Strategic Deployment: How To Think Like Toyota

There exists a misunderstanding among many manufacturers trying to emulate Toyota's success that simply deploying lean tools will reap them rewards similar to those enjoyed by the Japanese automotive giant. Not so -- too many firms already have discovered that isn't the case.

Some also have suggested that Toyota's accomplishments in the automotive sector derive primarily from a lack of the legacy costs that dog U.S. competitors General Motors, Ford and Chrysler, and that there's nothing fundamentally better about the way Toyota makes cars -- it's merely the extra health care, environmental and labor expenses that are slowing down the Detroit Three.

In reality, Toyota's success derives largely from its planning and execution system, says lean consultant and author Pascal Dennis, a former manager at Toyota Motor Manufacturing Canada. Called hoshin kanri (or hoshin planning), the management system (which was not invented by Toyota) helps Toyota remain competitive year after year by keeping the entire organization's eyes and actions focused on achieving the same goals. It's not just an automotive solution, either, as other manufacturers also are reaping the benefits of hoshin planning.

So what exactly is hoshin planning? The Japanese phrase "hoshin kanri" has been interpreted in several different ways. Among the more frequent translations are "strategy deployment" or "policy deployment." Broadly speaking, strategy deployment aims to formulate clear corporate objectives and goals, disseminating and aligning those objectives throughout all levels of the organization, and then creating plans of action to achieve those objectives.

"It's all about focus, separating the trivial problems from the really important ones, and how they relate to the organization's strategy," says Mark W. Smith, a consultant with Breakthrough Management Group Inc. "Do the improvement actions that go on every day relate to strategy? And then what do we do about them?"

Hoshin kanri is fundamental to Toyota's success today, says Dennis, currently an instructor at the Lean Enterprise Institute. He says Toyota's ability to grasp the situation, identify two or three obstacles, develop meaningful plans to address those obstacles, and deploy them "is outstanding."

Another company using strategy deployment, HNI Corp., has used a policy deployment mechanism for more than a decade. The office furniture manufacturer, an IndustryWeek Best Manufacturing Company for five consecutive years, deploys its strategy companywide using a Plan-Do-Check-Act (PDCA) sequence that moves from a three-year corporate plan to a unit-level development process that creates one-year plans with action steps. Progress reviews and annual reviews evaluate progress and then the cycle starts again, explains Todd Murphy, vice president and general manager of The HON Co.'s Cedartown, Ga., facility, a 2005 IW Best Plants winner. HON is the largest operating company within HNI Corp.

Also central to policy deployment at HON is rapid continuous improvement, or RCI, a company culture focused on making breakthrough improvements. Further aligning policy deployment at HON is its reward system, which is linked to the achievement of policy deployment goals.

Elements of Strategic Deployment

Among those who teach hoshin planning, or strategy deployment, there is no universally agreed upon set of elements that comprise the management system. Several are common to all practitioners' toolkits, however, including the need for the corporation to clearly understand and define its vision and objectives.

Dennis describes it as a company's need to define its "true north" in a meaningful way. That means it's important for a firm to truly understand who it is and what it believes in. Indeed, Shankar Basu, president and CEO for Toyota Material Handling U.S.A. Inc., says that in the late 1990s Toyota began working to put down on paper its own "DNA," answering questions such as "What drives us? What is our fundamental philosophy?" What emerged, he says, "is an idea, a standard and a guiding beacon for the entire global organization."

Also fundamental to strategic deployment is the PDCA process -- on an enterprisewide scale. Made popular by management guru W. Edwards Deming, it is a four-step problem-solving process, dynamic in that it cycles continuously to spur greater improvements. In the Plan phase, management must understand its current state and develop a plan to meet its objectives. The Do phase translates those plans into actions, organizational level by level.

At HON, each functional area within the operating companies develops its own one-year plan and specific actions. For example, explains Murphy, the operations team develops plans that involve input from the corporate level as well as from each operating facility and from support functions such as procurement, quality and continuous improvement.

At the Check stage of PDCA, monitoring and evaluating of results against objectives should occur. This phase may be the most difficult, says Dennis, adding that enterprise failure of PDCA most commonly occurs here. It's been thought of as the "ugly duckling" of management, "neither respected nor rewarded," he says. The Act phase (Dennis prefers to call it the Adjust phase) is about problem-solving and improving the entire system.

Breakthrough Management Group's Smith identifies hoshin planning's review cycles as "one of the more important but often overlooked features." Tactical shop-floor reviews may occur weekly, while upper-level management reviews occur less frequently. These review processes, he notes, bring rigor to the management process. At Toyota Material Handling, "each functional leader at Toyota, like myself, has a midterm as well as an annual hoshin kanri for the entire company and their own areas," says Basu.

Also at Toyota -- and it will come as no surprise to those who understand the Toyota Production System -- strategy deployment does not operate in a "thou shalt" manner, explains Dennis. People are not simply told what to do, as in conventional planning. Instead, they are engaged in the process.

Implementation Challenges

'No time' is possibly the most frequently cited obstacle to implementing enterprise PDCA, says LEI's Dennis. "It is usually [due to] two or three things. One is 'too many meetings,'" while another is too much e-mail. "In order to free time for improvement, a key learning point is that managerial work is two-sided," he continues. "There is routine work -- making the numbers -- and there is improvement work. With respect to too many meetings we need to set standards." He says there also may be too many feedback loops.

Murphy says a primary challenge of policy deployment at HON is "ensuring we stay focused on the key initiatives throughout the year and allocate necessary resources to achieve the challenging goals we set." A dynamic business environment exacerbates that challenge, but "the PDCA cycle is a key enabler to ensuring success."

He also says policy deployment "allows us to communicate key strategies to many members and help them ultimately understand how they can make an impact. For example, the same core strategies remain aligned from the highest to the lowest levels of the organization."

On a final note, Dennis points out that a company doesn't need to be pursuing lean to implement hoshin planning. Strategy deployment, he says, is "just good business."