(Sept. 27 Update: Reich, who managed strategy deployment in North America at Toyota, will teach an in-depth workshop on hoshin, October 24, 2016, at the annual AME conference: http://bit.ly/AmeHoshin There still are some seats available.) "Managing on Purpose," the forthcoming book by Mark Reich, shares a strategic approach -- hoshin kanri-- that connects the work of individual problem solving that was explained in "Managing to Learn" by LEI CEO John Shook to the problems of the organization. Hoshin planning is a strategic framework aimed at creating an organization capable of sustained high performance. It does so by establishing and executing strategic initiatives throughout an organization by focusing people on innovation which is supported by continuous daily improvement; while developing capability through the strategic delegation of responsibility and the subsequent self-development. Practicing hoshin requires a fundamentally different mental model than the prevailing approach of most organizations. Unlike the top-down command-and-control organization in which a few key leadership people set the direction for the company based on boardroom-generated data, leaders engage and align the entire organization continually, both vertically and horizontally. This requires a PDCA management structure which recognizes that process is as important as results. Mark Reich As COO, Mark oversees day-to-day operations at LEI, including marketing, finance, strategy, publishing, conferences, and training. He also supports new product development and leads the Co-Learning Partners program, assisting companies engaged in lean transformation. Before coming to LEI, he spent 23 years at Toyota in Japan and North America, most recently as general manager of the Toyota Production System Support Center (TSSC). As a hands-on GM, Mark directly implemented the Toyota Production System (TPS) or managed its implementation in a variety of industries, including automotive, food, furniture, and healthcare, among others. Mark doubled the number of companies supported by TSSC from 20 to 40. He transitioned it from for-profit to nonprofit status so it could better support its original mission to strengthen North American manufacturing and help any organization interested in implementing TPS. He expanded the client base beyond manufacturing to hospitals, schools, low-income food distribution, and nationally prominent nonprofits Previously, he was assistant general manager of the corporate strategy division where he managed and implemented Toyota's North American strategic (hoshin) process, designed jointly with Toyota’s Japan headquarters.

1. Managing
on
Purpose
Mark Reich
© 2016 Lean Enterprise Institute. All rights reserved.

2. Managing on Purpose
© 2016 Lean Enterprise Institute. All rights reserved. 2
1) Connect the work of individual problem solving that was explained in
Managing to Learn to the problems of the organization
2) Address challenges organizations face to build alignment and develop
bottom capability to solve challenging organizational problems
LEI will publish a book on organizational alignment:
Managing
On
Purpose
Individual
Problem Solving/PDCA
Organizational
Problem Solving/PDCA

3. What Problem Is Legal Sea Foods
Trying to Solve?
Shrink the Lead Time For
the Entire Value Stream from
Processing to Serving
The Processing Center The Restaurant
Long Lead Time

4. What Problem Is Legal Sea Foods
Trying to Solve?
The Processing Center The Restaurant
Reduced Lead Time
Result = Fresher Fish!

5. Before
After

6. Legal Sea Foods – Improved Guest Experience
© 2016 Lean Enterprise Institute. All rights reserved. 6

7. 1. What problem is SunPower trying to solve?
Values: a.k.a. “our culture and how we conduct ourselves every day”
Energy Cost
Carbon Solar
Energy, Waste, Water
2016 2019 2016 2019
Positive Impact on People
Mission: a.k.a. “the work to be done”
Purpose: We change the way our world is powered
7© 2016 Lean Enterprise Institute. All rights reserved.

8. © 2016 Lean Enterprise Institute. All rights reserved. 8
Lean Transformation Framework – 5 Dimensions

9. The Transformation Questions
© 2016 Lean Enterprise Institute. All rights reserved. 9
1. What is our purpose ,what value to create, or what problem
are we trying to solve,?
2. How do we do and improve the actual work?
3. How do we develop the capabilities we need?
4. What management system and leadership behaviors
are required to support the new way of working?
5. What basic thinking or assumptions underlie
this transformation?

10. Why do organizations struggle
to sustain a transformation?
Most common reasons we see:
1) Spread lean broadly, not deeply
2) Focus only on results or KPI, not building capabilities
3) Run as a program, not built into management culture
 Not full alignment across the organization
 Not tied to organizational purpose
© 2016 Lean Enterprise Institute. All rights reserved. 10
Management is not aligned to organizational purpose!

