Companies like Danaher, Ingersoll Rand and Xerox can teach us a lot about adopting Policy Deployment / Hoshin Kanri. These are 3 business' stories of strategy deployment success that you need to know.
Written by: James Milsom, Digital Marketing Manager
Defining, cascading, negotiating and delivering goals must be done right. A successful strategy (and implementation) makes market leaders. Every decision must be aligned to your goals, with effective communication and absolute clarity of your progress, and this is underpinned by a strategic methodology.
Whilst Management by Objectives remains a popular strategic framework, Policy Deployment (Hoshin Kanri) has risen to prominence since its inception from the Lean movement in Japan in the 1950s.
This for good reason. The Policy Deployment process is heralded as a one of the most rigorous strategic methodologies due to its linking long-term and immediate actions, as well as being a foundation for coordinated, cross-organizational planning.
Organizations like Danaher, Ingersoll Rand and Xerox illustrate the transformative power of well-executed strategy through an effective goal cascade via Policy Deployment. Read on to learn their stories.
Danaher is a global science and technology innovator with multi-billion-dollar businesses in life sciences, diagnostics, environmental and applied solutions, and dental markets.
In the last three decades they have bought, integrated and improved the performance of hundreds of acquisitions.
What you need to know about their business system
Originally known as the Danaher Production System, Danaher’s system was based on the best Lean practices that were coming out of Toyota in Japan in the mid 1980s.
The focus was to build competence in Lean for the next 15 years, driving waste out of the system, and implementing a toolbox of continuous improvements for every facet of the production environment.
In 2001, the logic of the Lean approach extended to growth opportunities, and Danaher built a similar toolbox to enable the company to be just as rigorous in sales and marketing as they had previously been in production.
The toolbox was not a static one and was continuously refined and improved over the years as part of the Kaizen philosophy.
In 2009 a third area was added – Leadership. The combination of Lean, Growth and Leadership provided Danaher with a complete business system.
How Policy Deployment helps Danaher
It is through Policy Deployment that Danaher converts their top-level strategy into execution using the X-Matrix as part of the toolset.
Annually, each of the Danaher operating companies creates a strategic plan that identifies opportunities along two tracks: improvement opportunities that exist around running the business day to day, and the more challenging
opportunities that involve larger or breakthrough transformation.
These translate into improvement priorities and, depending upon the nature of improvement priorities, a decision is taken on which toolsets across Lean, Growth and Leadership will be used.
Progress on the various programs, projects and action plans will then be measured monthly, or more frequently, against the relevant KPIs.
The combination of using this annual process to cascade, align and manage the vast array of initiatives, and measure the outputs to a regular drumbeat has delivered stellar performance for Danaher.
What we can learn from Danaher
When examining 25 years of Danaher’s total shareholder return vs. S&P, the years 2001 and 2009 hold significance.
It isn’t coincidental that the share price dramatically increased as Lean methodology grew into functions and
areas beyond the production environment.
It is the Policy Deployment planning process that ensures that planned improvement will drive commercial performance in its broadest sense in the most efficient way.
In 2009, Michael Lamach was appointed President and COO of Ingersoll Rand, and launched a transformation programme to build operational excellence based on lean principles.
This was a key element in his pursuit of achieving premier performance.
The development of Ingersoll Rand’s Business Operating System was critical to implement Operational Excellence as it provided a systematic way to grow and improve execution.
There are four key elements: the goal deployment process, functional excellence, value stream transformation, and ensuring the company has common systems.
Ingersoll Rand use an organization wide, structured process to align and deploy Breakthrough Goals, Annual Goals, actions and metrics. The process is extremely effective as it provides accountability for selecting, aligning, prioritizing, measuring and monitoring goals.
From top level company goals, cascaded down throughout the organization, alignment and common purpose is established.
Each function at Ingersoll Rand develops, governs and improves its work to accelerate their success. As a result, each function supports growth, margin expansion and working capital improvements.
Value streams are implemented across the company, with product management, engineering and integrated supply chain team members work together to define new products, solutions, services and processes. This coordination also results in faster time-to-market, increased productivity, and improved quality and delivery.
A use of a global enterprise resource planning (ERP) process and technology ensures agility and the ability to accelerate operational excellence across the company.
The results from using Goal Deployment (Hoshin Kanri), together with the other four elements of the business operating system have been outstanding.
Complexity and waste has been dramatically reduced. Meanwhile, growth programmes are led by multi-functional product growth teams all working towards a common, well-communicated goal.
