The Hoshin Kanri Method Explained

by Christos Mitsis, on Nov 23, 2021

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The hoshin kanri is a method of planning a company-wide strategy that is easily distributed. It connects the long-term vision of top leadership with the projects implemented on the front line.

The hoshin kanri method of strategic planning is used by larger organizations with lots of management levels.

The 7 processes of Hoshin Kanri

the-7-hoshin-kanri-processes-infographic

The hoshin kanri method of strategic planning is a fairly 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 method that takes a lot of work and time to be implemented.

With this being said, let’s dive in.

1. Establish Organizational Vision

Your vision defines your company.

It’s part of its identity. Every objective, metric and activity inside the company should, in some way, advance your vision. That’s why it’s the first thing that you visit.

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 distribute it. 

2. Develop Breakthrough Objectives

These usually are not very specific but express the company’s aspirations. The goals that everyone’s effort focuses on.

The breakthrough objectives are the pillars of the company’s strategy. They’re the outline of the company’s path for the next three to five years. Where you’ll dedicate almost all of your resources.

Thus, having 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 in Cascade, Strategic Focus Areas.

Examples:

  1. Be the best provider of [product].
  2. Be the best company to work for (in our category)
  3. Expand to global markets
  4. Innovate by launching 3 new product lines

3. Develop Annual Objectives

At this point, you inject more specificity into your strategy. What does it look like to achieve those breakthrough objectives?

The honsi kanri method guides you through building your strategic plan backwards. You first identify your end goal and then walk backwards, developing your plan step-by-step until you reach your current state.

Break down the long term goals into annual increments. Make them specific and measurable. Determine the successes you need to accomplish prior to achieving your breakthrough objectives.

This way, you ground your strategy to reality and avoid huge, overambitious leaps that you’ll have to accomplish in order to achieve your five-year goals.

4. Deploy Annual Objectives

deploy-annual-objectives-graphic

Deployment is another word for cascading.

Your annual objectives break down into departmental and regional goals. And then they become team objectives, KPIs and projects. At this stage is where company-wide alignment is built.

The process is iterative, though.

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.

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 as well. However, every company chooses its own method to inform itself on the effectiveness of the current strategy.

Paired with the next step, the implementation of annual objectives goes through a continuous improvement process.

6. Monthly Reviews

continuous-improvement-process-diagram

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.

With this process, missteps, gaps and opportunities are surfaced and addressed.

7. Annual Review

self-diagnosis-cycle

Did our strategy work?

This is the main question of the last hoshin kanri process. You revisit your strategy and see how you’re doing against the old plan. Thus, 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.

The Hoshin Kanri X Matrix

The hoshin kanri X matrix is a planning, static 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-x-matrix-example

The Hoshin Kanri Matrix flow: How to Read it

There is a certain way to read this matrix to understand the information it portrays.

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 rightquadrant (your KPIs) and land next to it. At the Owners section.

the-hoshin-kanri-x-matrix-flow
If you follow this flow for each breakthrough objective, you’ll find out the people and the projects dedicated to advancing that objective.

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