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The Ultimate Hoshin Kanri X Matrix Guide
The “Ultimate Hoshin Kanri X Matrix Guide” provides an in-depth exploration of the X Matrix as a critical tool for strategic planning and execution. This guide details how the X Matrix aligns organizational objectives, improvement projects, and KPIs to ensure cohesive strategy deployment across all levels. With a focus on clarity and alignment, the X Matrix simplifies complex strategic processes into a single, visually engaging framework.
Hoshin Kanri, a strategic planning and execution method, is a powerful tool that ensures an organization’s strategic goals drive progress and action at every level. The X matrix tool is a visually engaging one-pager central to aligning objectives, strategic projects, and key performance indicators. This guide will provide a comprehensive understanding of the X Matrix and its role in the Hoshin Kanri method.
History of the X Matrix
The Hoshin Kanri method originated in Japan in the 1960s, primarily through the efforts of Japanese manufacturing giants such as Toyota. The methodology was developed to align a company’s strategic objectives with its operational activities, ensuring that every department and individual works towards common goals. The X matrix was created as a practical tool to facilitate complex strategic planning and execution processes, and it has become a hallmark of the Hoshin Kanri approach.
Traditionally, the X matrix is handled with pen and paper or Excel spreadsheets. Coordinating many X matrixes can be overwhelming, especially in a large organization, where each department should prepare its own. Therefore, many organizations have implemented the Hoshin Kanri method without the X matrix but have lost an excellent tool for visualizing the strategy on one page. Many advanced organizations have recently sought software like Amplon with an interactive X matrix and integrated execution management to increase transparency.
The two purposes of the X matrix
Often, it is falsely stated that Hoshin Kanri and the X matrix are used from the beginning of the strategy work. There are other tools and methods used in the early stages of the strategy work, and the typical strategy process has the following four steps:
- Background analytics (Market, competitors, etc.)
- Formulation of overall strategic aspiration (vision, mission, strategic choices, high-level goals, and selection of strategic planning and execution method.)
- Strategic planning (objective setting, strategic project planning, and alignment.)
- Execution and execution management.
The X matrix is used after steps 1 and 2. Then, it is used in the strategic planning process to document and visualize all long-term and annual objectives, strategic development projects, and metrics. This visualization ensures that everyone can understand strategic priorities and what activities have been selected to achieve objectives.
Here is a link to another article to read more about the elements of the strategy.
The second purpose of the X matrix is execution management, especially if real-time status and progress are displayed directly in the matrix. Nevertheless, it is a best practice to start each review meeting by reviewing the X matrix and then deep-diving into possible focus areas.
Components of the X Matrix
The X Matrix is divided into four quadrants, each representing a crucial aspect of strategic planning. Understanding what each sector contains is essential for effective strategic planning and deployment.
Setting high-quality objectives is difficult; therefore, the SMART framework (Specific, Measurable, Achievable, Relevant, and Time-bound) is often used. The X matrix makes it easier to form SMART objectives since R and T are already handled in the matrix. T is dealt with long-term and annual objective sections, and R is with the correlations—the links between each quadrant.
1 Long-term Objectives
The bottom quadrant of the X Matrix outlines the organization’s long-term strategic objectives, which typically span a three—to five-year strategy horizon. In some instances, these are also called “Breakthru objectives” to make it clear that one should list only objectives that lead to a step change, not business as usual. As a rule of thumb, there should be only three to five visionary objectives.
It is still common practice to list the most important financial objectives, such as revenue and profitability, here, as it makes communicating the organization’s strategy easier with the X matrix one-pager. Most activities should, anyway, contribute to financial results.
Key questions to consider in defining long-term strategic objectives
- Is this objective logical and linked with the vision?
- What specific outcomes are we striving to accomplish?
- Is dedicating resources to this long-term objective and its initiatives crucial for our success?
- Will this objective secure our competitive advantage?
- Will these objectives drive transformational change?
2 Annual Objectives
This quadrant translates the long-term objectives into specific, measurable annual objectives, which the organization aims to achieve within a year to move closer to the long-term objective. Annual objectives serve as a bridge between long-term objectives and operational tactics, i.e., improvement projects.
In the optimal case, one long-term objective should be linked with one annual objective. However, breaking one long-term objective into a few milestones (annual objectives) is often the case. This quadrant should have 5-8 annual objectives. For example, one could have a long-term objective of 100 MEUR revenue split into two annual objectives: 50 MEUR revenue and the “introduction of a new product.”
Key questions to consider in defining annual objectives
- What are our key objectives for this year?
- Given our long-term objective of achieving XYZ in three years, what milestones must we reach by year-end?
- What specific indicators or outcomes will signal that we have successfully met our targets?
- What challenges do we anticipate in achieving these objectives?
3 Improvement projects
The top quadrant details the action-oriented improvement projects to achieve the annual objectives. Each project should have a direct link to the annual objectives. These improvement projects are done for two reasons: to improve something or to solve a problem that prevents the organization from reaching its objectives.
