Hoshin system of strategy implementation

The challenge faced by many people in the organizations of today is that there is a strategic destination they're all supposed to reach but they don't always have a convenient device to help them reach their objective. Sometimes individuals, teams, and even whole departments can get so far off course that they seem not even to remember what the final destination was supposed to be! This is where it's useful to have a system to co-ordinate different parts of your organization and keep them on course. The proposed system aligns all parts of an organization to accomplish an important objective.

The Process

1. Select a key objective.
2. Aligns implementation plans at all levels.
3. Implements, reviews, and improves the plan on an ongoing basis.

The process follows Deming's "Plan-Do-Check-Act" cycle which is well known as a method of continuous improvement.

Step 1: 
(Plan) Define What You Want to Improve

This is most often a key strategic objective that needs a significant change in how things are done. 

Step 2: 
(Plan) Establish Sub-Goals to Achieve Your Objective

• What organizational (or team/functional/departmental) goals for the year are need to achieve this objective?
• What checkpoints are necessary to keep the goals on track?
• What controls can you put in place to ensure that the goals are successfully reached?
• How will you measure progress and evaluate success?

Record these, and use them as the basis for your review process.

Step 3: 
(Do) Communicate the Plan

• Communicate your plan throughout the organization.
• Ensure that all levels of the company understand your vision and goals.
• Have each department and team set its own goals to link directly to the objective and the sub-goals you've established.
• Make sure that managers in these departments and teams "ripple goals down" so that everybody knows their part in the plan, and is using the Hoshin process to manage the people who report to them.
• Assign clear responsibility for each item in the implementation plan.
• Make sure that you have agreement on all items within the plan with all of your reports, and make sure that this agreement has rippled down as well.

Step 4: 
(Check) Develop a System to Collect Information on Your Control Parameters, and Then use it to Manage Change

Are your key metrics being met? If not, why?

Create a review table that shows the:

• Goal.
• Goal owner(s).
• Time frame.
• Performance metrics.
• Targets.
• Actual results.

Then use this table to manage movement towards these goals on an ongoing basis.

This "check" step ensures that your plan is a living document. It doesn't just sit on a shelf to collect dust once it's finished. Hoshin planning is based on the idea that to reach your strategic goals, the company needs to be in a constant state of reflection and evaluation.

On your review table, note any differences between the target and actual performance. This information will be used for subsequent plans, because Hoshin planning builds in levels over time. The plan you create this year will be used as the basis for next year's plan.

Step 5: 
(Act) Analyze Results, and Take Corrective Action Where Needed

If there are any differences between expected and actual results, identify the sources of those differences. Discuss these, organize corrective action, and implement this action.

• What is going right?
• What is going wrong?
• Do the plans meet the realities of your business and the problems you face?
• Are measures appropriate?
• What can be done better, or differently, to reach your destination?

This stage of the process ensures a system of continuous improvement. To keep moving the company toward its vision, review the plans not just once a year, but on an ongoing basis to determine how daily work should be done. With this review (or act) step, you can ensure that plans continually evolve to take into account a changing environment.

Step 6: 
Repeat the Process as Needed

This process can be cycled over and over to maximize the quality of your efforts. It can also be used within your various business units, functions, and teams to ensure that their specific strategies have the same goal alignment and commitment to continuous improvement.

Tip 1:

A tightly controlled approach like this only suits certain situations and certain industries. Use your best judgment when applying this tool to your own situation.

Tip 2:

Peter Drucker's Management by Objectives (MBO) was very influential in developing this method. The idea of various levels of organizational objectives, from management down to the workers, is a fundamental part of such planning.

The "8" : Strategy Implementation System

The organizational perspective and the individual perspective must meet in order to realize your strategy It is easy to believe the statement but difficult to make it happen. The main reasons for this are (1) Different views of finance, HR and strategy formulators at the top level (2) Lack of ownership by the middle management (3) Absence of a simple methodology.

