Hoshin Kanri is a management system that creates a method of policy deployment in the form of both organizational and employees goals. It is a step by step implementation and review process from a systems approach perspective for change. In the simplest form, top management sets a vision and bottom line employee sets the tactics. In the middle, there is a lot of give and take and coordination through the use of a term catchball that results in:
- Prioritizing activities and resources
- Organizational involvement from top to bottom clarify their own target and activities
- Utilizing PDCA in both the management and employee cycles of improvement
The difference in Hoshin planning is that we do not accept the current situation but seek to aspire to something greater. We seek solutions between the current and aspired state by bridging the gap through the process of Kanri the other part of the process. Kanri is defined as a method to efficiently achieve purposes through PDCA (Plan-Do-Check-Act).
Hoshin Kanri is different than just your typical continuous improvement is that we are not solving the typical workplace problem but rather the value-added problems based on top management thinking (Vision and Targets). The “Hoshin” is developed at each layer of management clarifying strategies and targets to assist in reaching the preceding layer’s targets. This results in both a macro and micro PDCA. This greatly increases the line of sight and shared responsibility to each other in achieving these goals.
The workplace mission is defined within Toyota from the question “For whom and what type of value added products and services should be provided?” In this way, measures are created from the value added problems determined in the Hoshin process. Breaking the annual strategy down to what I call “Doable Chunks” is one of the secrets to Hoshin Kanri’s success.
Hoshin sounds good doesn’t it? In next week’s Business901 podcast, I asked well-known and long time established Lean Six Sigma consultant, Forrest Breyfogle this question:
Joe: Is this similar to the Hoshin Kanri approach where we are taking things down the organization and back up and going through that, kind of Americanizing that approach?
Forrest: I think it really challenges the Hoshin Kanri system. Hoshin Kanri leads from the strategies and then you cascade that throughout the organization. I do have it cascading, throughout the organization, but I don’t have strategies as the lead to cascade throughout the organization. I think there are problems with the Hoshin planning process. A lot of times those strategies are worded like we want to be the best of the best, and also those strategies that are in the Hoshin planning are typically not developed in line with the financials.
What I’m suggesting is you really like to have strategies aligned to financials. We have certain example that we want to improve profit margins; we might look at our data and then we come back and say, “Gee-whiz, we’re just getting an awful lot of returns.” I think one of our strategies is to figure out what we need to do to reduce the number of returns that we actually are having. There’s going to be an owner of that. The owner of that metric is going to be asking for projects and efforts to go in and reduce the number of returns. Using an approach that I suggest, we might come out and say the most important thing to improve profit margins is reducing defect returns. I have never seen a strategy coming out from the traditional approaches saying you need to reduce the number of defects. It’s not so grandiose but to me that may be the most beneficial thing you could do for an organization, just as an illustration.
Forfest Breyfogle: is the CEO of Smarter Solutions. He has authored or co-authored over a dozen books. His most recent book is The Business Process Management Guidebook: An Integrated Enterprise Excellence BPM System. His five-book set, Integrated Enterprise Excellence provides radical management advancements in the utilization and integration of scorecards, strategic planning, and process improvement.
Leigh Ashton is the author of iSell and head of The Sales Consultancy. She specializes in helping people incorporate psychology alongside technical selling skills – leading to positive changes to their attitude, their approach and their sales results. Leigh works with business owners, directors, managers and sales teams to identify and eliminate their psychological barriers, their internal limiting beliefs…and the reasons or excuses they use to rationalize their lack of consistently great sales.
Enjoy the transcription!
Related Podcast: The Psychology of Selling
Lean Sales and Marketing: Learn about using CAP-Do
David Shaked of Almond-Insight has just finished his book, Strength-Based Lean Six Sigma: Building Positive and Engaging Business Improvement. Using various strength-based approaches such as Appreciative Inquiry, David has created a radically different way to approach Lean Six Sigma. He calls this method Strength-Based Lean Six Sigma. David is a Master Black Belt formerly with a large global corporation and has specific experience in transactional processes such as sales, marketing, finance, order fulfillment, customer services, distribution, demand forecasting.
