What is your business strategy?

The seven steps to deploy your business strategy using strategic deployment or hoshin kanji.

A business strategy establishes the framework to make decisions. In other words, how to conduct business, deliver value to your customers, and achieve target revenues and profits. Strategic planning answers the question, where are we going, and how do we get there?

Strategy Deployment, or strategic policy deployment

How do you deploy your strategy through the organization? That is to say, how do your employees know the company goals? Do you have a system or process? In CI, we use Hoshin planning.

Hoshin planning or hoshin kanri means strategic policy deployment. That is, identify the strategy to follow, develop objectives, communicate, and execute the plan. Hoshin is one of the various methodologies for strategic planning that emerge from Peter Drucker’s Management by Objectives (MBO). Some of the characteristics are that it plans at different timeframes, from short-term to long-term. Moreover, it uses SMART goals. Those components are similar to other systems. However, this one uses PDCA and establishes periodic reviews to assess performance against the plan.

Seven steps to deploy your business strategy

In general, Hoshin planning has seven steps.

  1. Assess the current state and establish the Vision
  2. Develop breakthrough objectives
  3. Develop annual objectives
  4. Deploy annual objectives
  5. Implement annual objectives
  6. Monthly and quarterly review
  7. Annual review

Your business strategy and people’s development

Strategy deployment addresses critical business needs by aligning goals and strategy. Even more, it aligns the company’s resources at all levels. For that reason, it makes it possible to respond quickly to changes in the business environment. Also, the use of the PDCA cycle brings a structure to deal with those changes. Moreover, it provides a framework to identify and solve the problem.

Besides, with Hoshin, leaders can develop the team’s skills and capabilities. They do it by engaging them to answer the question of how do we get there? Leaders will guide their teams based on their knowledge and experience. Aligned goals ensure that everyone is working toward the same ends. The newly developed problem-solvers will row in the same direction as you do to accomplish those goals.

Continuous improvement as a strategy

In the times of the COVID-19 pandemic, it is vital to be flexible. That is to say, to make decisions and create strategies to adjust to ever-changing realities. A system for strategy deployment will guide you to analyze the situation. Further, it will be a guide to design and implement a new business strategy.

Moreover, continuous improvement can be your strategy to create a flexible workforce and guide daily improvements. Better Process Solutions can help give us a call!

What can I do for my business now?

These days we are living a once-in-a-lifetime experience.  Uncertainty is the word of the day, every day.  Anxiety levels are higher than ever, everybody is wondering what is going to happen when the pandemic is over, and we go back to our “normal” lives.  For small business owners, there is one question constantly bouncing inside our heads.  Would I still have a business?   I don’t know the answer to that or many other questions, but I do know what not to do.

I know that this is no time to waste my energy thinking in all the what if.  There is nothing to gain but more anxiety, trying to imagine a world where I do not have the means to bring food to my family or pay for our house.  I also know that in difficult times it is worth focusing on the positive things.  

What is positive about this pandemic?  For one we have time to do those things that we always say, I love to have time to do.  Of course, things that we still can do within the social distancing and CDC parameters.  It is a good time to pick up that hobby or home project you never have time for.  It is also time to clear your head and separate yourself from the challenges coming ahead.  It is important to recharge before you can focus on the fight ahead.  One thing is sure, the economy, will not be the same when we reopen for business, we have to be prepared.

Focus your attention on all the positive things you can do to strengthen your operation without investing more money than you are right now.  Here are a few examples.

  1. You can do virtual networking to get in touch with your old contacts to say hello and make new ones.
  2. While you reach out, does anybody need your help?  Collaboration is a good way to create long relationships, a network of people that can help when you needed the most.
  3. Read a new book, learn, and change what you can. 
    1. What your customer reviews in social media are telling you?  What do you need to improve?
    1. Do you know your customers well enough to anticipate if their needs will change?  Create a new marketing plan using social media.
    1. Analyze your business performance and assess your business.  What do you need to improve?  There are several applications that you can use to communicate with your team and work together on improvement ideas.
  4. Learn about the different programs and aids the Small Business Administration and local governments are offering.
  5. Revisit your business plan and update it.  Adopt a new strategy, set new goals, and prepare a plan in tune with reality.

I humbly suggest that you read about continuous improvement and how it can help you to navigate through the storm.  Lean was born in a time of need; Toyota was facing bankruptcy when Eiji Toyoda and Taiichi Ohno created it.  Continuous improvement is not easy or magical, but it has been proven to work in any industry, any size, anywhere.  At moments like this, it worth more than ever to try something new, like CI.

What is a strategy? Do you have one?

Strategy is game plan, the framework to make decisions.
Photo by Pixabay on Pexels.com

Strategy and Planning

Many people confuse strategy with planning.  A strategy is the game plan for strengthening your business performance.  It establishes the framework to make decisions. In other words, it defines the way to conduct business, deliver value to your customers, and achieve target profits. On the other hand, planning is how you are going to achieve the business objectives and goals.

A plan without a strategy will not be effective.  Every organization needs a shared vision of where it is going. In addition, it needs to know what is the business model, and what will drive decisions.  The strategy is how you are going to overcome the biggest hurdles. It is what guides everybody in the same direction.

You create a plan after you know where you are going and what will frame the decision-making process.  Each project is specific for a goal and contains the detailed steps to achieve it. Effective planning requires a look into the company’s strengths and weaknesses and taking countermeasures.  

Continuous Improvement, Lean as a business strategy

Lean is a business management system, that when it is implemented as a whole, constitutes a great framework to conduct business.   The goal of lean or continuous improvement is to provide the customer with the highest quality, at the lowest cost, in a shorter time.  Therefore, by using lean as a strategy, you will set your business for success.

