Stratex Fundamentals – Goal Setting

How do we set strategic targets? What does our trajectory typically look like? What drives it? Do the StratEx lessons I learned as a young Toyota engineer & manager still apply?

Aim for the fences, settle for a double off the wall...

I grew up in the ‘90’s on a steady diet of the Toyota Production System (TPS). Our compass through the churning waters of continuous expansion was a business system called ‘Hoshin Kanri’ or Strategy Deployment. I’ve experienced countless cycles now & have written about it extensively. The past decade my practice has evolved toward ‘ambidexterity’ and fields like financial services, consumer goods & Tech. My hypothesis: those will prosper who can both protect the core business with OpEx and ignite new growth with Digital methods. 

So, do the TPS methods & mindsets I learned as a young engineer & manager apply? Yes, provided you translate & adapt them for each industry.  A common failure mode: ‘Here’s how we did it at Toyota ABCD…’, to which the COO, CFO, CMO, CIO et al respond, quite reasonably, ‘Who cares…?’ With that prologue, let’s see if we can answer the questions posed above.

How Do We Set Strategic Targets?

Set targets just beyond what your team thinks they can achieve. How do you know what they think? By scheduling Daily/Weekly/Monthly management walks. Okay, maybe Daily is difficult for a senior executive to sustain, but you know what I mean. To set targets you must know your business & team, which means you have to be there. Thus, you can answer core leadership questions like:

·       What is the nature my team? What is the nature of our industry & competitive challenge?

·       What is the capability of each team member? What motivates (or demotivates) them? Under what conditions do they thrive (or struggle)?

·       How capability are our processes? What are common failure modes?

·       What robust is our hardware? (Machines, info systems, supply chain…)

·       What is the capability of our software – both information systems, and culture?

·       What are the strengths & weaknesses of our management system?

Setting targets this way often produces a trajectory like the one I’ve illustrated. We don’t quite achieve our targets, but year after year we get stronger & build our muscles. In a few years, we’re a tough, capable team.

Failure Modes

Setting modest, unimaginative targets is perhaps the most common failure mode. What can cause this? Poor incentive structures, a weak grasp of blockers, unclear & unreliable data because of cumbersome central systems and a lack of YODA (Your Own Data)

Setting outlandish targets absent any real understanding of the business, team & competitive challenge is also a common mistake.  This is akin to the general manager of a baseball team blithely ignoring the team’s weaknesses & competitive position, while demanding they win 150 games next season and sell out every game.

A third common error is not setting effective improvement process targets. Want people to get good at value-added problem-solving? Set explicit targets for each team & check on them regularly. Start with modest targets, e.g. ‘Each team will close one significant problem per quarter usually scientific problem solving. Recognize & reward high achieving teams, e.g. with a ‘Problem Solving Expo’ or ‘Fair’ wherein teams demonstrate what they’ve been working on & the value they’ve derived.

Next time, what drives Stratex achievement & how do we sustain it?

Best wishes & a splendid 2026,

Pascal Dennis         E: pascal.dennis@leansystems.org

 

The Trouble With OKRs

 Despite their popularity, OKRs frequently fail to deliver business results. What’s going on?

I grew up professionally in the ‘90’s on a steady diet of the Toyota Production System (TPS). Our compass through the churning, treacherous waters of continuous expansion & new model launches was business system called ‘Hoshin Kanri’ or Strategy Deployment. I’ve written about it extensively & have lived many annual strategy planning & execution cycles with many fine companies. As my practice has evolved towards disruptive Innovation and industries like Banking, Insurance & Tech, I’ve seen more & more OKRs.

Here are some common failure modes I’ve observed:

·     Company winning logic is unclear, and/or poorly communicated - (‘Huh…?’)       

·       Rigid top-down directives with little validation from ‘subordinate’ levels – (‘Here’s another dumb thing they want us to do…’)

·       Teams create objectives disconnected from company ‘winning logic’ – (‘Let’s just do what we’ve always done…’)
·       Key results are disconnected from business outcomes – (‘What is ‘value’, anyhow?’)
·       Departments set goals in silos, few shared measures of success – (‘Let’s just focus on our corner’)
·       Objectives are either too abstract to guide action or too specific to inspire innovation – (‘Looks like AI wrote these things…’)
·       OKRs are invisible, hindering alignment - (‘Can anybody tell me what we’re trying to achieve?’)
·       Organizations try to do too much at once, diluting focus and impact – (‘Keep pressing buttons, something’s bound to happen.’)

The root causes of these failures include the absence of a) a comprehensive system (‘everything is connected to everything else’), and b) a set of mental models (‘how we think determines what we see’). OKRs are also prone to AI-sloppification & all the attendant waste & hassle.

Let me illustrate with the simple image above. Strategy development & deployment continuously cycles between the World of Thought & the World of Experience. Leaders live in the former, Team Members in the latter. Validating a proposed objective and winning logic entails multiple rounds of what I learned as ‘Catchball’ – essentially a series of meetings during which team members challenge, massage, tweak and ultimately validate the Leader’s objective and winning logic. Catchball continues at the front-line level where Team Leaders validate their team’s objectives and winning logic. Catchball concludes with a shared understanding of what we’re trying to achieve, what metrics represent Value, and what critical few activities each team will focus on.

Catchball is a messy, intensely human process & only sticks if a) your management system continually nudges people in the right direction, and b) your core mental models support it.  The key underlying question is ‘What do you think?’ – a simple question and the tip of a proverbial iceberg. Here are some of the underlying mental models:

• I know I’m prone to inherent cognitive biases – (illustrated in the work of Kahneman & Tversky and others).
• I accept that I am out of touch with what’s actually happening at the front line. Engaging team members is my reality check
• The senior team & I are prone to groupthink. That’s why we build management walks into our routines.
• Often team members understand the problem much better than I do.
• A strategic plan is worthless unless team members accept it.
• Our team members are really smart. Give them a challenge & they do incredible things.

Here’s you challenge: the only way to internalize all this is to experience it, which materially changes you. Talk is cheap, and AI slop is worth less than zero.

Best wishes,

Pascal Dennis         E: pascal.dennis@leansystems.org