You need to use top-down as well as  bottom-up processes so that everyone  is involved in executing the strategy; although from different roles.  The execution is a cyclical process and not a one-off exercise. With each cycle, you improve your execution capability and get a better performance  from your strategy.  The main concern is how to link internal individual behavior to changing external circumstances ( customers, competitors, company, collaborators, context). 

For this the senior managers must present the strategy in a focused, easy-to-remember manner and ideally in a story form (hero, villain, circumstances requiring strategy and courage) in order to change the behavior. A manager is a key in this process because he is the one who participates in all the activities like strategy communication, translating the strategy to department, division or team, setting his/her own objectives, defining objectives for the team, coaching for performance, and evaluating performance. The quality of your Strategy Execution is strongly linked to the effectiveness of your managers. The better your managers carry out their Strategy Execution role, the better the results you will achieve. 

SPECIFIC STEPS 

Update your Strategy 
at least annually  based on changes in its competitive environment and on the Strategy Execution feedback from the previous cycle.

Communicate 

when finalized and approved by all stakeholders communicate it in a transparent and easy-to-understand fashion and create engagement for the new/adapted strategy.  One big event and a single strategy e-mail are not enough. Use other meeting platforms, discussion groups, informal and formal encounters, performance management sessions, intranets, websites, screensavers, coffee corners, billboards. You cannot over-communicate your vision and strategy! Senior managers are strategy ambassadors and in addition to the content, tone of voice and presentation skills are essential for an inspiring communication.

Cascade

You break down objectives into smaller chunks for the next organisational level. The process stops at the smallest unit level − these are often teams. In the end, the size of your organization will define the size of the cascade. You should aim for alignment horizontally and vertically and you also need to balance your objectives across perspectives. These 4 perspectives are: financial, customer, internal processes, and people. You can add other dimensions, as appropriate.  In addition to the balancing act on the macro and micro levels, you need to select the right indicators – often called Key Performance Indicators or KPI's −  to track the objectives and define appropriate targets.

Compare & Learn

Your strategy is a hypothesis. It’s your best estimate of the route to success … but it’s still an estimation. It’s crucial to take some time at the end of a cycle to go back and check your hypothesis, to compare your initial strategic assumptions with what you have learned from the reality of the Strategy Execution cycle that is being completed. By doing this, you will put yourself in the forefront − research shows that only 15% of companies take this step.

But at the same time, make sure you don’t just look back at your strategy: take a look at your Strategy Execution capability as well. All too often, we see companies jumping automatically to change their strategy, because they did not reach their projected performance. But, upon examination, there is nothing wrong with their strategy. The problem is in executing it. So, make sure you evaluate your execution capabilities as well!

This ‘compare & learn’ step will help you verify your hypothesis, update your strategy, and fine-tune your execution capabilities accordingly.

Manage initiatives

Initiative management is the activity in which your dreams run up against reality, your strategy meets operations, and resources are added to the strategy formula. This is one of the most difficult steps in Strategy Execution − and so it’s also where execution quite often goes wrong. Initiative management is about selecting, prioritising and executing the right initiatives: those actions that will lead to the realisation of your objectives. Initiative management can be broken down into 3 main activities. See the answer to question 7 for more details.

Set Objectives

Setting individual objectives is one of the best things you can do to improve performance − your own performance, and (if you have them) your team members’ performance. The positive impact of goal-setting is one of the most widely researched and scientifically validated aspects of today’s organisational science. Make sure you link all individual objectives with the strategy at the organisational level. If you don’t, you might have a great objective … but it’s of no use to the organisation! Also, make sure you focus on the way you secure agreement on the objectives. It’s the quality of the objectives – including the link with the overall company objectives – AND the acceptance of the objectives that will make your individual objective-setting a success.

Monitor & Coach

Regular coaching motivates people and increases their chances of success dramatically. It also simplifies the final performance evaluation. In fact, regular coaching is far more important than the formal review meeting somewhere around the middle of the year. Providing feedback in the right way − which is a key coaching skill − is a crucial step in boosting performance!  

