Hoshin Kanri

Revision as of 10:15, 23 February 2018

Abstract

The point of convergence for this article is to present and explain the "Hoshin Kanri" (or Policy Deployment) method, descrived by Dr. Yoji Akao, a leading Japanese author, in Hoshin Kanri: Policy deployment for successful TQM (1991). Hoshin Kanri is defined as a "form of corporate-wide management that combines strategic management and operational management by linking the achievement of top management goals with daily management at an operation level" [1]. This method and it is an essential support for TQM [7] and is based on the PDCA cycle. Hence, at the strategic level, the method can be applied by scanning the context of the company in order to further understand how to position in the market. To do that, the external and the internal environments need to be studied utilizing the Porter's 5 forces analysis and the Porter's generic strategies (for the external environment). In the other hand, for the internal environment, which is about understanding the available resources of the company in order to develop a competitive strategy, a Business Model Canvas, SWOT analysis or a Balanced Scorecard is more applicable. Then, during the planning step, the long and mid-short term goals are decided and through the X-Matrix, which is the way of implementing the Hoshin Kanri, the operational and organizational goals are aligned. After the implementation, the progress has to be continuously monitored, keeping track of all the activities and improving them. Furthermore, the article will give attention to the Catchball process, which is a necessary communication process aiming to obtain successful implementation of the Hoshin Kanri throughout all of the company levels.

Different names of Hoshin Kanri

This approach was first used in Japan in the 1950 and 1960s, after the second world war, because the local companies were facing difficulties to be again competitive [6]. Only many years later, around the 1980s, it was introduced in the Western audience with the name of Policy Deployment by western writers [9]. One of the most curious fact is that this method, it is still called differently in many companies (for instance at AT&T and Texas Instruments,it is called 'policy deployment'; at Hewlett-Packard and Proctor & Gamble, it is labelled 'hoshin planning'; at Xerox Corporation it is 'managing for results' and at Unilever it is 'management into action' [2]) and by many writer, leaving space to it to be interpreted and used improperly [9]. Yoji Akao, was the first Japanese author in 1991 writing an authoritative text about the implementation of the Hoshin Kanri, Hoshin Kanri: Policy deployment for successful TQM (1991).[5].

Hoshin Kanri

Hoshin kanri, or Policy Deployment, is a strategic planning tool used to manage complex portfolio management processes, that combine the strategic management with the daily management, tying up the long term activities with the daily ones. [1]. The words HOSHIN KANRI can be divided in four small-words [10]:

1. Ho - means Direction 2. Shin - refers to Focus 3. Kan - refers to Alignment 4. Ri - means Reason

Hence, the Japanese term kanri means management and hoshin is translated as direction and shining needle or considered together as compass. From this translation, Hoshin Kanri is seen as a compass that helps employees to be focused towards the Vision and Aims of an organization in order to continuously improve its processes [10]. Promoting the involvement and alignment of all the employees, this method intents to build a strong connection between the daily activities done in the operational level with the business goals set in the strategic level, in order to achieve an higher performance in all the organization business objectives [5]. Furthermore, the process of Hoshin Kanri has no end, being applied as strategic improvement cycles repeated once a year.

Hoshin Kanri is based on the PDCA cycle and can be broken through 7 steps:

1. Establish the Vision and Mission of the organization 2. Develop a long strategic plan (3-5 years) 3. Develop the annual objectives 4. Define the projects 5. Implement the projects 6. Check the organization progress (every month or four months) 7. Annual review of the projects

Figure 1: Double loop learning through post-project reviews in R&D projects ^[1]

COMPETITIVE STRATEGY: Scanning process

The development of the long strategy of an organization is part of the scanning process. In this step, top-managers aim to understand where to positionate the business in the market analyzing two fundamental aspects: the external and the internal environment.

Analysis of the external environment: This can be done using two models of Michael Porter: "The Porter's 5 forces analysis": the external environment is analyzed by looking at 5 most potential threats (contemporary): - The power of larger customers (at the bottom of the supply chain): bargaining power of customer - The power of larger supplier (at the top of the supply chain): bargaining power of supplier - The level of rivalry among organizations in an industry: Industry rivalry - The threats of substitute products - The potential to entry in a new industry "The Porter's generic strategies": to create a competitive advantage and reducing the threats of the five industry forces, managers have to choose between two ways of increasing the value of an organization's product [12]: differentiating the product to increase its value to customers or lowering the costs of making the product. Furhter Porter discusses that managers have to focus or in the whole market (Broad Target) or in a specific segment (Narrow Target). Hence, managers are provided with four choices:

Cost and Differentiation have to be balanced.

