The document discusses Hoshin Kanri, a strategic planning and management method used in Lean management. It involves creating an "X matrix" to align long-term goals, annual objectives, priority initiatives, and key performance indicators. The matrix is filled out in steps: 1) defining long-term goals, 2) mid-term objectives, 3) short-term actions, 4) agreeing on metrics, and 5) marking dependencies between initiatives. Once the strategy is defined in the matrix, it is broken down into tasks and projects using Portfolio Kanban boards to track progress towards goals. Metrics are discussed as important lagging and leading indicators to monitor performance.

1. Lecture 8. Hoshin planning
The words "hoshin" mean “direction” in Japanese, it is a statement of desired outcomes.
Kanri means “management and execution”. Used together, Hoshin Kanri is direction plan-
ning, direction management, direction execution or strategic policy deployment.
The main goal of the Hoshin is the alignment. Aligning people with your vision. Well, it not
easy to start a business and reach a seven-digit revenue. And, it is never easier, in the history
of mankind, to make people care about your products and make people align with your vi-
sion.
Alignment is among the greatest challenges of the big enterprises, where thousands of peo-
ple do thousands of jobs every day. It is often a challenge even for smaller companies,
where work is much more dynamic and the big picture can easily be lost.
When Hoshin Kanri is implemented effectively, it forces the leadership team to come up
with a vision or strategy and a list of complementary goals that will help to create align-
ment. Hoshin Kanri bridges the gap between strategy and execution by creating alignment
and focus.
The Hoshin Kanri method is among the most powerful tools in the Lean arsenal for effec-
tive strategic management and alignment. And the most popular way of implementing
Hoshin Kanri is applying the X matrix.
The Hoshin Kanri X matrix template is a single-page document that includes goals, strate-
gies, strategic projects (initiatives) and owners.
In Lean management, the goal of applying the X matrix is to align the long-term needs with
strategic initiatives, identify the most important activities along the way, and list the metrics
that you need to improve.
A typical X matrix would normally look like this. The name comes from the X that divides
the matrix into 4 key quadrants:
• Long-term goals (south)
• Annual objectives (west)
• Top-level priorities (north)
• Metrics to improve (east)
At the corners of the matrix, template are visualized the dependencies between the activities
in each section. On the far right side of the diagram are placed the names of the people re-
sponsible for executing the plan inside.
How to Apply the X Matrix Template?
Typically the leader of your organization is responsible for setting up the matrix (if applied
on a grand scale) or any manager who is implementing it on a team level.
When filling the X matrix template, you need to list the most important parts of the diagram
closest to the center.

2. Step 1: Set the strategic vision & goals clearly
You must start with the long-term goals of your team. In Hoshin Kanri, they are normally in
the frame between 3 and 5 years.
List them at the bottom quadrant of the X matrix template and have in mind that every ini-
tiative will have a great number of smaller tasks that your team will have to process before
achieving the goal.
Consider the capacity of your team before rushing into filling long-term goals.
A simple way to calculate the capacity of your team is to break down each initiative into an
actual plan for execution to the smallest possible task before listing the next long-term plan
in the matrix.
Step 2: Define key mid-term objectives
After your long-term goals are all set, prepare the most important objectives that you aim to
achieve in a shorter time frame (e.g. 1 year) and put them in the left quadrant of the Hoshin
matrix.
To create your annual objective, you have to consider what you need to accomplish first to
reach your strategic objectives and then build on from there.
Step 3: Set short-term actions
Next, you need to fill the top quadrant with the most important activities that your team has
to complete in order to achieve the short-term goals. As a Lean manager, this is basically
your to-do list for the upcoming months.
Step 4: Agree on metrics and key performance indicators
The right quadrant is just for the metrics and KPIs that will keep you on track during the
time when you are executing the company’s goals.
However, you need to be very careful when putting the key metrics on the Hoshin Kanri X
matrix. So to create as accurate metrics as possible, you can apply the Hoshin Kanri
Catchball process and share your plans with the rest of the stakeholders. By doing so, to-
gether you can agree on the most crucial metrics that you need to list on the diagram.
Step 5: Connecting the dots – mark the dependencies
Last but not least, you should complete the picture by specifying the dependencies between
different strategic initiatives. Often, there will be dependencies among the different strategic
initiatives. It means, some initiatives might need to be completed before others can be initi-
ated. Because other initiatives will depend on the previous. So it is useful to lay out these
dependencies on a timeline.
To mark the dependencies between the initiatives in quadrants in your Hoshin Kanri X ma-
trix, you need to place an appropriate figure in the squares on the intersections between each
quadrant in the corners of the diagram.

3. Going from Strategy to Execution
Once you have the strategic vision and dependencies clarified, it’s time to turn the strategy
into tasks and projects. You can easily do that by implementing the Portfolio Kanban
method, which is another powerful Lean method that complements Hoshin Kanri.
Portfolio Kanban allows you to break down large projects into smaller initiatives on multi-
ple levels and link them to each other so you can have absolute transparency of what needs
to be done and how your affairs are progressing.
For example, you have decided to focus on 1 strategic initiative in the next 4 years. You cre-
ate a Portfolio Kanban board only for that initiative.
Next, you determine that there are 2 focused annual objectives for that initiative and you
normally break these objectives down to a 2 Portfolio boards for the initiative.
Afterward, you break down the Portfolio into 4 key projects that needs to be completed to
achieve them.
The third layer is the one where you have small tasks, which your regular team members
can start processing and begin the long journey toward completing your long-term goals.
You should assign to each Portfolio board the process owner who is going to be responsible
for executing the project inside.
The main difference between the Portfolio Kanban method and the Team Kanban method is
that the Kanban cards on your Portfolio Kanban board are “parents” of one or many Kanban
cards that live on your Team Kanban board.
As tasks are making their way toward the Done section of each Kanban board of your micro
teams, here you will be able to constantly monitor your progress on a micro level.
Since you have noticed that Metrics are a main way of monitoring and tracking the
progress of strategic goals & objectives, we must pay the due attention now to metrics and
how they must be designed.
Well, a metric is nothing more than a number that helps track performance and progress.
But firm essentially becomes what it measures. So, understanding metrics and measuring
the correct objectives are important.
Metrics can be leading indicators of performance (leads to an end result) or lagging indica-
tors (the end results).
Examples of lagging indicators include most financial type measurements (return on equity,
sales growth, etc.) and many non-financial type measurements (production breakeven, cus-
tomer retention, employee productivity index, etc.). We can’t do much with lagging indica-
tors except plan for how we’re going to do better next time.
So focusing on leading indicator is very important. Examples of leading indicators include
customer contracts executed, service response time, and time spent with customers.

4. Now, business is made up of two main components – people and processes. From a high-
level, sales is one of your processes. Fulfillment is another. And, we have people in each of
those areas responsible for making the processes work.
But, if we keep drilling down within those areas we’ll find that we need each individual to
hit certain levels of performance or hit certain number in order for the overall business to
perform according to expectations.
Naturally, we want to hold each individual accountable to the level of performance that they
need to achieve for the business to be successful as a whole. And, if we think about sales it’s
not hard to think about the key performance indicators that each sales person needs to reach.
However, when we think about an area like fulfillment, it often takes a little more time to
determine what metrics need to be hit by the individuals working in that area of the busi-
ness.