Evaluate Performance
Most organisations conduct a formal performance evaluation at the end of the individual performance management cycle. Ideally, the evaluation should answer the question: have the individual performance objectives been achieved? Be sure you make an honest assessment. There are several techniques that can help you. One of the best known is the STAR technique.  Although many organisations link performance to remuneration, performance evaluation is − and should be − a separate process.

 

"vmost" tool for aligning strategy

In the routine day-to-day activities it is easy to lose track of your original business strategy. Your strategies become redundant, vision and mission lose relevance, tactics may not lead to the results you want-and you may not even realize that you've inadvertently changed direction. VMOST tool helps avoid this by checking whether the five VMOST elements – Vision, Mission, Objectives, Strategies, and Tactics – are in alignment. It helps you re-connect to your vision, throw up problem areas you need to address and helps create and evaluate plans. 

Understanding the VMOST Tool

1. Vision – This is your organization's purpose, in terms of its values or how it goes about doing business. It should inspire staff, and help customers understand why they would want to use the company's products or services.
2. Mission – This is also your organization's purpose, but expressed in terms of key measures that must be reached to achieve your vision.
3. Objectives – These are specific goals that you must meet to achieve the mission.
4. Strategy – This is the overall plan you'll follow to meet your objectives.
5. Tactics – These are specific sets of actions needed to execute your strategy.

Looking from the top down, you need alignment because a clear vision drives the mission – which, in turn, lets you set your objectives or goals to achieve that mission. You design strategies to meet your objectives, and you implement your strategies with specific tactics or activities. Looking from the bottom up, your tactical actions should fulfill your strategies, which help you meet your objectives, which help you accomplish your mission, which, in turn, helps you realize your company's overall vision.

Use the Tool

Step 1: Choose the scope of your analysis. Do you want to assess how well your whole organization's day-to-day activities contribute to its vision? Or do you just want to focus on your own contribution, or that of your team? 

Step 2: Collect the five sets of information for the scope you chose in Step 1:

• Vision statement.
• Mission statement.
• Key objectives.
• Strategy document.
• Tactics used to deliver that strategy. 

Step 3: Answer the following questions:

• Do the key measures in your mission statement fit the values described in your vision statement?
• If you achieve the objectives, will the measures in the mission statement reach the levels described in the mission statement?
• Does your organization's strategy support the achievement of the objectives?
• Will your tactics deliver the strategy?

If the answer to every question in Step 3 is yes, you can be reassured that you, your team, or your entire organization – depending on your scope from Step 1 – contributes to your overall vision through your day-to-day activities.

However, if you answered no to any of the questions in Step 3, you need to adjust or redefine one or more of the VMOST elements. For example, if the tactics will not deliver the strategy – and if no tactics you can identify will deliver the strategy – you'll need to reconsider everything else.

Stakeholders and classification

Classification of stakeholders

Stakeholders can be broadly categorised into three groups:

• internal, e.g. employees;
• connected, e.g. shareholders;
• external, e.g.government.

Internal stakeholders: are intimately connected to the organisation, and their objectives are likely to have a strong influence on how it is run.

Connected stakeholders: Connected stakeholders can be viewed as having a contractual relationship with the organisation.

External stakeholders

External stakeholders include the government, local authority etc. This group will have quite diverse objectives and have varying ability to ensure that the organisation meets their objectives

What Are You REALLY Good At? Why is this an important question ?

Achieving a lasting and true differentiation may be difficult for many of you because your competitors may have the acess to the same raw materials and other factors inputs as you have. In such case what will set you apart is your experience and expertise.
Core competencies are the resources and capabilities that combine to become the source of a company’s competitive advantage. It is a deep proficiency that enables you to deliver unique value to your chosen customers due to its embodying an organization's collective learning, particularly of how to coordinate diverse production skills and integrate multiple technologies. Such a Core Competency creates sustainable competitive advantage for a company and helps it branch into a wide variety of related markets. Core Competencies also contribute substantially to the benefits a company's products offer customers.

