Strategy Deployment: Hoshin, PDCA & Drucker

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In another chapter from the book of simple concepts that are difficult to implement comes the story of strategy deployment.  Over the years, I have seen some great business plans that failed to deliver because of the inability to stay focused and drive them into the organization.

Hoshin kanri is a process focused on setting direction, developing plans, and managing implementation.  Progress on the plan is continually reviewed to understand when adjustments are needed to achieve success.

There have been many books written about Hoshin Kanri that cover the subject in great depth.  And since I could never adequately cover the topic in detail in a short blog post, I’ll try to hit on what I consider to be the high points of the process.

Hoshin & Drucker

Much of the hoshin process appears to be aligned with Peter Drucker’s method of strategy deployment.  I have always considered the strength of Drucker’s approach to lie in his technique of continually asking a few simple questions to get people focused on what’s truly important.

What are we trying to achieve?
How are we doing?
What are we doing about it?

Hoshin Kanri follows a similar approach through the application of the Plan-Do-Check-Act (PDCA) cycle to business planning.  Deploying strategy requires an obsessive focus on the few high-level objectives that are critical to success.  Utilizing Drucker’s simple questioning technique within a PDCA framework helps maintain focus by increasing understanding of the following:

PLAN:  What are our objectives?
DO:  What are our plans to meet objectives?
CHECK:  How are we doing?  Are our results meeting objectives?
ACT:  What are we doing about it?

Another benefit of PDCA in strategy deployment is that it drives home the idea that business planning is not a once per year exercise.  It is an ongoing process that needs continual reflection and adjustment to succeed.  There is no "new" plan each year - there is only a new revision that has been adjusted to account for progress and changes in the environment.

Deploying Strategy

 The initiatives that are developed from the business plan also go through the PDCA process to assure they continue to progress.  When doing the CHECK on each of the initiatives, the team should follow the general approach listed in the exhibit.  By creating the initiatives, the team is predicting that completing them will result in meeting one or more business objectives.  Because of this, it is important to review whether the initiative is progressing as planned and, if so, whether or not it is driving the desired results.

Although the Drucker questions appear simple, the answers can get fairly complex.  The key is to provide enough time to reflect on the answers in order to keep people focused on objectives.  The effectiveness of leadership, after all, lies in the ability to simplify complexity.  Whether using Hoshin Kanri or some other method, it is critical to utilize some type of framework that enables this to occur.

Why The Obsession With Speed?

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Many years ago, I remember W. Edwards Deming questioning the obsession businesses had with speed.  I thought it was strange coming from the man who worked so closely with Toyota - the company that invented lean.  Wasn’t one of the main objectives of the Toyota Production System to reduce cycle times and make processes run faster?

I’ve thought about Deming’s question for many years and, after working with a variety of production and improvement systems, I finally came to the conclusion that Deming may have been referring to the idea that rhythm between processes is more critical than the speed of individual processes.

Rhythm vs. Speed

Companies put a lot of effort and focus on the speed and efficiency of processes.  People are measured and rewarded on their ability to speed up the processes with which they work.  As a result of this focus, we often end up with a completely unsynchronized production or service system, thereby increasing inventory and costs, and in most cases, slowing down the company, as a whole.

I have seen many instances where people pushed as much output as possible to the next step in the process in order to meet goals – even when the next step was not ready or able to handle the extra work.  As a result, teamwork breaks down, finger-pointing increases, WIP inventory increases, and quality decreases. A common response to the buildup of WIP in the system includes measures to attack the symptoms (e.g., the increased inventory), rather than the causes (lack of synchronization and poorly focused goals).

There is an optimal speed at which a process should operate in order to meet objectives (i.e., its takt time).  Achieving and sustaining takt time requires that every step in the process operate in rhythm with each other.  Any individual step in the process that produces in excess of takt time has a negative effect on the overall system, which is often as destructive as producing too slowly.  Whether the operation provides a product or service, the key is synchronization at the optimal pace.  Even ignoring the internal cost and cultural problems associated with a lack of synchronization, one has to question the practice of producing faster than customers want.

Although I'll never know, it could be that Deming was referring to the idea that synchronization of processes – and meeting takt time – is far better than increasing the speed of any individual process.  He may have been trying to teach the concept that, without a focus on rhythm, speed means nothing.

