Lean Strategy Development

What is Lean Strategy Deployment?

Lean Strategy Development is an important step in the Lean Journey for an organization.  Many companies start making changes with little thought to a plan for the process work or a plan for the development of their employees.  There are many things to take into consideration and several approaches we can learn from to improve our Strategy development process for a lean implementation.

Hoshin Kanri – Toyota calls their Lean Strategy Deployment process Hoshin Kanri.  Hoshin Kanri has been referred to by many different individuals over the years and is typically interpreted as Hoshin Planning, or Lean Policy Deployment.  The translations serve the same purpose in order to keep an entire organization’s vision, goals, and actions aligned throughout the year. Hoshin Kanri, or Lean Strategy Deployment, is a key part of the Lean Management process that engages all employees and leadership around a common strategic plan. 

Lean Strategy Deployment – Hoshin Kanri

1) Starting with True North and a Vision –  The first step in the Lean Strategy Process is to make sure the company has a Vision and long-term strategic objectives, typically 3-5 years.  The key to Toyota’s successful Hoshin Planning process is the long-term focus.  This long focus minimizes the distractions of non strategic issues that happen throughout the year.  The Lean Strategy Development at this level will have clear breakthrough objectives that will challenge the company over the next few years.  

2) Break down Vision into Measurable objectives – The next step is to break the 3-5 year strategy into manageable objectives that the company can work on over the next year.  Depending on the size and structure of the organization, the objectives may look different.  In a multi-plant or multi-product line company, the planning process might be seperated and aligned accordingly.  In a smaller facility, there may be a need to develop planning objectives by functional department.  Organizations should develop a Lean Strategy process that makes sense for them and aligns the company objectives throughout the company.

3) Frequent review Cycles – An important step in the Policy deployment process is the frequent review cycles that verify progress to goals and objectives.  There will need to be multiple review cycles for the different levels and areas within the company.  Leadership will need to review progress at minimum on a quarterly basis along with executives.  Leadership will also be reviewing more frequently with mid-level management and even daily on the shop floor gemba walks.  The frequent strategy reviews allow Leadership to ensure alignment of all activity to the corporate objectives and vision.  

4) PDCA – The scientific problem solving process, or PDCA, should be the basis for all activities in the Lean Strategy Process.  The review cycles should have a clear structure and treated as a PDCA cycle.  Each review should have clear objectives and actions to achieve those objectives.  During the review process, there will be learning and adjustments based on the performance.  PDCA cycles will happen at Quarterly, weekly, and even daily intervals, around structured hypothesis.  Each PDCA cycle will have continuous improvement goals to be achieved and problems to be solved.  

OGSM Model as a Lean Strategy Tool

What is OGSM? – OGSM stands for Objectives, Goals, Strategies, and Measures.  The OGSM model is a basic planning process tool that organizes the breakthrough objectives and the manageable objectives within the company.  The OGSM template is a compliment tool to be used with Policy Deployment.

OGSM template – The OGSM template is simple in design.  The template can be filled out using two key rules to make the user is thinking about the information.

1. The form is designed left to right and ties each Objective to Goals, Goals to Strategies, and Strategies to Measures.  
   1. 1. 1. Objectives are “breakthrough” objectives of the company.  These will be at least 1 year objectives
         2. Goals are the measurable way to know if you are moving closer to the Objectives.
         3. Strategies are the actionable activities that the organization is working on to meet the goals.
         4. Measures are the measurable way to see if the strategies taking place
2. When filling in the information, use the words, numbers, words, numbers rule.  Objectives should be expressed in words.  Goals should be expressed in numbers.  Strategies should be expressed in words.  Measures should be expressed in numbers.  

OGSM Development – Following the Hoshin Kanri process, there must first be a clear vision to start the process.  The OGSM will then be used to breakdown the objectives and build the process for PDCA cycle reviews.  The OGSM can typically be developed with a leadership team over a couple days.  

Strategy Focus Areas

Lean Strategy should always start with vision and an enterprise view of the organization.  The size and structure of the organization should determine the breakdown of the Lean Strategy.  Lean strategies may need to be targeted towards specific functional areas.  These are some common Lean strategy areas that may need to be understood and used within the broader Planning process.  

Manufacturing strategy – This is easily the most common area of focus when discussing the Lean Journey.  The majority of Lean Journeys start on the manufacturing floor and eventually spread to other functional areas.  The majority of all the lean tools were first used in the manufacturing environment.  Having a clear strategy for your manufacturing process is critical to servicing your customers.  Lead-times, quality levels, cost, and reliability are all impacted by the manufacturing strategy.  Manufacturing needs clear direction from leadership around immediate expectations and what the markets will be expecting in the future.

Inventory Management strategies – Excess inventory is one of the waste seen in the manufacturing process.  Not all inventory is necessarily bad.  Inventory is simply a reflection of the current process capabilities in response to the customers needs.  Reducing inventory is the most common direction as a response to cost within the process.  Reducing inventory is common, but there may be other strategies that are customer facing.  Stocking programs to meet short lead-times is another common practice.  Lean inventory strategies may be more complex by strategically holding inventory mid process. Depending on the process, this strategy can create flexible capabilities to meet customer needs while also reducing cost of manufacturing.  

Lean Procurement strategy – Procurement strategies can be very similar to the Inventory management strategies.  What separates Lean Procurement strategies from internal inventory strategies is the fact that different businesses are involved with the supply base.  Procurement professionals will work with suppliers to balance the total cost decisions in the purchasing process.  Buying larger lot sizes will lower the individual part cost, but it will also increase the inventory levels within the company.  Another example is the frequency of order processing.  Frequent orders may cost more, but they will most likely reduce the inventory levels.  Lean procurement strategies must look at the total picture in relation to the company strategy.

Lean Supply Chain  – A total supply chain strategy is the best level approach in reference to inventory and procurement strategies.  A lean supply chain strategy focuses on the best total cost decisions and strategic decisions for the company.  A good Supply Chain strategy works with the supply base partners to eliminate waste.  Extending the continuous improvement process deep into the supply chain can provide excellent results for a organization. 

Lean Strategies for business process improvement – Lean has been used as a strategy outside of the manufacturing process for many years.  Lean strategies for business processes in and out of the manufacturing space is an opportunity to impact your organization.  Depending on your business core competency, this may be the most impactful area that you should focus on.  Many business processes can have a direct impact on lead times, quality, and customer experience.  

Lean Strategies for Product Development – Toyota incorporates the Strategies for Product Development directly into the Hoshin Kanri process.  The impact of new products may be one of the most critical areas directly related to the customer.  The impact of new products can also have a monumental impact on cost, quality, and reliability.  The product development cycle done correctly will impact key metrics and strategies in a very positive fashion for a company.  A poorly managed product development cycle can have disastrous results.  

The “Lean Startup” Strategy – The Lean Startup Strategy is a more recent movement to Lean.  Using Lean in Startup companies is not new.  Author Eric Ries brought the topic mainstream with his book, “The Lean Startup” in 2011.  Eric describes a practical approach to using the PDCA cycle and problem solving early on in the development cycle of startups.  This approach minimizes the risk and collects feedback as quickly as possible direct from the customer and is a great Lean Strategy Development Process.  

Lean Strategies in Healthcare – Healthcare is the most notable industry use the Toyota Production System outside of the Manufacturing sector.  There are several Healthcare systems that have used Lean Strategies to redefine how they service the patient.  Lean Healthcare Strategies are used to create great patient experiences.  They can be used to reduce infections, eliminate long lead times, and assist doctors and nurses to provide better care.