I have blogged in the past, An Appreciative look at the Seven Signs of Value (Waste), about some of David’s work and interviewed him in a previous Business901 Podcast, Strength–Based Lean and Six Sigma.
Lean Sales and Marketing: Learn about using CAP-Do
When we start thinking of value in the Service Dominant Logic (SD-Logic) mindset, it is much easier to understand how successful products and services are now being developed. They are developed in a mindset of an ecosystem. Apple’s demand has not increased because of more features and benefits. It has increased because of more ways to use the product, apps for example. Amazon has not grown and prospered because of more features and benefits but through customer use of their core services. 37 signals did not grow and prosper because of Ruby on the Rails rather through the proliferation of simple highly focused cloud products that facilitated at first only software developers. Most successful recording artist now make their money, not from record sales but tours and other appearances and even starring roles as judges in reality TV.
An ecosystem begs us to take a deeper dive into the customer experience. The beauty of it is that by engaging and understanding how users will interact from the functional, emotional, and social points of view, other sources of income could potentially be driven to the organization. This comes as a direct result of interacting with the company’s value proposition.
Demonstrating a shared outcome with your customers should be the ultimate strategy of your organization and your improvement cycles. Many people are still touting improvement capabilities of internal processes. Except for growing industries, such as healthcare, many companies are seeing little return in their investment in process methodologies. It is not enough to improve internally anymore. We no longer live in a world of excess demand. The strategies that we need for improvement must be demand driven.
Our planning cannot be isolated. In fact, we no longer own our standards. They are only validated through customer interaction. The customer cannot be introduced at the end of the cycle; he must be at the beginning, middle and part of the entire cycle.
The tools that are being developed to serve this purpose are not really new. Previous tools and processes allowed us to exist and improve in a goods dominated world. It was driven by process methodologies and thinking that better, faster, cheaper wins in the market place. Goods Dominant Thinking (GD-Logic) will limit our growth in the future, and cause a downward spiral as product commoditization occurs. Even as we develop new products, we only stay ahead of the curve for a very short time, and most of our developments and innovation become copied, replicated, and mass produced. What we seem to forget is that a significant advantage is not in the product’s features, it is in the use of the product.
Many organizations justify improvements by using the terms value and internal or external customers. If we’re not careful, the process of improvement can become more important than what the customer really values. If our efforts are not tied to the marketplace then we need to begin questioning why not? Sometimes “savings” (Cycle Time, Space, etc.) are trumpeted at internal meetings when, in fact, the improvements were really cost avoidance or nothing of any real consequence. This is similar to politicians who slow down the growth of government spending and then proclaim it as a cut in spending.
Opportunities for creating value with customers and stakeholders is limited if we take a “Goods Dominant” approach.. Similarly, a transactional approach to marketing ignores customer loyalty entirely by putting emphasis on developing the lifetime value of a customer to the organization. Eco-systems are not built through product features. They are built from a SD-Logic perspective.
The foundational principles of Service Dominant Logic has developed into 10 principles (Vargo and Lusch, 2008a). The authors are publishing a new book, Service-Dominant Logic: Premises, Perspectives, Possibilities, that is due out the winter of 2014. However, to begin understanding SD-Logic, the authors recommend focusing on four basic principles:
- Service is the fundamental basis of exchange: The application of operant resources (knowledge and skills), “service,” is the basis for all exchange. Service is exchanged for service.
- The customer is always a co-creator of value: Implies value creation is interactional.
- All economic and social actors are resource integrators: Implies the context of value creation is networks of networks (resource-integrators).
- Value is always uniquely, and phenomenological determined by the beneficiary: Value is idiosyncratic, experiential, contextual, and meaning laden.
When starting to explore SD-Logic thinking, I recommend understanding and using these four principles in action. An example of these principles are in this blog post, Increase your Innovation Capacity: Manage your Sphere of Influence.