What is Hoshin Kanri in Lean Manufacturing?

Transcript of Hoshin Kanri Video

Jeff: Hoshin Kanri is that a new idea, it needs various things but Hoshin is often interpreted as a compass, a direction that you want the organization to go. And Kanri is the management control systems in order to align the organization toward that objective. It was first adapted by Toyota in the 1960s as part of total quality management. At that point Toyota’s quality was worse than the American auto companies and Toyota had ambitions to become the best in the world in quality.

They simultaneously adapted Hoshin Kanri and they also decided they were going to go for the Deming award. As part of total quality management the starting point is always the customer. Understanding what the customer wants, turning that into goals that can be measured and then aligning that through the organization. In the Toyota wide lean leadership we developed a model and included Hoshin Kanri. We call it create vision and align goals. And you are systematically working toward a vision of true north, the true north values in the center of the model.

And these are unattainable. But you have to take little bites every year. It is done where you are in the current state and where the environment is moving and where you see trends in the future and your corporate strategy. And we put this as step four rather than step one. And one might logically argue that your starting point should be your direction. You shouldn’t do anything until you have a vision for where you want to go. And there is some truth to that but Hoshin Kanri is an entire company strategy that gets broken down to targets, objectives for every part of the organization, every value stream, vertically, horizontally, it aligns the entire enterprise.

And what we have discovered is that if you prematurely jump to Hoshin Kanri from the CEO level down, almost always you are going to do a bunch of quick and dirty projects that will make numbers but they won’t actually improve the organization. And the reason is that your leadership is not developed and mature enough to translate those challenging targets into meaningful improvement, meaningful change. So what we are really arguing by numbering those one to four, is that you need some degree of development of your leadership from top to bottom and across the organization before you can expect to align the organization at the enterprise level.

Again, you can have goals that are aligned within, say a department, within a plant, within the software department, within the sales department. But we are talking with Hoshin Kanri about whole organization vision being deployed. So again, our observation is that Hoshin Kanri is often adapted prematurely and it doesn’t have the effects that people hope it will have.

Because this is what management sees if you sell Hoshin Kanri. And there are consulting companies that truly believe in Hoshin Kanri and have a process for implementing it, and they go and they sell it to management. And what the senior leadership sees is, ‘Yes, that’s what we need.’ We need everybody in the organization, all the functions of project development and accounting and in manufacturing and whatever it is that you do, all these functions align to serve the customer.

And in addition to that, the CEO always has a vision and always has targets that they would like to achieve and they would love it if everybody lines up behind their targets and does a great job. And by the end of the year they’ve achieved everything that they’d hoped. So this is the promise, is total alignment, focusing on the customer and that includes quality, and it includes cost reduction. It includes on time delivery and it includes any kind of service or product that’s exactly what the customer wants or maybe even more than they think they want.

So that’s what we want and that changes over time. Customer takes change overtime. The world around us changes, the organizations change, which means that our target is a moving target. We have to constantly be moving the target appropriately and people in the organization have to adapt and change and improve their processes to meet new targets on a regular basis. The cadence for Hoshin Kanri’s capability annually focused on a five-year business plan, focused on very long-term building. First of all, you are breaking down the annual numbers in a planning process. And that’s one definition that Hoshin Kanri aligned the activities of people throughout the company, so the company could achieve key goals and react quickly to a changing environment.

What you are imagining is that all these people in departments and the departments themselves are all going to get together and aligned. They are going to have a clear direction and then their activities are going to be focused on achieving those targets throughout the year. The end target can be yearly, five year, six months. We find yearly is therefore the overall planning process. Because the planning process itself includes these little round things in the diagram called catchball. And what’s happening is that the top is going to the next level down, and saying, let’s develop a strategy and there’s going to be a lot of give and take in that strategy.

Based on that, let’s set a five-year business plan and turn that into an annual plan. The direct report, say the senior vice presidents are going to go then to their people, maybe their vice presidents and directors and they are going to say, ‘We are now engaged in a planning battle, it goes for the whole company. We need your input from purchasing, from sales, from manufacturing, what do you say? So the three levels operating at a given point in time, drawing this ball back and forth, playing catch ball, collecting data. And that process then to then move down to the next three levels down and the next three levels down, down to the working level is easily a three month process if it’s done well.