Lean: It's More than Kaizen

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I have noticed recently that there is a common misconception about the true meaning of lean.  Even among some improvement consultants, what is often referred to as lean is really nothing more than kaizen.  This is unfortunate because many organizations are missing out on the benefits associated with a true lean deployment.

Lean = Kaizen Plus Production Control

Too often, people learn about value stream mapping or the categories of waste and think they understand lean.  Although true that lean includes identifying and reducing waste, this type of activity is only one component of lean.  Changes to improve a process or system – whether through value stream mapping to reduce waste or an independent project to address a quality issue, is kaizen.

What many people do not seem to understand is that a focus on production control is what differentiates lean from a kaizen or 6-sigma process.  Without an emphasis on production control, companies miss an important component to align improvement efforts with business objectives and, more importantly, transform the organization and gain buy-in at all levels.  In the most basic sense, lean is about production control and kaizen is one way to help gain control over the production process.

Aligning Improvement With Business Results

The purpose of a business is to continually improve the value it provides its customers.  A company’s processes are critical to achieving this purpose.  Whether providing a product, service, or both, there is an optimal pace at which processes need to operate in order to meet objectives and, therefore, the needs of customers.  Lean thinking requires clearly understanding this pace (referred to as takt time) and focusing efforts on eliminating or reducing the effects of anything that interferes with synchronizing the overall system to operate at this pace.

Whenever I visit an operation that claims to be lean (a problem in itself because an operation is never truly lean), I ask questions about takt time.  All to often, I get blank looks or comments that takt time does not apply because the company does not have manufacturing operations or that they produce a highly customized product.  By ignoring takt time, however, these companies are focusing their efforts on general process improvement (e.g., 6-sigma or kaizen) rather than lean.  The problem with deploying a kaizen – rather than a lean – approach is that it becomes more difficult to directly tie improvement to business results, making it tougher to gain (and sustain) buy-in throughout the organization.

Takt Time:  Not Limited to Manufacturing

As written in a previous post, takt time can be calculated for virtually any process.  Whether the process produces invoices, maintenance services, gas wells, or sandwiches, there is an optimal pace at which it must operate to meet objectives.  Understanding and striving to consistently operate at this pace is a vital part of running the business. Note:  it should be inherently obvious that success also requires that the process must provide - and continually improve - its product or service at a level of quality that customers expect.

Although a kaizen or 6-sigma process is commendable (and a valuable component of lean thinking), a company that stops there is missing out on a critical improvement opportunity.  Focusing on takt time makes the connection between improvement and business objectives much clearer.  As a result, it becomes much easier to get people throughout the company to buy into the process.  In fact, once people understand – and are held accountable for – takt time, they will begin to look for ways to reduce the waste that interferes with the throughput of their process.  Improvement efforts become seen as part of, rather than interfering with, meeting objectives.  And when this happens, transformation can truly begin to take place.

Determining Takt Time

Takt time can be determined for virtually any type of process.  Examples include:

• Number of invoices processed within a given timeframe to keep up with demand;
• Number of gas wells to be drilled over a period of time to meet production objectives;
• Number of bags handled at an airport to keep airplanes and passengers moving;
• The pace of filling prescriptions at a hospital to keep staff from waiting, and assuring patients don’t experience medication delays;
• Making coffee and specialty drinks in order to meet customer preferences while keeping waiting lines relatively short.

With this in mind, a basic process for implementing lean should include:

1. Clarifying business objectives (including clearly understanding the customer’s needs);
2. Determining the optimal pace (takt time) for critical (and eventually, all) processes to meet objectives;
3. Implementing visual measures for throughput (to enable process leaders to understand how well they are keeping up with takt time);
4. Standardizing processes and systems (i.e., the value stream);
5. Continually identifying those things that are preventing the value stream from meeting takt time (which can involve shortening or reducing variation in cycle times).

Improving processes in order to meet takt time is where kaizen or 6-sigma enters the picture.  These approaches provide a framework for improving the throughput of processes in order to meet objectives.  Without creating energy around takt time, however, a 6-sigma implementation can easily lose focus and miss an opportunity to gain full buy-in of the improvement process by leaders.

Introducing takt time gives perspective to people to help them better understand why the organization is pursuing lean.  It provides the business context that is so critical for successful transformation and commitment, and helps reduce debate regarding the importance of spending time on improvement projects.