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Home > Business Strategy Best Practice > Hoshin Kanri: Deploying Your Strategic Intents to Achieve Business Excellence

Business Strategy Best Practice

Hoshin Kanri: Deploying Your Strategic Intents to Achieve Business Excellence

by Jeffrey T. Luftig and Steven M. Ouellette

This Chapter Covers

  • Introduction to hoshin kanri, a technique to align a company to achieve its strategic goals.

  • Strategic planning in the absence of hoshin.

  • The strategic planning process.

  • A real-world case study of hoshin planning in a turnaround crisis.

Introduction

Many companies strive to be the best in their market. Most never succeed. Many of those that do, do so only temporarily, and subsequently lose their position through misunderstanding how they got there and what is needed to stay there. Very few, as Jim Collins (2001) has stated, are capable of going from “good to great.”

Companies that achieve, and subsequently maintain, business excellence have a number of traits in common. One of the most fundamental, though, is that the company has a vision of where it is going and everyone there knows what they need to do in order to support the company’s objectives.

This does not happen by accident. The first phase in attaining business performance excellence is the process of strategic planning and policy deployment. In this chapter we will demonstrate a proven method called hoshin planning (also referred to as “policy deployment”), a process that is designed for identifying and deploying activities in order to make progress toward business performance excellence.

The outcome of an effective hoshin planning process is hoshin kanri, a Japanese phrase that means “controlling the compass” and which is interpreted to refer to the actions needed to align everyone in an organization to achieve the company’s goals (Akao, 1991). In the absence of companywide direction, cascaded through the organization, each person in the company has no alternative but to guess at what they should work on to add value. Using hoshin planning, employees know exactly what to do and how that supports the company’s objectives.

Strategic Planning in the Absence of Hoshin

In our experience, most companies perform strategic planning in exactly the reverse order that they should. The second author has experience of an organization that had just been through a large-scale and expensive strategic planning session. The results certainly looked impressive—a 20-page brochure with beautiful four-color photographs and a professionally designed layout on glossy paper. On closer examination, however, that year, there was no unifying theme and no direction for the organization as a whole.

Contrary to conventional wisdom, the last step in the strategic planning process is the strategic plan. The strategic plan is an output of all the preceding work, not a starting-point to figure out what to measure.

In this case, the strategic planning had been done by first asking each discipline to identify its SWOTs—strengths, weaknesses, opportunities, and threats. Each disparate division had done so, and from there found a number of strengths to leverage, weaknesses to improve, opportunities to exploit, and threats to avoid—and metrics to measure all of that. There was, however, no integration showing how these divisions were going to work toward a common goal, or how they would support one another on their path to excellence. Instead, each area focused on its own expertise, working on what it thought it should rather than on what the organization as a whole needed. With disparate goals such as these, divisions compete for resources and upper-level attention and the organization as a whole makes little or no progress toward an objective. In fact, in such a situation there is no objective for them to make progress toward.

We will define the proper strategic planning process in general terms first, and then follow up with a real-world case study of a business in need of a major turnaround in order to survive.

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Further reading

Books:

  • Akao, Yoji (ed). Hoshin Kanri: Policy Deployment for Successful TQM. New York: Productivity Press, 1991.
  • Collins, Jim. Good to Great: Why Some Companies Make the Leap... and Others Don't. London: Random House Business, 2001.
  • Imai, Masaaki. Kaizen: Key To Japan's Competitive Success. New York: McGraw-Hill, 1986.
  • Juran, Joseph M., and Joseph A. De Feo (eds). Juran's Quality Handbook: The Complete Guide to Performance Excellence. 6th ed. New York: McGraw-Hill, 2010.

Articles:

  • Knowlege@Wharton. “The customer profitability conundrum: When to love ’em or leave ’em.” Strategy+Business (April 12, 2002). Online at: tinyurl.com/77zy6zy
  • Schneiderman, Arthur M. “Why balanced scorecards fail.” Journal of Strategic Performance Measurement (January 1999): 6–10. Online at: tinyurl.com/8x2t9km [PDF].
  • Treacy, Michael, and Fred Wiersema. “Customer intimacy and other value disciplines.”Harvard Business Review (January/February 1993): 83–93. Online at: tinyurl.com/7s5ozdt [PDF].

Website:

  • Center for Business Performance Improvement, University of Colorado at Boulder:www.csscu.com

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