Within Toyota it starts January 1st, it ends March 31st . And everybody in Toyota will tell you, ‘we are really busy, that’s really not enough time. We wish we had six months.’ So you are not going to spend three months planning for a target that’s just a few months out. It makes sense that it will be an annual process. This is what we have. And when I say, ‘this is what we have’ I mean over 90% of the organizations I visit, this is common traditional corporate America, healthcare, government, we are bureaucracies. So we have a lot of functions if we are a big organization and the managers and supervisors within those chimneys, within those silos have learned through their careers to make the numbers. And they’ve learned that if we make the numbers we are okay. What the numbers represent are the outcomes of some sort of process and those outcomes could be a dollar cross savings.

And also I am going to be interested in the numbers within my chimney. And then we all know about the chimney problem and that’s actually one of the drivers of lean SP is to get people to start to think horizontally in value streams focused on the customer instead of purchasing wanting to simply get the lowest bid and engineering wants to get the most engineering capability. Manufacturing wants to get the simplest design and a schedule that’s easy to make. So each of these functions has their own interest. And what we are really trying to do with Hoshin Kanri is align those interests. But in an organization where people have gotten in the routines, the habits of making only their own silo numbers, we are going to have to break those habits. We are going to have to literally change the culture of the organization.

We have a tool to help us envision the elements of Hoshin Kanri. One is called the x matrix and you’ll see these in all the books on Hoshin Kanri. And what I just ask… at first glance, without getting into details and trying to read all the little boxes and circles, what does this look like to you? Number one, I think it’s impressive that it’s an A3. That so much information is on one page. What we have is literally everything from the company strategy to the tactics that we are going to use to approach that strategy to the process we are going to use to achieve the tactics to the results we expect to get by implementing these processes. And we also have all the key team members.

We know what strategies lead to what tactics, what tactics lead to what processes, what processes and tactics lead to what people and who’s accountable. All these information is contained in this little bundle of one page. The second question, what does this say to you, how does this speak to you is a question of whether this really gives you a clear picture of what should be happening. And for me personally, the answer is no. And I have a PhD in Sociology and maybe that’s my problem. Yeah. But for some reason when I look at this, my eyes glaze over. It’s just too complicated for me.

And I know that most of the people in organizations aren’t used to reading abstract diagrams like this any more than I am. So if it’s too complicated for me, it’s probably too complicated for a lot of people. So what I see is a lot of information at a very high level of abstraction and it’s too busy and it’s hard for me to read. And what I’ve done is on the next slide I’ve broken this down and I just picked one path just to see what it meant. This is an example that I got from a consulting company that has a book on Hoshin Kanri. And what I’d say is one of the leaders in Hoshin Kanri and this is an example that they use from one of their clients.

That one of the strategies, there are multiple strategies but one of the strategies for this to make better products just in time at the target cost. And at the lean community we know that make better means we want better quality and then also maybe better functionality. Just in time means have all the materials flows and information flows and everything happens just when it’s supposed to happen. And then target cost means we define the target based on the market. And our profit is going to be whatever the market bears minus whatever cost we achieve and achieving the cost becomes the target.

So that’s the strategy. Those academics, those thought leaders who write about strategy, I don’t think any of them would say this is a strategy. Because what a strategy really does is it defines what makes you unique in the market place. What’s your unique value proposition to your customers. And there’s nothing about customers here and your customers actually don’t care if you make the products just in time or you reach your target cost. They care about the products and services they achieve, what it cost them and the quality and timing of that service.

So this really lays a strategy as much as it’s, say a set of operation characteristics. And it’s also a bundle too. It’s like one of the strategies and it really requires every part of the organization does everything just in time. Every part of the organization is making better products, it’s building quality and designing quality. Every part of the organization is striving toward a target cost. So it’s at least three things in one with probably more like a dozen. One of the ways we are going to do this… actually there are two ways we are going to do this. If we look at the bull’s eyes where there is a big connection. There’s a big connection to two items. One is to make a plan, a lean machine. And we all know what lean is and it includes a whole system.

So somehow these plans are going to become totally lean in all respects. And we are going to have an extended supply chain, whatever that means. The process is then not how we are going to achieve the tactic but rather what results we are going to achieve in the process and that is inventory turns are going to go up by 10. And whatever they are calling supply factor, however they measure that was going to go up to 75%. So now we get extremely narrow after having extremely, unreasonably broad strategies, in fact almost meaningless statements. And the results are that we are going to save a bunch of money.

If we go down all the results are in dollar terms. And how they came up with these dollars related to this process and these tactics and strategy I have no idea. Now, this may be just one example from one website but in my experience, when you look at the content of these x matrixes, they often are as vague as this. And the companies aren’t really skilled at developing a real company strategy. And they understand tactics only at a very, very abstract level. We will deploy [inaudible 00:16:16] the quality just in time. We’ll create a partnership with our suppliers. So they have very abstract concepts that are not related to where the organization is, which may be thousands of miles away.