Analysis of the internal environment: The analysis of the internal environment is about understanding the available resources of the company in order to develop a competitive strategy, a Business Model Canvas, a Blue Ocean strategy, a SWOT analysis, a Balanced Scorecard, a Product/Market matrix and a Importance/Performance matrix is more applicable. "Blue Ocean": developed by Kim and Mauborgne, is a potent method for questioning Value Propositions and business models and exploring new Customer Segments. It develops two Oceans: the Blue one about creating a new innovative business value without threats and the Red one that considers all the threats(competitors) . "Business Model Canvans": The Business Model Canvas complements Blue Ocean by providing a visual "big picture" ,through nine building blocks, that helps us understand how changing one part of a business model impacts other components. (modify) "SWOT analysis": It is a powerful tool to identify possible external threats and opportunities and internal weaknesses and strengths of an organizations. "Balanced Scorecard": It is a strategic tool based on four core areas: Financial, Customer, Internal business processes and Learning and Growth. "Product/Market matrix": called also Ansoff matrix, it is a tool that gives information about the risk of growth/expand in another market. "Importance/Performance matrix": called also Slack matrix, it is a tool that rank a list of competitive factors (i.e. quality,costs,..) and their performance in order to define the real importance of each factor to define a set of strategic operations [slack].

FROM THE A3 TO THE X-MATRIX

Toyota was the first using the A3 to develop the X-matrix. The A3, which name is due to the format of the paper (approximately 11x17 inches), is a status report that helps managers to gather information into a visual form facilitating the comprehension when communicated with others and hence applying efficiently the PDCA activities[6] and [8]. An A3 is developed around 8 key points:

picturre

In the Hoshin Kanri six A3 are described in order to handle the process.

A3-i: Competitive information report

The result of Scanning process (needed to define the long-term goals) is represented by the A3-i (intelligent report), which are used " to build consensus about changes in the conditions of demand and supply before bulding the A3-X"[6]. The aim of the A3-i is to gather all the information that managers have and then to share it later.

Supply conditions: change in the price of the materials, advances in technology, innovations in managements methods, new products introduced in the market by your competitors that may require you to develop new capabilities. Demand conditions: change in the willingness of customers to buy the company product or service.

Observation: In this space is asked to report all the changes about demand and supply that might influence the strategy thus modifying it. Analysis: In this area the observations are explained via the tools used in the external and internal environment. Implications for the business: In this area are shown the specific implications due to the change of the demand and supply. Therefore, it is asked to explain which changes in the market can impact on the demand of products and services in the long and short period.

A3-X and the X-Matrix

A3-T

A3-SR

A3-SSR

A3-P

THE CATCHBALL PROCESS

THE PDCA in Hoshin Kanri (mandatory references)

Pros and Cons

Conclusion

Reference

[1] HOSHIN KANRI: POLICY MANAGEMENT IN JAPANESE-OWNED UK SUBSIDIARIES, Barry J. Witcher and Rosemary Butterworth, Journal of Management Studies 38:5 July 2001, University of East Anglia [2]Policy management of strategy (hoshin kanri) ,Barry J. Witcher, School of Management, University of East Anglia, UK [3]HOSHIN PLANNING, The Flyover to Strategic Planning, Dr. HEMA BHALAKRISHNAN, Dr.Sangeetha Natarajan, Institute of management Studies Coimbatore,INDIA [4]Hoshin kanri: A preliminary overview,B. J. Witcher & Rosie Butterworth, School of Management, University of East Anglia, Norwich NR4 7TJ, UK [5]Using Hoshin Kanri to improve the Value stream, Elizabeth A. Cudney [6]Hoshin Kanri for the Lean Enterprise: Developing Competitive Capabilities and Managing Profit,Thomas L. Jackson [7]USING QFD TO DRIVE TQM IMPLEMENTATION,Dr. Robert A Hunt,Director Centre for Management Innovation and Technology Graduate School of Management, Macquarie University,Sydney, Australia 2109 [8]Hoshin Kanri for Improved Environmental Performance, Conrad Soltero, 2007 Wiley Periodicals, Inc. [9]Policy deployment: an examination of the theory, R.G. Lee and B.G. Dale Manchester School of Management, UMIST, UK [10]Hoshin Kanri, The Strategic Approach to Continuous Improvement,David Hutchins [11]Essentials of Contemporary Management Sixth Edition, Gareth R. Jones, Jennifer M. George, Rice University [12] Business Model Generation, Alexander Osterwalder and Yves Pigneur, Published by John Wiley & Sons, Inc., Hoboken, New Jersey