and address missteps, execution gaps, and opportunities.
7. Annual Review
Did our strategy work? Are we going in the right direction?
This is the main question of the last step in the Hoshin Kanri process. You revisit your strategy and see how you’re doing against the old plan. You determine where you fell short and why at a higher level this time.
In other words, you perform a self-diagnosis. Armed with that knowledge, you revisit your long-term objectives and adjust your Catchball processes.
Hoshin Kanri Matrix
The Hoshin Kanri Matrix, also known as X-Matrix, is a static planning tool that companies use to keep track of all the information from the seven processes. It’s usually created in a sheet and looks something like this.
Hoshin Kanri Matrix Example
How to read The Hoshin Kanri Matrix?
There is a certain way to read this matrix to understand the information it portrays.
In the matrix´s center, 4 quadrants represent a business strategy. You start in the bottom quadrant (the 3-5 years goals) and move clockwise. So, you go through the left quadrant (your Annual Objectives), then the top quadrant (your Top Strategic Initiatives), and then you skip the right quadrant (your KPIs) and land next to it, at the Owners section.
If you follow this flow for each breakthrough objective, you’ll find out the people and the projects dedicated to advancing that objective.
Frequently asked questions about Hoshin Kanri
Is Hoshin Kanri a lean tool?
Yes, Hoshin Kanri is considered a tool for a lean management approach that relies on continuous improvement.
What are the four phases of Hoshin Planning?
The seven steps in Hoshin Planning can be grouped into four phases: Plan, Execute, Review, and Adjust.
What is the difference between Hoshin and Kaizen?
Hoshin is a visual strategic planning tool. Kaizen is an approach that focuses on continuous improvement (only one aspect of Hoshin Kanri). It was made popular in the 1980s by Toyota and has since been used by thousands of organizations across the globe.
What is Hoshin Kanri Catchball?
This method is usually used in the 4th step of the Hoshin Kanri planning process. It facilitates two-way communication across all levels of the organization by creating open feedback loops. The goal is to provide an opportunity where every person can share their input and align their actions with the company’s shared vision.
What is PDCA?
PDCA Cycle, also known as the Deming Cycle, provides a 4-step process for continuous quality improvement and problem-solving: Plan, Do, Check, Act. It’s an important part of monthly reviews so the team can identify bottlenecks and plan corrective actions to achieve annual goals.