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The Ultimate Hoshin Kanri X Matrix Guide
The “Ultimate Hoshin Kanri X Matrix Guide” explores the X Matrix as a crucial tool for strategic planning and execution. It explains how the X Matrix aligns organizational objectives, improvement projects, and KPIs to ensure cohesive strategy deployment across all levels. By focusing on clarity and alignment, the X Matrix simplifies complex strategic processes into a 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, a visually engaging one-pager, aligns objectives, strategic projects, and key performance indicators. This guide comprehensively explains 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.
They developed this methodology to align strategic objectives with operational activities, ensuring that every department and individual works toward common goals. The X Matrix emerged as a practical tool to facilitate complex strategic planning and execution, becoming a hallmark of the Hoshin Kanri approach.
Traditionally, organizations used pen and paper or Excel spreadsheets to handle the X Matrix. Coordinating many X Matrices can overwhelm large organizations, where each department prepares its own. Some organizations skip the X Matrix in their Hoshin Kanri method but lose a valuable tool for visualizing strategy on one page. Many advanced organizations now use software like Amplon, with interactive X Matrices and integrated execution management, to increase transparency.
Two purposes of the X matrix
Many mistakenly believe that Hoshin Kanri and the X Matrix are used from the beginning of strategy work. However, other tools and methods precede the X Matrix in typical strategy processes, which usually follow these four steps:
- Background analysis (market, competitors, etc.)
- Formulating strategic aspirations (vision, mission, strategic choices, and high-level goals)
- Strategic planning (objective setting and project planning)
- Execution and management.
The X Matrix comes into play after steps 1 and 2, documenting and visualizing long-term and annual objectives, strategic projects, and metrics in the strategic planning process. This helps everyone understand strategic priorities and the activities chosen to achieve objectives.
Here is a link to another article to read more about the elements of the strategy.
The second purpose is execution management, particularly if real-time progress appears directly in the matrix. Best practices suggest reviewing the X Matrix in each meeting and then diving into focus areas.
Components of the X Matrix
The X Matrix has four quadrants, each representing a critical aspect of strategic planning. Understanding what each section contains is essential for effective strategy deployment.
Setting high-quality objectives poses a challenge, so organizations often use the SMART framework (Specific, Measurable, Achievable, Relevant, and Time-bound). The X Matrix simplifies the process of forming SMART objectives by already addressing the R and T elements. It handles “T” in the sections for long-term and annual objectives, while “R” is covered through the correlations—the links between each quadrant.
1 Long-term Objectives
The bottom quadrant outlines the organization’s long-term objectives, usually spanning three to five years. These “Breakthru objectives” focus on transformational change rather than business as usual. Typically, there are three to five visionary objectives, often including key financial goals like revenue and profitability.
Key questions to consider in defining long-term strategic objectives
- Does this objective link with the vision?
- What specific outcomes are we striving to accomplish?
- Will dedicating resources to this objective secure a competitive advantage?
- Will this 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.
Ideally, 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 outlines the action-oriented improvement projects that directly link to the annual objectives. Each project must connect to these objectives, either to improve something or to solve a problem that hinders the organization from achieving its goals. Teams plan improvement projects with the necessary details, such as scheduling and resourcing. These project plans, often called A3s, include the rationale and the execution strategy.
Listing too many projects is a common issue and a major cause of strategy failure. Experience shows that a business unit with about 10 MEUR in revenue can effectively manage around 10 projects. Given the rapid changes in today’s business environment, planning projects that span an entire year is often 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.
Organizations often use the X Matrix to communicate their strategy and key day-to-day activities. As a result, some KPIs may not link directly to improvement projects since they serve as indicators for continuous improvement.
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 lists project owners. Best practices suggest listing only the owners responsible for each project to ensure accountability. In such a case, accountability is evident. The owners must 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 X Matrix corners visually connect quadrants, highlighting the interdependencies between objectives, projects, and KPIs. One of the strong points of the X matrix is that one can link multiple 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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