Improvement projects should be planned with the needed details, such as scheduling and resourcing. These project plan documents are often called A3s, as they contain the reasoning for the project and the execution plan. Listing too many projects is a typical problem and one of the root causes of strategy failure. Experience shows that a business unit with about 10 MEUR revenue can handle about 10 projects. Nowadays, the business environment changes rapidly, so planning projects lasting an entire year is inefficient.
Key questions to consider in making improvement project planning
- What do we need to do to reach the annual objective?
- What key actions are required to achieve our annual objectives?
- What are the most straightforward steps we can take to begin?
- Which KPIs will these actions impact, and to what extent?
- Who holds accountability for the success of this project?
- Which stakeholders and resources do we need to engage?
- Who will champion and support the project throughout its execution?
- Which other departments must contribute to this project?
- Who will implement the results, and how will we secure a successful outcome?
- What are the key risks?
4 KPIs and Targets
The right quadrant focuses on metrics: Key Performance Indicators (KPIs) to measure progress and success. KPIs provide a quantitative basis for assessing whether the organization is moving towards long-term objectives. The indicators should be leading indicators, which are typically difficult to set and measure. A lagging indicator that shows historical performance is generally easier to set but less useful in driving a high-performing organization.
The X matrix is often used to communicate the organization’s strategy and most important day-to-day activities. Therefore, it is common for some KPIs not to be connected with improvement projects, as some are for continuous improvement indicators.
Key questions to consider in setting performance metrics
- How do these metrics strategically align with and drive our long-term objectives?
- What is our current state, and where do we want to be with this KPI?
- What will impact our KPIs, and how?
- Is investing in this KPI and its associated initiatives essential for achieving our objectives?
- Is this a leading KPI, or how could we make it a leading KPI?
- Is this KPI something we can track regularly?
5 Owners
The far right quadrant focuses on the resources needed to accomplish the improvement priorities. In some X matrix versions, all key resources are listed. However, the best practice is limiting the list to the owners of each strategic project. In such a case, accountability is evident. The owners should be senior managers of the displayed X matrix organization.
Questions to consider in choosing project owners
- Who will own the outcomes of the improvement projects?
- Is the improvement project owner the right owner?
- Is the owner and the project manager roles segregated?
- Do we have sufficient resources (competence and capacity) to complete the assignment?
6 Correlations
The corners of the X Matrix are crucial for visually connecting the quadrants, ensuring alignment and coherence between different elements of strategic planning. Each corner signifies the interdependencies and relationships between the objectives, projects, and KPIs. One of the strong points of the X matrix is that one can set many to many correlations, just like in the real world.
In a basic X matrix version, only one type of correlation is used. However, separating strong and weak correlations makes the X matrix even more logical.
Here is a short X matrix tutorial video and link:
Cascading objectives
Implementing the X Matrix promotes transparency, accountability, and continuous improvement, ensuring everyone works towards the selected objectives. The X matrix is typically for one organization unit, and objectives must be cascaded through each department. There are two ways to handle the X matrix while cascading objectives:
The traditional way is to rotate the X-matrix 90 degrees when moving to the next organizational layer (e.g., from corporate to departmental level). The X-matrix is conceptually “rotated” so that the next layer’s bottom quadrant is for annual objectives, and the projects are split into short-term milestones. This ensures that each layer of the organization directly contributes to the broader strategic objectives. This method is useful for organizations with only two layers.
The emerging way is not to rotate but to maintain the same X matrix principle throughout all organizational levels. Each organizational layer has the same granularity in its X matrix in such a model. This model benefits larger organizations with cascaded financial responsibilities across the organizational layers.
Key takeaways:
- Strategic Focus and Alignment:
The X Matrix is vital for ensuring that an organization’s strategic objectives are clearly defined and aligned across all levels. It visually guides teams toward focused strategic planning, preventing the dilution of efforts across many objectives and projects.
- Cascading Objectives:
The X Matrix helps cascade objectives through the organization, ensuring alignment between corporate strategies and departmental actions. This cascading effect promotes transparency and ensures that every organizational layer contributes directly to broader strategic goals.
- Enhanced Communication and Collaboration:
The X Matrix facilitates better communication and collaboration across departments by visualizing their plans on one page. It also helps team members understand how their work contributes to the overall strategy.
- Accountability and Ownership:
Clearly assigning ownership of strategic projects within the X Matrix enhances accountability. Well-defined responsibilities drive the successful execution of projects and initiatives.
- Common Pitfalls to Avoid:
Success with the X Matrix requires avoiding common pitfalls such as overloading the matrix with too many objectives and, in particular, too many projects and setting modest goals that don’t challenge the status quo. It’s also crucial to distinguish day-to-day operations from transformative strategic initiatives.
Amplon is Hoshin Kanri software
Amplon is an AI-assisted Hoshin Kanri software with an interactive X matrix and integrated project and performance management.
With Amplon, you can boost your digital transformation:
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