And then they end up with very, very specific measurable targets and ultimately it comes down to how can we turn this into dollar savings? And there are other ways to measure results besides money. So I would say that this is not a good situation. This is not a thoughtful plan for Hoshin Kanri. And you might not have noticed because it was buried within that x matrix which is so complicated that it all looks very good on the surface.

Interviewer: Initially you said, the strategy is not tied to customers. So is that one of your litmus tests? If the strategy doesn’t describe how you are going to satisfy your customers, it’s not a good strategy?

Jeff: That has to be a part of it and it also has to tell me where is your unique distinct value proposition that separates you from your competition, if you are in a competitive environment? But if you are not in a competitive environment, what are you going to do that will surprise [inaudible 00:17:41] customers. What are you going to do at the next step that’s going to provide a better service and make you worthy of being invested in in the future?

So the problem that we have if we were to do a root cause analysis of what happens when someone comes into a typical organization and says, we are going to come up with a company strategy, we are going to use Hoshin Kanri to align all these activities. You’ve been doing lean, you’ve been doing six sigma, you’ve making improvements but it hasn’t added up to what you want. We are going to solve that problem. And we are going to do that by getting everybody aligned around common objectives. Those are going to turn into key performance indicators, we are going to have targets on those key performing [inaudible 00:18:38] for everybody.

And you are speaking the language of the chief financial officer and the CEO, the COO, the executive suite. What this actually means though in a mechanistic bureaucracy again is usually chasing money. Now there is a department that’s making about new products and services but it’s only one department and they are usually long term thinkers, visionaries. In operations, people sell things, people make things, people buy things. What this is going to mean is, tell me how much money you want me to chase, either in increased revenue or in decreased plus.

And then what we are going to get is the silos are there for a reason. They are there because we structured the company this way. We hired people, we got people on the bus who fit into each silo and they are being measured in a certain way. And that’s what they know and that’s what their bosses know and that’s what their bosses’s bosses know. So now we have this x matrix that reflects what we are hoping to achieve in a somewhat abstract way. And then we have this bureaucracy, this functional bureaucracy of people who don’t really know how to improve. They are not lean experts and they also are not used to trying to think of objectives that would really affect the different departments.

For example, I’m in purchasing and I want to help engineering meet their objectives. On manufacturing I want to help sales meet their objectives. On the sales I want to make sure that I don’t destroy the leveled schedule in manufacturing. So they are not used to playing nice together and helping each other. And again, that’s a habit, it’s a routine, it’s the culture that exists. And simply having the x matrix does not change that culture.

Interviewer: I think that’s funny because, I think some companies actually promote this kind of competition. I worked at a company that did exactly the same sales. It goes south, manufacturing is just going to go make and you guys have different objectives, no connection and it’s sale’s job to overload manufacturing. It’s manufacturing’s job, to do what they can with these orders. I mean it’s kind of an interesting craziness.

Jeff: It is an interesting craziness. I say that the craziness at the top where showing people in chaos but at the level of the department within a silo, it’s extremely rational. I know exactly what I’m supposed to achieve, my boss knows exactly what I’m supposed to achieve. My boss can hold me accountable for achieving that. As soon as you start to have multiple objectives like how to cross value streams everything becomes muddier at the bottom level, at the working level and it becomes more clear at the higher level. We now have a clear line of sight to the customer that we didn’t have before. But what that translates into the silo is a lot of confusion because they are just not trained to meet these other types of objectives.

If I’m a boss and I have 10 plants and I have them all competing to be the low cost producer, that’s great. Then I can just sort of sit back and let the competition do my job for me.

Interviewer: It’s interesting because, I think they also put some type of countermeasure that says, ‘we need a corporate funding office’. Now you guys’ve got to make sure everybody is planning this in a way and they are covering 10 plants. Now the person at the bottom has a dotted line responsibility, like a matrix management system. It makes it even worse. I mean it’s kind of crazy. I think you right.

Jeff: Yeah. What’s happening is that this x matrix is sort of this heavy thing that’s coming from the top that’s coming to crash you. And at the bottom of this x matrix are the results. And that’s in fact how you are going to be judged. So when I look at this from the point of view of any one of these silos, I’m going to say, ‘cut the crap, tell me how much money you need me to save and I’ll figure out how to save it.’ Forget about all that other stuff. So let me just compare this to an old book. I think it’s actually out of print, but they went through a Japanese company’s annual Hoshin and this gives a different view than what I showed you. This could’ve been represented by an x matrix, but let me just show you what they did.

