Now is the time of year when many leaders turn their thoughts to crafting the strategic plan for next year. In most cases, this involves financial forecasting, resource planning, and a review of this year’s performance to date. All of that is important, but according to the book, The Balanced Scorecard by David Norton and Robert Kaplan, 90 percent of organizations fail to execute their strategies.

The reasons for this alarming figure vary, but in many cases, the root cause is the failure to deploy the strategy thoroughly across the organization. Successful leaders don’t just create a plan and then hope for the best. Instead, they make the strategic priorities a part of day-to-day work in the organization. It isn’t easy, but a couple of techniques and tools can help - the Hoshin Kanri approach and the X-Matrix.

What is Hoshin Kanri?

Hoshin Kanri is a strategic planning approach developed by Japanese professor Yoji Akao in the 1950s. In Japanese, Hoshin means “compass needle” or “direction.” Kanri translates to “control" or “management.” One of the books published about this method is called The Management Compass.

The term aptly describes the intention to let the strategic direction of the organization control every large decision and major strategic activity. The ideal state where the organization is headed is often referred to as “True North.”

Hoshin Kanri is sometimes called "Hoshin planning," “strategy deployment,” or “policy deployment.”

Hoshin Kanri Principles

The approach rests on five core principles:

Communicate Objectives

To practice Hoshin Kanri, leaders must effectively communicate the definition and aim of “True North” so everyone can work toward the same ends. This is most effective if the mid-level managers responsible for executing the strategy are involved in determining the goals and which metrics will be used to measure progress.

This communication is not strictly "top down." Mid-level managers provide input through a back-and-forth process that's often called "catchball."

Communicating the strategic plan is not an annual event. To keep the organization on track, leadership must reinforce the goals through regular communication. While "True North" tends to stay pretty constant, the objectives and plan would be updated more frequently based on, for example, changing business conditions. 

Analyze the Current State

A clear understanding of the current reality is essential for building a plan to reach "True North." Hoshin planning requires deep insight into existing operations, especially related to the new strategic objectives. Leaders often use Value Stream Mapping and Standard Work to understand and document the current state in ways that identify opportunities for improvement.

Foster Widespread Engagement

For strategy deployment to be successful, everyone in the organization must have a stake in the outcome of executing the plan. Therefore, each team member’s goals should be aligned with the objectives outlined in the Hoshin plan, and they should have great clarity on how their work pushes the organization toward True North.

Prioritize Resources

Most organizations have limited resources, so focusing on the most critical goals generally means letting some things go. Or, instead of saying "no" to some major initiatives, we might say "not now." The most successful leaders can find the right balance between what needs to be done to solve today’s problems and what should be done to reach long-term objectives. 

The beauty of small "Kaizen" style improvements is that they don't consume a lot of time and resources. Small improvements don't need to be prioritized -- we can do them all. But, when it comes to larger projects or strategic initiatives, we have to be more selective and more strategic.

For example, if five parts of our business have major initiatives that all require major time and attention from Information Services, we might run the risk of outstretching their capacity. Based on the "catchball" discussions, senior leaders might be better off deciding which three are the "right now" most important and which two I.S.-related initiatives might have to wait.

Actively Manage Performance

The Hoshin approach requires constant information about how the organization moves toward "True North" and the progress we are making (or not making). That’s why it is essential during the planning process to select aligned metrics that leaders and managers can review at any time to follow the progress and get involved if there are obstacles or slowed progress.

The feedback loop question of "how are we performing against our plan?" allows us to then ask "how do we adjust the plan?" if needed.

The Seven Steps

With these principles in mind, there are seven steps to the Hoshin Kanri technique: 

1. Establish the vision and describe the current state

The process starts with reviewing the current mission, vision, and values to see if they are still aligned with the desired future state and our "True North." Next, leaders examine existing processes and procedures that are in place to further the objectives. Finally, they consider what is working well and what needs to be improved.

2. Determine the breakthrough goals

Hoshin Kanri is meant to help organizations achieve breakthrough goals that will change the playing field. These goals may mean releasing new products, entering new markets, or adjusting the entire business model. Breakthrough goals often take three to five years to achieve.

3. Set annual objectives

Hoshin planning involves taking the breakthrough goals and breaking them down into manageable pieces starting with the annual goals. During this step, you ask, “What do we have to do this year to achieve our breakthrough goals by year three?”

4. Cascade goals from the top down

Step four breaks the objectives down even further by defining what each department, team, and person needs to do to reach the annual goals, again prioritizing their major initiatives and projects. 

5. Execute annual objectives

Execution is where the rubber meets the road. On top of the major projects, ongoing daily management and continuous improvement are the essential ingredients for success. Some organizations use techniques such as PDSA, A3 planning, and DMAIC to implement thoughtful change.

6. Conduct monthly reviews

Hoshin Kanri requires active management and hands-on attention at every level. Therefore, monthly reviews are needed to ensure that forward progress is maintained and that any issues or barriers can be addressed promptly, adjusting as needed in that PDSA mindset.

7. Perform annual audits

At the end of the year, it is time for a comprehensive assessment of the new current state and the development of the following year’s goals. Following the review, adjusting the goals or implementing additional tracking methods may be necessary. We can ask, "How do we improve our approach to Hoshin Planning next year and beyond?"

What is the X-Matrix?

The X-matrix is a visual management tool designed specifically for supporting Hoshin Kanri. Using the X-Matrix helps leaders plan the strategy, explain it to others and track progress. It contains four quadrants and an area for teams and owners.  

 Breakthrough Objectives (Bottom)

The lower quadrant houses the key strategic objectives to be achieved over the next three to five years. The number of these goals is limited, but they are crucial to reaching the organization’s "True North."

Annual Objectives (Left)

On the left, you’ll find the annual objectives that must be accomplished to reach the breakthrough goals. The design of the X-matrix allows users to link each annual goal to the breakthrough objective that it furthers.

Annual Improvement Opportunities and Priorities (Top)

At the top of the matrix are the opportunities for improvement and priority changes aligned with each annual goal. Progressively smaller goals help create actionable steps.

Metrics to Measure and Targets to Improve (Right)

Once all goals and improvement opportunities are laid out, it’s time to determine how success will be measured. The right quadrant contains the KPIs that will ensure that momentum is maintained. 

Teams and Ownership (Far Right Side)

Effective strategy deployment depends on ownership and accountability. Therefore, the far-right side of the matrix is where an owner will be assigned to each metric, improvement opportunity, and objective.

The best practice is to visit the X-matrix monthly to ensure it is current and responsive to new information. The review helps leaders access progress, address challenges, and provide necessary coaching. The team closes out completed goals and prepares for the next year at the annual review.

Hoshin Kanri Software

One way to ensure that strategic planning and breakthrough goals stay top of mind is to use Hoshin Kanri software to house and share your X-matrix. Having it available at any moment with the proper permissions and roles assigned helps bring it to life and keep it up-to-date. Hoshin Kanri software offers several additional advantages:

Engagement and Activity Reports: Keep abreast of who is working on the tasks necessary to reach your annual and breakthrough goals.

Opportunity Capture: Make it easy for employees to submit opportunities for improvement that align with the annual and strategic goals.

Active Notifications and Alerts: Make sure that no assignment is missed and that someone reviews every improvement opportunity that employees submit with email alerts and notifications.

Strategic planning is the key to long-term success and growth. The structure of Hosin Kanri, along with the X-matrix and improvement software, help improve the odds of reaching "True North."