Hoshin planning is the process used to identify and address critical business needs and develop people’s capabilities.   Continuous improvement or lean is a strategy to win by developing the team into problem solvers.  At times of economic uncertainty, it is critical to respond to changes in the business environment as fast as possible.  

When you and your employees know how to identify and respond to the daily challenges, the opportunities for success grow exponentially. Never is late to change your strategy, and win!

How do you reduce operating expenses?

There are two ways to increase profits, to increase revenue or reduce costs. Operating expense is a common headache for business owners, are you one of them?

These days consumers have more choices and more information than ever. They know that with so many competitors, they have multiple options for the needed product or service. To survive and be successful in this environment, cost reduction is critical. How do you reduce operating expenses?

Unfortunately, when it comes to cost reduction, the first thought is to reduce team members. Another common idea is to cut materials cost by buying inferior quality. You can not afford to do anything that affects the quality of the service or product. The best solution to cost expenses is to identify and reduce waste.

Waste reduction has to be an everyday activity, it is not a one-time event. With the help of your employees, you can improve your business working with continuous improvement basics. The basic activities of CI are housekeeping and organization, waste reduction, and standardization. You know already what waste is, in the next weeks I will talk about the other two.

Assessment of your business processes to identify waste reduction, standardization and organization opportunities is the best way to improve. Do not start this process as an excuse to cut manpower. Reducing team members is not, and never will be a continuous improvement goal.

What are your business goals?

you can achieve your business goals with continuous improvement

I bet that one of your business goals is to deliver high-quality products to the customer at the lowest cost. The goal of lean or continuous improvement is to provide the customer with the highest quality, at the lowest cost, in a shorter time. It sounds to me that both goals are the same, what do you think?  

Business goals and continuous improvement

Continuous improvement achieves the goal by continuously eliminating waste. To achieve your business goals, you need to learn what it is and eliminate it. Your customers don’t have problems paying for activities that transform materials into finished goods or processed information. We call those activities value-added.  However, they are not willing to pay for the waste in your process.

The customer should not pay for the cost of fixing errors, waiting time, or excess inventory. These activities are non-value-added or waste. Therefore, the target of continuous improvement is to eliminate them.

What is waste? The seven types of waste in continuous improvement

Waste has seven categories: transportation, inventory, motion, waiting, over-production, over-processing, and defects. There is another category added later, which is the underutilization of people’s talents.

  • Transportation is an essential part of operations, but it does not add value from the customer perspective. The goal of CI is to minimize transportation to the minimum necessary.
  • Inventory of raw materials is also a necessary evil, but you do not want to have excess inventory. Excess inventory is at risk of being damaged or become obsolete.  
  • Any motion of a person’s body that is not related to adding value is a waste. Poor ergonomic designs make people move their bodies more than necessary, causing safety and productivity issues. 
  • Waiting for materials, for approvals, for a phone call, or for shared equipment to become available are all examples of waste.  
  • Over-production is when we make too much because we are producing ahead of the real demand. Over-production creates more waste in the form of inventory, motion, waiting, and others.
  • Over-processing is doing more than what the customer requires. For example, when you receive items in a box that is three times the appropriate size.
  • defect is when we make a mistake or produce defective items. Fix defective products comprise time, material, and other resources.  
  • Underutilization of people’s talents is not letting people work at their full capacity. Examples are lack of training, not trusting in their capacity to improve processes, and siloed thinking.

Achieve your business goals with continuous improvement

What are your business goals? Is one of them to deliver a high-quality product at a low cost? Are you targeting to increase your business profitability? Do you want to grow your business? If you answer yes to any of the last three questions, then continuous improvement is the business strategy you are looking for. Contact us, and we will work together to improve your business processes from the customer’s perspective.

Metrics and KPIs, Do you know the difference?

Metrics and KPIs are not the same. How do you know if your business is successful? Do you use metrics? Or do you use key performance indicators? What is the difference between them?

Metrics and KPIs

A metric is a measurement you use to track and assess the condition of a process. These measures give you information about how the process is working and provide a baseline for improvements. KPI stands for a key performance indicator. It measures how well the business is doing against a goal. Key performance indicators are strategic, and metrics are tactical.

Example of what metrics and KPIs are

Let’s use the Yummy Broths restaurant that specializes in soups as an example. One process for Yummy is cooking a plate of chicken soup. To measure the status or condition of this plate, the owner can use the cost per plate, sales per day, or the quantity of the ingredients per batch. One goal for Yummy Broths is to increase the gross margin by 20% before the end of December 2020. The owner decided to track the cost of goods sold (COGS) as the KPI.

KPIs are metrics, but as the name indicates they are key metrics. Not everything is key, otherwise, nothing is. KPIs are like vital signs for the business. Metrics are tactical because they measure the daily business activities that support the accomplishment of the goals. The KPI will let you know If something is wrong, other metrics will help explain why.

The restaurant owner decided to increase profit by reducing the cost of goods sold rather than increasing revenues. The standard is 31% of the sales or less. When the COGS reaches 40%, Yummy Broths owner knows that something is wrong. He knows that for his business profitability, inventory cost is vital. One way to control it is by making sure cooks use the right amount of ingredients to prepare each recipe. Looking at the ingredients used, he realized that compared to the standard, the ingredients per batch are off. Cooks are using more quantity than the recipe asks for. Now he can take action to correct the performance against the goal. Meeting the ingredients per batch standard will support achieving the COGS.

Selection and follow-up

There are two critical things about KPIs, selection, and follow-up. Select indicators that aligned with the business objectives. Always look for the best way to measure the progress towards the goal. Also, since they are critical, monitor them weekly. Do not wait until the month-end because it will be too late to do something if you need it.

Now that you know the difference between metrics and KPIs, go check if you selected the right metrics to measure your business goals.