First of all, the president has met with his board, his leaders. They’ve done some analysis, they looked at the current situation they looked at where they are and they have come to the conclusion that there is a lot of opportunity to reduce cost by decreasing business cycles, by reducing lead time. How they came up with that, we don’t know. But they came to that conclusion. So they have both… now in this case, this is not a strategy again, it’s just simply cost reduction. We don’t know what the broader strategy is but the point is that they thought a little bit more deeply about how they are going to reduce the costs. And they are focused on lead time reduction to reduce the cost.

It’s a little clear, it’s a little simpler and each of these departments, manufacturing, finance, sales, each of these departments is going to participate in that process of lead time reduction with the aim of reducing cost. We have then another step which each function is asked the question, ‘what is preventing you from achieving this Hoshin?’ And if we compare this to the Toyota Kata process that I’d spoken about in other webinars, you can call these the obstacles. So what are the biggest obstacles, manufacturing, to you achieving those lead time reduction. And manufacturing comes back and says, our procurement and inventory system, so the way we get parts to our plant and the way we manage inventory is not responsive.

And therefore we have lots of the wrong kinds of inventory and too much inventory and we are going to focus on making the system more responsive. So that they want to become more just in time. That they put in terms of the barrier they face. Sales looks at bare data, they talk to the working level people, talk to a few levels down and what they discover is that we have enough qualified prospects to make the sales targets that we would like except unexpectedly after we think that they are qualified, we think they are going to be customers, they decline to purchase at the last minute. And that is our biggest obstacle.

So now we’ve got another step in the planning process to thinking about some of the key obstacles that will prevent them from meeting the present Hoshin. So then we are going to zoom in a little further, just the sales part. And then sales looks further and they say, ‘Really there are two things we do. One is direct sales to new customers and we are calling on customers and other sales support to existing customers where we… you know them, they might even call us or we might talk to them.’ But those are really different processes, in fact they even have different people who are working on those processes. And in direct sales, there’s really no system to evaluate and address what they might possibly object to in our product or service.

And then they even come up with a solution which arguably is premature in the planning process. But they come up with an initial solution which was that customer feedback and the user lab when they are developing their product and process is not doing a good job of anticipating customer objections. Therefore the customer objections come out in the last step when they choose not to buy. When they actually look at the product carefully, it’s not what they really want and they choose not to buy. But the point of cost is really in the development process. And then for sales support, they find that the users are having a difficult time using the product and the product trials are really unsuccessful.

And they believe that’s because they don’t have good training in how to conduct these product trials and they don’t have that input feedback into development process. So again, it’s part… for the development process in sales. And this is a great analysis that I don’t think it’s wonderful but what I’m getting at is at least they are going beyond simply saying we are going to be just in time, we are going to help better inventory turns. That’s going to lead to this money and they are starting to dig a lot more deeply into the actual situation today and the actual obstacles they face and the current state. And then they are starting to think about the direction of their countermeasures.

Interviewer: Jeff, you said it’s premature. The solution is a little premature, however, here’s what they have as a countermeasure. Is it worth doing it? Is it worth doing a little bit of a premature assessment or is there an appropriate answer I have no idea?

Jeff: So I would say that, particularly as you move down the organization Hoshin Kanri, I think identifying obstacles is a very good thing to do. Your initial assessment of the obstacles and then what they are calling the solution is really the next step in problem solving, which is where does the problem occur? It’s not really a solution, it’s really us just asking what is the point of cause of this problem. And I think that’s useful to ask. Recognizing that it is a preliminary answer, that you are not going to know until you dig deeper into the planned to check act process after you’ve broken the problem down in more detail.

So I think in the early planning stages, by calling the solution, they are going too far. What they are actually doing is not a solution. So now they go back and they say, for sales we are going to ask both direct sales to end sales support to improve by 50%, that is to get qualified products to actually buy the product after trying it, after the trial and improve that by 50%. Why 50%, I’m not sure but that’s what they came up with. So again, they’ve done some thinking. I’m not holding this up as a great example but they’ve done some thinking and there’s now more focus, direct sales has a clear picture of what they have to do and they also know that if they are going to be successful, they are going to have to work with product development. They are going to have to work with the people who are doing user tests, they are going to have to work with the customer in order to improve these trials. So it’s now defined in a cross functional loan.

Interviewer: So if we take a look at this process, it starts on the left. We’ve got a top down direction and it moves to the next level and then the next level and we are looking at countermeasures. But as we go back up now, we are setting the targets. How long does that process take or process that you are American… how long does it take from going from the right to the left?