The litmus test of a Core Competency is VRIO

• The Question of Value: "Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?"
• The Question of Rarity: "Is control of the resource/capability in the hands of a relative few?"
• The Question of Imitability: "Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"
• The Question of Organization: "Is the firm organized, ready, and able to exploit the resource/capability?"

Resources are a firm’s assets, including people, your brand, capital equipment, skills of employees and financial resources. There are tangible and intangible resources, as shown below:

Tangible resources -- combined with intangible resources – are components to create capabilities…which can be structured to become core competencies.

Capabilities result from the integration and interaction of specific resources to achieve a desired end state…and often involve a company’s human resource – your people – to mix the right resources.

Core competencies are the resources and capabilities that combine to become the source of a company’s competitive advantage…usually activities that add unique value to the goods and services a company sells. These competencies represent what your company typically excels at…the areas where you outperform competitors.

How do you go about discovering your core competencies?

To develop Core Competencies a company must:

• Isolate its key abilities and hone them into organization-wide strengths;
• Compare itself with other companies with the same skills, to ensure that it is developing unique capabilities;
• Develop an understanding of what capabilities its customers truly value, and invest accordingly to develop and sustain valued strengths;
• Create an organizational road map that sets goals for competence building;
• Pursue alliances, acquisitions and licensing arrangements that will further build the organization's strengths in core areas;
• Encourage communication and involvement in core capability development across the organization;
• Preserve core strengths even as management expands and redefines the business;
• Outsource or divest noncore capabilities to free up resources that can be used to deepen core capabilities.

Another effective approach is to answer a series of questions – trying to dig beyond the surface when analyzing your strengths:

It is only strength when it is recognized by a customer.

• What compliments do our customers consistently bestow on us?
• Do we usually win the jobs we quote? Why or why not?
• Are we specialists or generalists? Where do we specialize and excel?
• Do we offer turnkey solutions to customers (such as complete, usable products, or do we excel at specific component parts that fit into a larger solution)?
• Do we have existing products or services that could be re-bundled to enhance each other, or offer new solutions?
• Are our lead times competitive enough? Could we be doing more to dramatically cut down project completion time?
• What are some advantages created by a strength of ours… or a combination of our  strengths?
• What value do these strengths add to our product or service that is unique or difficult to imitate by the competition?
• Does our product or service mix really satisfy the needs of potential customers – those we don’t serve today?

Criteria that turn core competencies into competitive advantage

Analyzing one’s strengths can often yield misleading results. In one case, a company’s strengths are valid but may not provide any value to your customer. Remember, it is only strength when it is recognized by a customer. Second, a company is often unrealistic about what their strengths really are. If in doubt, try making a list of the characteristics of your company…inevitably, some of the items will pop out as being core competencies.
Another tip when looking at your strengths: Think about them in relation to your competitors. For example, if all of your competitors provide high quality products, then a high quality production process is not strength in your organization's market, it's a necessity.
Finally, here are four criteria – and they are a challenge – that will help you judge the competencies leading to competitive advantage:

• Is this particular core competency of high value?
• Is it rare – something hard to find elsewhere?
• Would it be costly for others to imitate?
• Is it nonsubstitutable – if others try to replicate it, will they typically fail?

B39C5 Strategic Management

Architecture of the PGEMP Strategy Course
C3/C4 : Business Strategy : Mainly about how to take decisions
C5/C6 : Strategic Management : Mainly about how to implement strategic decisions
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2 Classes on February 1
First class was a review of C3 and C4 

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Question to the class: 
What are the visible signs of a strategy
Question : what are the visible signs of a company being strategic which you can find from observation - or by going through the existing records of a company? 

Answer : All of the following are signs of a company having a strategy in place :

1. Above average rate of return on investment
2. Clear focus / investments in well defines areas ( avoidance of waste )
3. Avoiding neglect or over-servicing of only a few stakeholders
4. Adaptation to changes in the environment (PESTEL)
5. Adaptation to the changes in the positions and strategies of various existing and potential "players who matter" : customers, competitors, collaborators, investors, government
6. Alignment of all activities 
7. Active allocation of resources and planning of significant changes
8. Budgets and KPI/KRAs are linked to strategy and not developed incrementally

Exercise : Which of these exist in your company and division ?

