Research shows that poor service is the number one reason customers leave (45%), and reliability is the most valued of the five service qualities. In retail or distribution settings, stock-outs are the leading cause of losing business. If you can’t deliver the product when the customer expects it, you will have difficulty making money now and in the future.

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The Theory of Constraints (ToC) challenges you to build your company to last – to be ever flourishing; your performance consistently improves, even during challenging times. Your people are happy in their work. Your customers are delighted with your offer. You invariably select the ‘right’ strategic goals – building a successful differentiator and a structure to capitalize on it long-term. Your organization’s people, policies, and practices are aligned with your strategic objectives. The organization is dynamic, constantly pushing to improve its performance.

The principles embodied in the Ever-Flourishing Company (EFC) are to create an organization that will endure, providing long-term security for its stakeholders and societal benefits and informing managers’ strategic thought and actions. They provide leaders with a framework that they can use to create successful strategies and tactics without compromise. Finally, it solves two of the biggest problems for strategists, picking the right objectives and resolving internal conflicts and contradictions.

The principles embodied in the Ever-Flourishing Company (EFC) go beyond mere success; they describe an enduring organization that is a beacon of long-term security for stakeholders and delivers significant customer benefits. These principles are the guiding light for visionary managers, providing a framework that empowers them to craft winning strategies and tactics without compromising their integrity. By embracing the EFC, you unlock the solution to two of the most daunting challenges strategists face: the ability to set the right objectives and the capacity to resolve internal conflicts and contradictions.

In this world of the Ever-Flourishing Company, the possibilities are infinite, and the rewards immeasurable. Escape from mediocrity by embracing the power of the EFC and transform your business into a force that shapes the future.

Four pillars support the Ever-Flourishing Company:

1. A process of ongoing improvement (the organization is constantly driving towards the goal – more now and in the future)
2. At least one Decisive Competitive Edge (the organization has an offer, difficult for competitors to copy, that creates significant and sustainable results for customers, which in turn provides them for the company)
3. Avoids operational risk (the organization offers security for their employees and stability when the market is uncertain)
4. It breaks the Engines of Disharmony (the organization actively works to align authority with responsibility, removing contradictory rewards)

Moving the Organization Closer to Its Goal – A Process of Ongoing Improvement

A ToC strategy embodies the relentless pursuit of ever-increasing performance, a concept famously coined by Eli Goldratt as the Process of Ongoing Improvement (POOGI). But this is no ordinary endeavor; it goes beyond mere operational activity—it’s a strategic imperative. With a systematic approach, visionary leaders forge ahead, developing, implementing, and measuring strategic initiatives that yield extraordinary outcomes.

The Strategic Objective of Improving Performance

Improvement is the driving force of an EFC, encompassing much more than mere efficiency and small wins. It represents a deliberate, resolute journey toward the organization’s ultimate goal. The POOGI is an unwavering commitment to identify and shatter the strategic constraints holding the organization back.

By embracing a POOGI, improvement becomes ingrained in the organization’s DNA; it becomes a way of life. It’s not about sporadic bursts of change; it’s adopting a culture of constant evolution and relentless adaptation.

Green Curve & Red Curve Improvement Paths

The EFC requires both baseline soundness and continuous improvement. The green curve symbolizes the foundation of stability and harmony, while the red curve represents continued improvement.

 The presence of the green curve is necessary for the existence of the red curve; both are essential for organizational success. The EFC strategy is to achieve significant improvement while maintaining stability.

Success requires stability; if it is not already present, the first step is creating it. If your organization’s processes are unstable, there is little room for management attention to improve; managers are caught up in the day-to-day business activity. Put another way, we can’t focus on fire prevention while we’re fighting fires.

A Decisive Competitive Edge

An organization must build a Decisive Competitive Edge (DCE) to get on the red curve. A DCE exists when a company has a decisive, sustainable advantage over competitors.

A Decisive Offer

Decisive means providing customers with unique, meaningful value that competitors cannot easily replicate. A decisive offer is not simply “better” than others; it uses an organization’s operational abilities[1]still far away, indicating that operational excellence with ToC solutions can be the DCE.

It could be changing the product (its physical characteristics or performance), how customers engage with the product, how and when you collect payment for orders, or how the customer receives the product’s benefits—for example, superior supply reliability with penalties that compensate the customer if you don’t keep your delivery promises. 