Jeff: I know what Toyota does and you could make an argument that this really is a system so it should be going at all directions at once but they would never get done. So what they do is they use a serial process meaning we start somewhere and then we go to the next step, the next step. The starting point is the precedence Hoshin which actually comes from the board of directors meeting with the managing officers from all over the world will be poured into the board of directors to get data and information. But what the precedence Hoshin represents is, this is what the business needs. Based on a five year business plan, based on a 10 year region, this is what the business needs this year.

At that point when the president has renounced it which actually kicks off the Hoshin, the beginning of January, that’s not debatable. That’s not going to change because we go down from the plant level and discover this isn’t realistic. That’s what the business needs and it’s not related to our capability. So then as we go through the world and break this down, I’m asking how can I achieve the vision, how can North America achieve the targets set. And for North America based on the precedent Hoshin. So it ends up being top down, there’s dialogue and discussion and catchball but once the target it set, the target is set. And it’s not going to be revisited actually until six months into the year. After the six months worth of experience, actually implementing. At that point there is a major review. At that point you can have some changes to the targets.

This is what this company is using as their x matrix, the alignment matrix. And now what I know is that if I’m the global head of purchasing, I have a set of three things that I would need to achieve, A, B and C. And then I have three subordinates reporting to me and maybe there’s more. There probably is more but three subordinates, here are the three things they’ve taken on and I’m looking to see if there’s alignment. So for example, subordinate 1 has nothing to help me with my Hoshin A, but subordinates 2 and 3, that’s a major focus for them. So I have to look at this and see if the numbers add up and if I’m getting what I need. This is a simple 2×2 matrix and it would be embedded in the x matrix but it’s really pulled out so that it’s, I think simpler and more clear and the superior can have the…At this point, the strategy has been set at the top of the house and what I’m really interested in when I’m meeting with people who report to me is, are we aligned? And perhaps we would include in this matrix a few other departments who are in… it could influence the superior Hoshin.

The point is though, it’s simple and I like that. Okay. So if we move along and ask what we do once we have this direction. We’ve spent the three months. However, we represent the direction. We now have people at various levels that have targets set for them. And then what are we going to do and now relate this to Toyota Kata which says what the Hoshin Kanri has done for me is that it’s given me my direction for the year. This is where I want to be at the end of the year. It’s given me particularly results that I want to achieve. Now, how I’m I going to go about achieving those results? And the Kata says number one I have to understand the direction and I have to translate it into my language. Make sure that I understand it. So now I’m the plant manager and it’s very clear to me and it’s very clear to the purchasing and quality and manufacturing, and the direction between each department understands clearly what their direction is and that cascades down to the working level.

So everybody understands where we want to be at the end of the year. That’s the first step. Then what we are going to do is we are going grasp the current condition. There was some of that happened in the planning stage but it was very quick and dirty. But we are going to now take this target and break it down so that each department and even down to the process level, so I’m running one machine and I’m going to be looking, I’m going to know what my target is to support the machine department targets. And I’m going to ask what is the current condition relative to that target on my machine. And then based on that I’m going to establish my next target condition which is two to six weeks out. But in relatively new organization to this improvement process that it’s generally recommended to keep it shorter rather than longer. So two weeks is better than six weeks.

So here is what I’m going to achieve in two weeks and it’s not simply the target, say a cost reduction or defect reduction. It’s the pattern of work that I expect to achieve that I could see in two weeks. And then I’m going to PBCA my way for two weeks, working every day toward that target condition and try a lot of things. I’m going to do a lot of experimentation in the execution stage. So in other words, I’m doing planning dynamically and let’s say I have two week target conditions. Every two weeks I’m checking in. Did a reach the target condition, what’s my direction again, what’s my current condition now and what’s the next target condition that will get me another step toward that year end direction.

So I’m breaking down this very big hairy objective at the end of the year that may seem almost impossible to achieve into little steps which are actually improving the way we work, improving the equipment itself, improving the skills of all those people. We are actually improving our organizational capability to sustainably achieve that target. And we are doing it with the help of a coach. And this is the image that Toyota wants to happen every place [inaudible 00:39:48] systematized it. Now I would then ask is there something like this in place in the organization? And this is also very consistent with everything we talk about in developing lead leaders of self development, developing others, developing daily [inaudible 00:40:10].

This fits all the requirements we are describing for lean leadership. So I would ask are our people naturally doing this in the organization, is this what’s happening when a department manager gets the objectives or is he on a piece of paper or on his computer saying, ‘All right, I need this amount of money. I’m going to have to reduce labor by this amount. I’m going to have to improve uptime of the equipment and I’m going to reduce overtime. If I do those three things I’ll meet the target. And I’m going to sign that to an engineer and basically I’ve done my thinking for the year at the beginning of the year. And the rest of the year is executing my solutions.’