Ingersoll Rand has been able to bring its people, processes and production together, managing its strategy in a coordinated way, with Hoshin Kanri continuing to provide visibility on how each employee fits into the wider plan.
What can we learn from Ingersoll Rand?
A well-defined business operating system is the backbone of success. Ingersoll Rand, Danaher and Fortive, and the Toyota Production System's success speaks volumes.
Consider your existing processes and systems and if they hinder or support your strategy execution.
Policy Deployment is widely acknowledged as being used in most large Japanese businesses to provide a core capability which integrates strategy and daily management, and Xerox UK uniquely adopted this methodology.
Xerox UK employs thousands across 50 different locations for sales and marketing, supporting Xerox Corporation's focus on manufacturing and selling print and digital document products and services in more than 160 countries.
Given the scale of Xerox, naturally its organizational structure is one which could all too easily present significant challenges in aligning and engaging their workforce in ensuring their efforts support the achievement of their goals.
With four Business Development Units, regional Customer Business Units which covers sales and service, and then centralized corporate functions of legal, finance, quality, HR and corporate communications this is but one layer of complexity.
When considering that business processes are based on customer groups, not specialized function, and a widely dispersed workforce, Strategy Execution becomes increasingly difficult.
Beyond Total Quality Management
Having originally applied Total Quality Management (TQM) in the 1970s, the results of this slowed down, calling for a major review of corporate strategy in the early 1990s, which involved Fuji Xero, an avid applicant of Policy Deployment.
Today, Xerox UK have nearly 30 years of Policy Deployment experience, with Xerox Corporation tweaking this to their Managing for Results methodology.
Originally seen as a manufacturing system, Xerox UK's choice to adopt Policy Deployment as the name, specifically their FAIR framework, as opposed to Hoshin Kanri was a conscious one at that.
Reluctance by a sales and marketing focused business to adopt TQM and Hoshin Kanri was because of the inherent link between those and manufacturing. Thus the birth of the FAIR (Focus, Alignment, Integration and Review) framework.
This is derived from the Xerox Corporation's Vision.
Aligning local level employees is achieved with their Blue Book and Employee Guide to Policy Deployment. Intended for managers by choice, this is the guide for cascading the key programmes, and includes information on each sponsor and programme scope.
It also includes details on the role of managers in communicating the programmes. The managers will translate, communicate, negotiate and define goals (catchball) and projects using this information.
Other supporting documents are summary sheets of how individuals contribute (Roles, Responsibilities and Objectives), and Start Year presentations, which go through the Blue Book and Employee Guide.
As part of the framework, Xerox are mindful of integrating its other systems for a comprehensive approach. This includes their TQM system (Leadership Through Quality) and their business management model (Xerox Management Model - XMM). Certification in the XMM serves to drive even greater alignment in process and thinking.
Three level of management review occur. The first two are at business unit and company level.
Each business unit has a management team which conducts a monthly review where short term action is identified. For Xerox UK the Quality Management own these, but they also take place at a central level where the Managing Director and Heads Of review overall progress. These reviews are not solely about the key programmes.
Operations Reviews are also conducted on a quarterly basis with senior managers reviewing performance with each unit's general manager and staff, with an agenda which focuses on achieving strategic consistency.
What can we learn from Xerox UK?
In its first iteration, Policy Deployment in the FAIR framework yielded results, but stuttered due to inconsistent reporting, and likely a combination of fearing accountability and failure meaning leadership were misaligned to strategy.
However, by 1998 a change in leadership resumed performance. The new Managing Director's approach was to streamline the documentation, and form a central function to oversee the deployment.
This demonstrates the risks of over-complicating Policy Deployment, and is a clear lesson for any business applying Hoshin, Policy Deployment or their own framework, such as Xerox, for their strategy.
Learn more about Policy Deployment
Click here to learn more about Policy Deployment, or take a look at these content recommendations:
- What is Hoshin Kanri? The definitive answer: Learn about Hoshin's origins, the seven steps of execution, how Hoshin is different from policy and goal deployment, plus much more
- Hoshin Kanri - OGSM - OKR: A case of apples and oranges?: Uncover the similarities between Hoshin Kanri, OGSM and OKR in our comparsion feature.
- Download our Hoshin Kanri eBook: Read how Hoshin Kanri is supporting organizations to drive great business results, how two businesses have used the methodology to build their business systems, case studies and more.
About the author
James is i-nexus' Digital Marketing Manager. Bringing a passion for strategy from a marketing angle, you'll find he loves to intertwine sports and strategy. His background covers industries such as energy, broadband, education and employee benefits.