This offer is decisive in two ways; one, in some markets, few companies deliver 98% on time, and two, few managers will bet they can consistently provide that result. A decisive offer has a superior benefit while blocking competitors from duplicating it.

A Sustainable Offer

An offer is sustainable when it does not stretch or stress the organization to provide it. It can deliver the decisive offer repeatedly without sacrificing its performance in other aspects. For example, lowering prices to gain more sales could create more work with less profit. Entering a new market that requires significant additional capability introduces operational risk. 

The offer doesn’t need to be new, splashy, or expensive (although solving a significant customer problem could be considered splashy). Instead, having a decisive, sustainable offer can be (and has been) created with any of the solutions of the Theory of Constraints.

Avoiding Operational Risk

To move into the growth phase of the red curve, a company must establish operational stability by effectively managing risk. Operational risk is the potential loss due to ineffective or failed internal processes, people, systems, or external events that can disrupt business operations.

Maintaining Adequate Capacity and Reserving Capabilities

The organization’s resource demand fluctuates, causing periods of both under and over-utilization. Managers may optimize labor costs when demand is low by balancing staff levels with demand. Unfortunately, this approach often results in staff layoffs. However, the Ever-Flourishing Company anticipates market variation with strategies that eliminate the need for large-scale layoffs, retaining its skilled workforce even during slower periods. Better planning saves them from incurring the costs of rehiring and retraining new staff when demand eventually picks up again.

The Ever-Flourishing company excels at this by avoiding the trap of over-committing its resources and using its competitors as a buffer (not capturing all of any market they are in). When an organization operates at nearly 100% utilization, operational performance declines, leading to unpredictable and inconsistent outcomes. This inconsistency will negatively impact customer satisfaction, and unreliable suppliers will force customers to seek alternative sources. Even worse, switching costs can prevent customers from returning; even a short-term decline in operational performance can have a long-term effect on future sales. When the company has all (or nearly all) of a given market, any fluctuation in demand affects it.

Financial Support for Operations

If operational risk is anything that exposes an organization to loss of profits, then financial leverage would qualify as such. Debt allows for increased return on investments by increasing asset turnover. Still, it increases risk: (1) debt means future expenses and cash demands- principal and interest, (2) developing new capabilities is not free, and (3) there is uncertainty in the market’s response to a new capability. The EFC uses debt cautiously to build or acquire capabilities only after considering other ways to create new competencies.

Engines of Disharmony

In the early 1980s, Dr. Goldratt recognized a significant obstacle to improving factory performance – conflicting incentives or performance measurements. At that time, he stated, “The goal of a plant is to make money, and the measurements we are seeking should measure progress towards that goal. We have seen that cost accounting measurement [of productivity] not only doesn’t measure real progress towards that goal but provides a disincentive.” Executing the OPT (Optimized Production Technology) software schedules contradicted the commonly held beliefs about lot sizing and setup costs. Managers were often unwilling to follow the software’s recommendations. He wrote The Goal: A Process of Ongoing Improvement to overcome these widely held beliefs. “They flew in the face of accepted policies and procedures, but they were obviously correct…at least to me.”, he later wrote.

In the late mid to late 2000s, Yuji Kishira, a leader in applying and teaching the ToC, trained and led the implementation of the concepts of Critical Chain Project Management (CCPM) in many companies in Japan. He noted that managers considered the results in improving human relations and harmonious workplace culture (in Japanese, Wa) more significant than the financial results they achieved. This outcome led to the realization that the true power of the ToC is not the ToC solutions but the solution’s ability to remove the Engines of Disharmony. Goldratt then realized that the foundational element of creating the ever-flourishing company was to improve human relationships. And the obstacles to improving them were the “Engines of Disharmony.” These engines cause conflicting behaviors between individuals and between organizational units (departments).

Managers have long thought that silos in organizations are problematic, but the Engines of Disharmony go deeper than isolated information and warring departments. Silos are not the problem; they are the symptom of the problem. The Engines of Disharmony also lead to conflict between individuals inside and outside an organization. Goldratt stated, “You cannot have an ever-flourishing company with broken relationships…The most important thing in the success of the company is human relationships.”