This process is a process of ongoing planning, trial and error learning and the basic assumption that you have to buy into or else this doesn’t make sense because there’s so much work is that we actually don’t know the best way to achieve the objective. That we are uncertain, Mike talks about dishonor and uncertainty. At the beginning when we set these plans through Hoshin Kanri, we don’t know how we are going to achieve them. And the only way we can know is by breaking down the problem into small pieces and trying things and checking to see what happens and then acting days of what we learn. So we have to go through some cycle of some defined process of improvement so that we can learn step by step. And if we do that we are not going to simply cut people and get low hanging fruit.

We are going to actually significantly improve the process. So it’s much more capable. People aren’t working a lot harder to make a bad process function. The process is very smooth and clear and it’s actually joyful to work in this environment.

Interviewer: So Jeff, on this scenario if you go two weeks between your checks, the only thing that stays consistent is your direction. You might grasp the current situation, you might say I’ve gone backwards in the last two weeks.

Jeff: Absolutely.

Interviewer: Then you could adjust again. But the direction stays consistent and this is all about living the year.

Jeff: Absolutely. Absolutely. It’s how you live the year, the process by which you live the year and if you go back to the core values of the [inaudible 00:43:02] away 2001 and which we put beside our leadership model, this is I understand a challenge and that doesn’t change. And I accept the challenge. And the culture has gotten to the point where I can accept the challenge also knowing I’m not going to get fired if I fail. But I’m going to do everything I can and I’ve got a team of people who will knock themselves out to meet this challenge. And the way I’m going to do that is through Kaizen and there’s defined process for Kaizen. This is one process for Kaizen. And we use that process and the process is going to involve me being at the [inaudible 00:43:47] what I’m I going to do at the [inaudible 00:43:48]. I’m going to be either a learner or a coach.

I’m going to have teamwork and I’m going to treat people with respect. So that’s really defining the values that drive the way we will work to achieve these challenges that come out of Hoshin Kanri.

Interviewer: It’s interesting because, not to take up too much time here, those values, the way you describe them is so vivid and I think a company’s values need to be explained in such a way where people could connect to. Otherwise they are just not doing it.

Jeff: Right. So the tire condition is not an outcome metric. So the Hoshin Kanri will generally lead to desired outcomes or results or how we keep score. Things like inventory level, lead time, [inaudible 00:44:47] per hour, quality level, productivity. So those are the measures of whether you are winning or losing. The tire condition is what is the operating pattern that we believe will lead to that desired outcome. Okay. So for example in that case of the Japanese company that wanted to reduce lean time, the sales department is actually going to reduce the cost by spending less money on every sale. They are going to put less effort into getting a sale. And the way they are going to do that is by having a pattern where the product is developed with the user in mind upfront.

So the user will want the product and when they actually run through a trial with that customer, it’s going to be run in such a way that the customer will really understand the product, be giving useful feedback which will then improve the development of that product. So they are not talking about characteristics of a process. How we get feedback, how quickly we get that feedback, the quality of that feedback. The quality of facilitating the trial. And now they are going to turn those into chart conditions. And they are going to do it one by one. So they will for example look at the way a trial is run and they might notice that the customer is participating and is asked some standard questions but the answers are not giving a clear picture of what the customer really needs.

So they might set a target of a chart condition of getting at least 15 unexpected types of feedback from the customer. I’m just making that up. But they are digging into the process. Another type of example is that we realize that if our equipment runs more, we’ll produce more parts, we won’t need overtime, we’ll reduce costs, if costs are our focus. And then we look at the machine and would be looking at the current condition and we see how long it takes to change over the machine which is actually tying up the machine. And one of the problems, one of the challenges is that we often see that the carts of tools are missing tools and they are not available at the time that we are ready to start the change over.

So now we have a chart condition of tool carts being complete and on time at the beginning of the change over. That’s something that I can work on for this machine over the next two weeks. And I can measure it and I’ve now made a step towards reducing the change overtime. And I’ve learned something, one of the reasons I’ve learned something is because I’ve tried one thing, I’ve only changed one variable and I see a result. Maybe it doesn’t make that much difference but it makes a big difference.

Interviewer: This example is excellent because you are talking about something that you can see happening if you have [inaudible 00:48:41] as an example. And that sustains that [inaudible 00:48:44] in three days but you go out two weeks. Is there some logic to that? I guess it’s the next target condition shouldn’t be so far out that you can’t make the connection.

