The Lean Approach to Strategy

A strategy is a plan of action intended to achieve a major objective. Lean transformation aims to make major changes in how we work, to streamline our processes, to upgrade our thinking and skills. Many agree that Lean is a strategy for long-term organizational prosperity. If Lean itself is a strategy, what is the approach to strategy consistent with Lean principles? The contribution from Lean thinking to strategy management is known as hoshin kanri. It is the result of applying scientific thinking to the development and execution of big plans. Hoshin follows the PDCA cycle and applies various Lean principles.

All strategies are plans, and no plan goes according to plan. The longer the planning horizon, the more it is likely to diverge from the original. Plans to achieve annual objectives by definition are fated to diverge. Why bother to plan? If long-term plans inevitably drift off-course, is it not wasted effort to make plans? The answer is that the discipline of creating detailed plans allows us to have a standard against which we can measure our thinking, our assumptions, our effort. One could say that the practice of hoshin is a strategy kata that teaches a way of thinking about making and executing big plans.

The hoshin kanri process guides us to

– Start from a long-term vision,

– Identify a small number of breakthroughs for the next period (1+ years),

– Collaborate with people who will do the work to develop detailed plans,

– Develop the plan in greater detail close in time and place where the work is done,

– Make fact-based promises that we can and intend to keep,

– Synchronize and align hoshin work with daily work,

– Review frequently to identify efforts drifting off-course, errors on the map (the plan) or the addition of side-projects mid-year,

– Hack away at the jungle of constraints, contradictions, communication barriers facing the team, and

– Correct course, learn from mistakes, feed lessons forward to future planning.

Even when the top-level priorities are set without much thoughtful fact-based discussion, an organization can succeed as long as there is plenty of catch ball from the 2nd level to the front lines. The hoshin mistake that is rarely survivable is the failure to focus. Overproduction is the deadliest of the 7 types of waste because it acts as a multiplier for all waste, obscure’s the organization’s true capacity, and causes us to fail to deliver what the customer needs. Most organizations practice overproduction of their strategic objectives without realizing it. They may be familiar with the feeling of strategic indigestion.

I am increasingly convinced that it is easier to understand the word “hoshin” not as “policy, direction or strategy” but to mean “vision”. Hoshin kanri is not a method for “deploying a strategy” or cascading it down, but many organizations practice it that way. The top-level hoshin is not yet a strategy. It is almost a slogan. It only becomes a strategy as a result of the hoshin kanri process. When organizations develop a strategy, or buy it from an outside firm, then “cascade it down” via various Lean strategy deployment tools and practices, they are missing the point. Hoshin is a way of translating a broad vision into concrete and detailed plans through a collaborative process.

That is not a popular message. Senior leaders believe, and may in fact be, smart enough to think through and set the strategy, and then tell people what to do. This is understandable. It may have worked for them in the past, gotten them where they are today. Lean transformation often requires changes that are broader in scope, deeper in their effect on the organization, its people, and customers, greater endurance and long-term commitment, and broader engagement in the change. Faced with these demands, the traditional approach to strategy planning and execution often falls short.

Hoshin kanri in its true form starts with a clear long-term vision, identifies few strategic priorities and then gives subordinates a chance to, in effect, tell senior leaders where their priorities are wrong, that their wish list unreasonable, or that their assumptions about the realities of the business are false. The humbling doesn’t end there, because the regular reviews relentlessly reveal further opportunities for growth. Hoshin kanri takes courage from leaders. It also requires an educated and competent workforce who can understand the vision, translate it into local terms, develop detailed plans, and articulate them.

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