The ToC eliminates (or reduces) significant sources of friction (the thing that drains most managers’ time) to get things done. Most managers are fighting ‘fires’ caused by friction—the friction they had (inadvertently) created.

The causes of consistent friction are compromises between seemingly necessary conditions, Core Conflicts. A core conflict is a more profound problem – beyond guidelines and methods; for example, short-term versus long-term, centralized versus decentralized, process versus results.

What Goldratt did was identify and name the engines of disharmony. He verbalized them this way:

1. “What is my contribution? Many times, an employee’s effort and its effects on the organization are not specifically connected. Where there is no vision, the people perish. People need to know that their work has value and purpose. If my work doesn’t matter, then why should I make any effort?
2. What is my peer’s contribution? Most people don’t know how many of their colleagues’ activities are essential or at least contributing to the organization. Would you be collaborative if you were in that position?
3. Conflicts. People are operating under conflicts, which may be the results of 1 and/or 2, “making the right decision for my company vs. the right decision for my measures.”
4. Inertia. Many people are required to also do tasks for which the reason no longer exists. People’s intuition is always strong enough to feel it, but not always is it strong enough to convincingly explain it to their superiors.
5. Gaps between responsibility and authority. You, like any other manager, know firsthand – how frustrating it is to have something you are responsible for accomplishing, but you do not have the authority for some of the actions that must be taken to get it done.”

The presence of these engines means that the organization needs to resolve at least one core conflict.

Improving relationships as a path to improved results may seem obvious, but collaboration and teamwork are ephemeral for those who seek measurable causes and effects (what gets measured gets managed). How do you directly measure and thus influence collaboration or better workplace cooperation? We can’t observe all behavior, but we can observe the effects of compromise.

The organization’s architects, its managers, (inadvertently) build engines of disharmony and allow conflicts to exist in their organizations. The biggest obstacle to the EFC is the acceptance of organizational conflicts.

Summary

In conclusion, the Ever-Flourishing Company (EFC) presents a robust framework for building a business that withstands the test of time. By embracing the principles of the EFC, visionary managers can craft winning strategies and tactics while maintaining integrity and creating enduring organizations. The EFC approach revolves around four pillars: a process of ongoing improvement, a decisive competitive edge, avoiding operational risk, and eliminating the engines of disharmony.

The process of ongoing improvement (POOGI) is not just about improving operations but a strategic imperative to continuously and purposefully move the organization towards its goal. It involves developing, implementing, and measuring strategic initiatives to achieve extraordinary outcomes and break through strategic constraints.

A decisive competitive edge (DCE) is crucial for sustained growth. It involves providing customers with unique, meaningful value that is difficult for competitors to replicate.

Operational disruptions can kill the business, and the EFC approach focuses on avoiding such risks. The organization can ensure stability despite market fluctuations by maintaining protective capacity, reserving capabilities, and carefully managing financial leverage.

The engines of disharmony, conflicts and contradictions within an organization, hinder success. The EFC fosters collaboration, teamwork, and harmony within and outside the organization by addressing and eliminating core conflicts.

By adopting the EFC framework, businesses can achieve continuous improvement, establish a decisive competitive edge, mitigate operational risks, and promote harmonious relationships. This approach empowers organizations to create a lasting strength that defies mediocrity.

Bibliography

Goldratt, Eliyahu, (1983), Cost Accounting: The Number One Enemy of Productivity, APICS International Conference Proceedings,

Goldratt, Eliyahu, (1996), My Saga to Improve Production, APICS – The Performance Advantage (USA) Vol. 6, No. 8, pp34-37

Goldratt, Eliyahu, (2002), TOC on Strategy and Tactics, Theory of Constraints a self-learning Program, Goldratt’s Marketing Group

Goldratt, Eliyahu, (2008), The Ever-Flourishing Company – Part One, https://www.youtube.com/watch?v=fv7SCRNZggk

Goldratt, Eliyahu, (2008), The Ever-Flourishing Company – Part Two, https://www.youtube.com/watch?v=ij71X6cxv-I&t=158s

Kishira, Yuji (2009), WA Transformation Management by Harmony, North River Press

Barnard, Alan, (2010), Continuous Improvement and Auditing, in Cox and Schleier (eds), Theory of Constraints Handbook (pp 403-454), McGraw Hill