Jeff: You want the chart condition is going to, you are going to achieve the chart condition by overcoming, usually several challenges, if I ask what prevents that from happening? Why is it that these carts don’t have the right tools? Why is it that they are not there on time? There’s a variety of reasons for that. And it may have to do with the tooling department and they are sharpening the tool and there’s a long queue and you are not prioritized right, so could be involved in other department. It could be that the car itself is not designed in a way that shows me clearly what should be on the cart and what’s missing. [inaudible 00:49:39] issue. So there will be a variety of challenges, that is not clear what tools should be on the cart.

The department that sharpens the tool is not prioritizing properly. So we have now several challenges that we have to overcome to meet this chart condition. And for each of those challenges we want to encourage the team to experiment with a variety of different improvement ideas, innovations. So that can’t happen in one day or three days. It’s probably going to take a couple weeks. And we’re also assuming that it’s better to have small amounts of activity each day. So the standard for Toyota Kata is 15 minutes each day of active… we spread over two weeks, then to have say eight hours of activity for three days. What we want actually is for the management of that process to be responsible for achieving the challenges and the chart conditions and using this process.

We don’t want the six sigma [inaudible 00:50:47] through the engineer from staff to be responsible. And that’s how you get deployment of these objectives every place, is by having enough people with the skill for improvement that we can actually try a lot of things, continuously learn, continuously improve, and then step by step move toward the challenge.

There’s a lot of evidence in learning. For example, that we learn much better in bite size chunks. Where we hear an idea, we reflect on it, we do something, we take some action, we practice if we’re learning a skill like music or [inaudible 00:51:33] looking or something. But we practice then we get the next bit of information, then we practice and we get the next bit of information and then we practice. The idea of cramming before a test, we know that almost everything that you cram into your mind even if you get an A on the test, will be out of your mind within few weeks. It goes in short term memory and it never makes it to long-term memory.

There’s a similar process where unless you break this down into small steps, you’re not going to really look in detail at the process and learn how to improve the process in a sustainable way. It will just make these big steps where you change 50 things at once and nobody will understand and nobody will implement them, and that’s why they’re less sustainable. So again the idea is to go from here’s what’s the president wants for the whole company. Here is what I need in my department. Here is what I need at my machine and here’s what I’m doing on a daily basis. I’m actually doing PDCA. I’m doing continuous improvement. Continuous improvement then, it is no longer just an abstract concept, that that’s meaningless. Continuous improvement doesn’t mean we have a lot of things going on. It means that throughout the organization people have a direction and every day they’re doing something to get closer to that direction, to that higher level of performance.

And what they’re doing, they’re learning from it. So they’re planning. They’re doing the experiment. They’re checking, reflecting on what they’ve learnt. They’re figuring out what does this mean for me. They’re going through that thought process in these small steps. And then that gets them to the target condition in two weeks which is actually a significant part and will show some significant improvement. And then that then leads them to set the next target condition and iterate their way to the year end results. And at no point are they cramming at the end of the quarter. They’re not cramming in the three-day Kaizer event.

They’re spreading the work out so you could look at this as how do we achieve a heijunka, a leveled work load in the improvement process or improvement is a little bit everyday, instead of these big chunks that are beyond our real capability to absorb and understand a little bit [inaudible 00:54:21]. And finally again, a slide from Mike and he has a great slide share that talks about the coaching process, starting with value stream mapping, the current state, the future state and we are actually now at the future state for an entire value stream. And we have measures of the current state where we are in key performance [inaudible 00:54:53]. And if we achieve this new value stream, here’s where we’ll be in the future state. Here’s the outcomes that we will achieve in cost, in quality and whatever your objectives are.

And now that we have this future state value stream map, William, the vice president, is responsible for that entire value stream. He’s responsible for several value streams actually. And then Nancy is responsible for one value stream and she’s led the process of bringing the future state. And the future state is giving the vision, you can say that’s part of Hoshin Kanri would be here is the value stream map and then here’s is what I will achieve if I achieve this value stream, this process. Then Nancy is going to then be working with Steve who has one piece of that future state value stream to achieve. Luke who works with Rodger who has one process and then Rodger is working with the operator on that process. So in this case we have alignment and you know their storyboards. And William is coaching Nancy and Nancy is coaching Steve, Steve is coaching Rodger.