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Question to the class : 
what goes into strategy and what come out of it?
Question : what is the input and output in strategy?

ANSWER

The "inputs" are the resources and assets of the company, the "strategy" is in allocating these to various applications so that the "output" as per previous question is produced
 

The "applications areas" are customers, needs, uses, geographies, activities, competitors and collaborators.. The resources are  what get used up and can be tangible (financial, Physical) as well as intangible (human, structural, relational).

Exercise : What are the important inputs for your business? How are you "applying" these currently ?

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Question to the class: 
visible signs of implementation
Question : what consists of strategy implementation?

ANSWER

The heart of strategy is setting of clear purpose in the light of what is happening externally and internally and then allocate resources accordingly. 
 While almost everyone in business tries to do it, many times things are wrongly done because: 

• formulation is done only by the owner or the top few
• formulation is only informally and it is in the mind
• strategy is not shared and hence fails to guide and inspire others
• strategy is not consistent with long term vision and mission
• strategy is not converted into operational initiatives & individual KPIs
• no implementation arrangements are made
• monitoring, review and correction is not carried out
• budgets, plans and operations are not linked to strategy
• strategy is formulted "here onwards" and not "future backwards"

By defining what goes wrong in strategy implementation, we have automatically defined what is the meaning of right implementation

Exercise : How well is the strategy implemented in your company and division ?
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Question to the class:
Which are the 2 ways (schools) of approaching?
Question : what are the two basic things needed for a sustainable and strategic success?

• "YOU NEED TO BE IN RIGHT BUSINESSES SCHOOL" believes that you need to be in search of the right businesses (green pastures) and strive to have the right portfolio of  businesses. Example : if your goal is to grow by 15%pa, it is clear that you must choose to operate in those markets which are growing at least at 15%pa.  The tool to do this is to identify attractive markets. These markets are such that you can make a difference to them with your resources and competence and they also should be able to make sense for you due to their size, growth rate, competitiveness, and ease of locating and accessing them
• "YOU NEED TO HAVE THE RIGHT RESOURCES AND CAPABILITIES" SCHOOL believes that just identifying the right businesses and entering them is not sufficient. You must have inbuilt competitive advantages in order to compete on a sustainable basis in that business. Otherwise your success will be short lived. The concept is the resources-competencies framework. Click here to know more

Exercise : Are you reviewing your portfolio of businesses often enough to decide whether you should increase / maintain / decrease your investment of money and management attention to each of these? Do you act on them? 


Exercise : Are you reviewing whether your portfolio of resources / capabilities / competencies is keeping pace with your decisions regarding your investment stance vis-a-vis your principal businesses? Do you know which competencies will be needed for which generic position.

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Question to the class : 
Signs of external , marketing, alignment 
Question : are we aligned well to the external environment ? Who are all these "players" that we see around us : are they here to help us or harm us? 

ANSWER

It is important to identify not only the trends and the insights but also specific parties, companies, types of people 

1. who will give us money for what we sell ?
   (Customers)
2. whom we need to fight in order to get the revenue?
   (Competitors)
3. who will help to reach these customers and fight these competitors
   (collaborators)

In fact finding the right customers to serve, right competitors to fight and the right collaborators is a critical task of strategy. It is important to realize that you should 

• not aim to extract revenue from all types of customers
• not compete with all of them who are out there
• use carefully selected collaborators

Exercise : Conduct a thorough environmental analysis and also do a thorough introspection to decide which customers, competitors and collaborators you will engage. Tools ( 5Cs, PESTEL )

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Question to the class : 
Signs of alignment with stakeholders
Question : signs of having a balanced approach to what the various stakeholders like employees, vendors, partners, governments and communities expect from the business so that we earn their support to run our business properly? 