11. Why do organizations struggle
to sustain a transformation?
• People at all levels – from the CEO to the front line worker -
must feel aligned and connected to all levels of the
organizational purpose
• We need a mechanism – a management system – to align
people to purpose
© 2016 Lean Enterprise Institute. All rights reserved. 11
Management is not aligned to organizational purpose!

12. 5 Myths of Strategy Execution
12
Myth 1: Execution Equals Alignment
Myth 2: Execution Means Sticking To The Plan
Myth 3: Communication Equals Understanding
Myth 4: A Performance Culture Drives Execution
Myth 5: Execution Should Be Driven From The Top
Reference: Harvard Business Review, March 2015 Issue

13. 5 Myths of Strategy Execution
13
Myth 1: Execution Equals Alignment
Reference: Harvard Business Review, March 2015 Issue
Myth 4: A Performance Culture Drives Execution
Myth 5: Execution Should Be Driven from the Top
“If Managers believe that hitting their numbers trumps all else, they tend to make
conservative performance commitments.”
“When Managers cannot rely on colleagues in other functions or units, they compensate
with a host of dysfunctional behaviors – duplicate effort, let promises to customers slip…”
“Frequent and direct intervention from on high encourages middle managers to
escalate conflicts rather than resolve them…”

14. What is Lean’s Alternative?
© 2016 Lean Enterprise Institute. All rights reserved. 14
• How do we build alignment to corporate objectives
across the organization?
• How do we build capability for bottom up
innovation(kaikaku)?
• How do we drive towards a aligned objectives,
not merely towards targets?
• How do we align purpose to people and the culture?

15. © 2016 Lean Enterprise Institute. All rights reserved.
Lean Transformation Framework
How to
Align
These?
Purpose
Basic
Thinking

16. © 2016 Lean Enterprise Institute. All rights reserved.
Lean Transformation Framework
Purpose
Basic
Thinking
What
Management
System and
Leadership
Behaviors
are needed?

17. © 2016 Lean Enterprise Institute. All rights reserved.
Hoshin links the Framework
Hoshin
Connects Organizational
Purpose to Basic
Thinking

18. © 2016 Lean Enterprise Institute. All rights reserved.
Hoshin links the Framework
Hoshin
Connects the work
to the people

19. Hoshin
Breaking Down Company Problems and Solving Them at Each Level
19
Company
Hoshin
Department Hoshin
Group/Individual
Problem Solving
Think Why at
Each level
Team Member
Motivation
Horizontal Alignment
A3 A3 A3 A3

20. © 2016 Lean Enterprise Institute. All rights reserved. 20
Hoshin
1)Ties the front-line problem solving(A3, etc.)
to the organizational objectives
2)Aligns leadership vertically and horizontally
to the organizational objectives

21. Legal Sea Foods – the Traditional Management Way
© 2016 Lean Enterprise Institute. All rights reserved. 21
“Legal Sea Foods
Ice Cream!”
The RestaurantsThe Processing Center
HQ
“The 2nd Floor”
Aligned?
“Popcorn Shrimp!”
Make the Ice Cream?
Space Available?
Outsource?
What’s the recipe for
Popcorn Shrimp?
The
1st Floor

22. Legal Sea Foods – the Aligned Hoshin Way
© 2016 Lean Enterprise Institute. All rights reserved. 22
The Processing Center
The 1st and
2nd Floors
ALIGNMENT!
What problem our we
solving for our
customer? Let’s define our
priorities together
The Restaurants

23. 23
Provides vision
and direction
a) Reflect on Performance
b) Define annual objectives
c) Align as a team
Clarify problem to
be solved with each
objective –A3
Coaches and Guides
Roger
Roger’s Team
Hoshin Catchball at Legal Sea Foods
1
23
4

24. Managing on Purpose
© 2016 Lean Enterprise Institute. All rights reserved. 24
1) Connect the work of individual problem solving that was explained in
Managing to Learn to the problems of the organization
2) Address challenges organizations face to build alignment and develop
bottom capability to solve challenging organizational problems
LEI will publish a book on organizational alignment:
Managing
On
Purpose
Individual
Problem Solving/PDCA
Organizational
Problem Solving/PDCA