And they’re meeting every day at their storyboards and they are understanding the direction. They’re checking to make sure we understand the direction, we understand the current state. This is the next chart condition which is aligned because Steve will make sure it’s aligned. Because he is responsible for Nancy and Nancy will make sure Steve is aligned because she’s responsible for William. And then we’re going to be doing this iteration. This working pattern for improvement is going to be this iteration that’s happening on a daily basis. So again, this is what we want to happen in lean.

This is what Toyotas are unusually good at even though they have breakdowns all over the place, all the time, but they’re still on average. They’re unusually good at having many people who understand this and are able to do that breakdown in a way they’ll meet daily and do PDCA. The coaching Kaya and the improvement Kata are a formal process for kind of forcing us to take this abstract result, turn it into what my process will need to look like, what do I have to look like in order for me to consistently achieve those objectives. And then gives me the steps to evaluate where I am, self [inaudible 00:57:56] condition, run experiments and see if I’m getting closer and closer, it forces you to do what we’re trying to get you to do at all levels.

And again it’s a teaching tool. It’s Kata, it’s intended for the beginners to learn. Once you get really good at it you don’t have to go back to following every step exactly as it’s laid down in the Kata. In most organizations it’s very unusual to find all but maybe a few people, say the black belt, they work for Toyota, they work for [inaudible 00:58:31] Toyota. They have a good picture of how this improvement process should proceed and what needs to happen next and they have the skills to do it, but they’re a very small percentage of the organization.

Interviewer: Well Jeff, I think in general, lucky for our business model here, I would say there’s a small number of people that can coach. And if everybody needs to become a coach, they need the process in place, which also eliminates consultants. The last thing you want is consultants coming in, doing the work and leaving you with something you can’t maintain or sustain.

Jeff: Well. Yeah. I wouldn’t say limit the consultants. If you have the internal coaches to coach and start the process then you don’t need the consultants, but if don’t have those people then you have to start the process. So I sometimes use the analogy of the consultants bringing the yeast. The initial yeast to get the dough started. And you need to get the dough to start rising. So you need something to trigger the process and then it will start to grow and build by itself to the point where you don’t need the consultants anymore. My opening question was why is it that on our Lean Leadership model we have put Hoshin Kanri as the fourth step after there’s a lot of leadership development? Leadership development is happening through real projects, through improvement projects and those projects need to have challenges. They need to have targets. We need to have a process for going through those projects but we’re going to normally … even an organization that’s not very mature in improvement and the Lean Leadership, we’re normally going to start those projects in selected areas to begin to see the organization with leaderships who can be coaches.

Then when we develop enough capability, then we can start to connect the dots, connect those improvement objectives with a broader plan for the business. So the issue is that few organizations have the mature leadership with the capabilities needed to make Hoshin Kanri right. They lack the mature leadership to develop a well articulated strategy. They lack the ability to develop a clear business plan that goes beyond financial plans. And then the organization lacks the ability to translate those desired outcomes into actionable plans for improvement that we can then learn our way to through smaller steps and through planned check [inaudible 01:01:20].

So when all that is lacking in the skills of the organization, has maybe a culture that discourages failing, trial and error, that doesn’t allow the time for learning when all of that is … and when we have these [inaudible 01:01:35] for bureaucracies, we have to straighten out the bureaucracy to some degree and change the culture of that entering the skill set. And then when we do that, we can then have a certain level of Hoshin Kanri, to some degree people can participate. And then the Toyota way lean leadership we have the Dyna example at the end, where Garry Canvas is a very skilled lean leader and the CEO at the time.

At first he set targets, a few very specific targets that the business needed to survive or [inaudible 01:02:14] bankruptcy and there was very little catchball. And then they’re coaching the senior leaders and how to go about achieving those targets through actual price down. And then it started to cascade down from the organization, but you have to start with steps to build capability which allows you to then set more challenging objectives with the cooperation and with catchball and with participation, and allows you to start to spread that process of creating the Hoshin Kanri downward and across the organization. When you build that capability year by year by year outside of a company that’s really serious about this, there’s a medium size, so it’s a more attractable.

They are great coaches and they started somewhere with developing leaders. They might have a reasonably mature Hoshin Kanri system at the end of five years. I say reasonable, still a bit strong probably some part of the organization, maybe an operations and not quite a strong in the support structure. But they would have something that looks like Hoshin Kanri within five years. So in short, Hoshin Kanri is an evolving capability and it won’t solve your problem to bring it in at the beginning. The root cause of the problem is actually the skills, capability of your leaders and the culture of your organization. [inaudible 01:03:56]

Interviewer: Thanks. I appreciate it.

Jeff: [inaudible 01:03:56]

Interviewer: Bye bye.

Jeff: Bye bye.