ANSWER

Stakeholders are those external and internal parties who prosper when we prosper. They are interested in our doing well. The main stakeholders are direct employees, indirect employees, vendors, distributors, retailers, investors, lenders, governments and communities. The problem is that the expectations of many of these stakeholders conflict with each other because the resources available with the company are the same. Therefore a balanced approach is taken. No stakeholder shall be excessively rewarded or unserviced. 

Click here to know more about stakeholders analysis

Stakeholder conflict examples



One problem with analysing stakeholders is that they tend to belong to more than one group and will change their groupings depending on the issue in hand, e.g. marketing and production departments could be united against dropping a certain product but be in opposition regarding plans to buy a new product for the range.

Resolving conflict 
There are a number of ways of resolving stakeholder conflict, including the following:

•  Satisficing involves negotiations between key stakeholders to arrive at an acceptable compromise.
• Sequential attention is when management focus on stakeholder needs in turn. For example, staff may receive a pay rise with the clear implication that it will not be their ‘turn’ again for a few years and so they should not expect any further increases.
• Side payments are where a stakeholder’s primary objectives cannot be met so they are compensated in some other way. For example, a local community may object to a new factory being built on a site that will cause pollution, noise and extra traffic. The firm concerned may continue to build the factory but try to appease the community by also building local sports facilities.
• Exercise of power is when a deadlock is resolved by a senior figure forcing through a decision simply based on the power they possess.

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Question to the class : 
What are the generic strategies 

ANSWER

Each company tries to achieve a competitive advantage in a crowded marketplace. In the airlines business there are 3 types of companies (1) No-frills airlines cut costs and pass savings to “budget conscious  customers” (2) Luxury airlines give wonderful service to attracts premium customers (3) Small capacity planes on short routes which cannot be operated by a big plane

These three approaches are examples of "generic strategies", because they can be applied to products or services in all industries, and to organizations of all sizes. 

The terms "Cost Focus" and "Differentiation Focus" can be a little confusing, as they could be interpreted as meaning "A focus on cost" or "A focus on differentiation". Remember that Cost Focus means emphasizing cost-minimization within a focused market, and Differentiation Focus means pursuing strategic differentiation within a focused market.

The Cost Leadership Strategy : Remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services. The cost or price paid by the customer is a separate issue!  You  need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have (1) Access to the capital needed to invest in technology that will bring costs down (2) Very efficient logistics (3)  A low cost base (labor, materials, facilities), and a way of sustainably cutting costs below those of other competitors.

The Differentiation Strategy : Differentiation involves making your products or services different from and more attractive those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support and also brand image that your customers value. To make a success of a Differentiation strategy, organizations need (1) Good research, development and innovation (2) The ability to deliver high-quality products or services (3) Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.

The Focus Strategy : Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors.

Whether Cost Focus or Differentiation Focus, the key is to ensure you are adding something extra as a result of serving only that market niche. That "something extra" can contribute to reducing costs (perhaps through your knowledge of specialist suppliers) or to increasing differentiation (though your deep understanding of customers' needs).
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Second class was on execution / implemeentation  

You need to use top-down as well as  bottom-up processes so that everyone  is involved in executing the strategy; although from different roles.  The execution is a cyclical process and not a one-off exercise. With each cycle, you improve your execution capability and get a better performance  from your strategy. 

The organizational perspective and the individual perspective must meet in order to realize your strategy  There are two systems presented here to ensure that this happens :

Click here to understand the Scheme of "8" 
Click here to understand the Hoshin system

Irrespective of which system you follow, you will realize that you need to change not only the strategy but also the other 6S from the 7S model :

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DO NOT READ BEYOND THIS POINT (THESE ARE MY OWN NOTES )

Brett Knowles explains the frequent characteristics of bad strategy maps:
- No Clear Cause-and-Effect Explanation (lack of arrows)
- No Clear Strategic Priorities (no weightings, too many objectives)
- No Communication of Strategic Themes

The results then are:
- There is no clear direction for the organization
- BSC is a poor communication tool (everybody has his own story)
- No leadership accountability
- No alignment
- No way to analyze processes and projects for strategic capabilities.