Barnard, Alan, (2003), New Developments and Innovations in the Theory of Constraints Thinking Process, Conference Presentation at TOCIO Cambridge, UK

Holt, James R. and Boyd, Lynn H., (2010), Theory of Constraints in Complex Organizations, in Cox and Schleier (eds), Theory of Constraints Handbook (pp 983-1013), McGraw Hill

Goldratt, Eliyahu, (2011), Above and Beyond the Competition: A Conversation with Eli Goldratt, Goldratt Consulting, https://vimeo.com/169617632

Cox III, James F., Lynn H. Boyd, Timothy T. Sullivan, Richard A. Reid, and Brad Cartier, (2012), The Theory of Constraints International Certification Organization Dictionary, Second Edition, https://www.tocico.org/resource/resmgr/dictionary/tocico_dictionary_2nd_editio.pdf

S. Patrick Viguerie, Ned Calder, and Brian Hindo, (2021), 2021 Corporate Longevity Forecast, Innosight, https://www.innosight.com/wp-content/uploads/2021/05/Innosight_2021-Corporate-Longevity-Forecast.pdf

Goldratt, Eliyahu, (2011), Never Say I Know, the Tangibility of the Green Curve, The Theory of Constraints International Certification Organization 2011 Conference Proceedings Presented by Lisa Scheinkopf

[1]  Interestingly, some companies built their DCE on operational excellence (i.e., reliable delivery or quick response); years later, their competitors are still far away, indicating that operational excellence with ToC solutions can be the DCE.

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Almost every manager is aware of Pareto’s law, the important few – the trivial many which is often thought of as the 80/20 rule. 80% of results are generated by 20% of the actions. To improve your effectiveness, one only need to focus on the 20% and you’ll get almost all of the results (80%). This simple truism is generally true, but not true in systems where there is strong dependency relationship between the entities. In these types of systems, the rule is closer to 99/1. 99% are relatively trivial and only 1% are important. 

This is the world of organizations.

The ToC is the science of making decisions in that world. 

It starts with the articulation of the Goal. The purpose of the organization.

Throughout the literature, the goal of the enterprise is stated as to make more money now, and in the future. This is rooted in the idea of ownership and the rights of owners to establish the direction of the enterprises in which they have an interest. Who gets to establish the purpose of any system? Its owners. For companies that are publicly held, it is clear that the motivation of its owners (stockholders) is profit. Therefore, the enterprise must be directed towards that end.

That’s not to say that the pursuit of increasing profit is exclusive of anything else. The goal is to make money in the future as well. In order to fulfill this aspect of the goal, we recognize that are boundary conditions – necessary conditions that must be met in order to achieve the goal. You can’t mistreat your workers for long, it will sacrifice the future. You can’t disobey the environmental regulations for long, or your profit will be impacted through fines, negative market response, etc.

This goal (making money) is not universal. Charities, governments, churches, schools are (generally) not directed to making more money now and in the future. Maybe your private company is not directed towards that goal. That’s fine. ToC is not about the goal; it’s about pointing the organization to achieve the goal. What is important is that the goal is verbalized, and a measurement is in place to determine whether or not you are getting closer to it. If you’re a non-profit, the goal is not measured in money, but money is a necessary condition to achieve that goal.

The objective of using ToC is to improve your capabilities to move you closer to achieving your goal. More money now and in the future, fewer people without homes now and in the future, mores students better prepared to enter the workforce now an in the future, etc. Your efforts as a manager and leader are to move the organization closer to its goal. Now and in the future. 

Marking the distinction between THE goal and necessary conditions is the first step to focusing. As a matter of focus, the necessary conditions are those factors that are monitored, but not improved unless there is some violation. 

The goal is your “true north” or your chosen strategy to achieve that true north. The necessary conditions are the boundaries. The distinction between the two is found when you satisfy that necessary condition. For example, cash flow. If you have enough, it is not a matter that requires full attention. If you don’t enough, nothing else matters, not even the goal! 

A Chain is Only as Strong as its Weakest Link

Achieving the Goal is a process, subject to dependency and variation. In order to make money, one must have a product, a customer to buy, a system to deliver, and then get paid. How many people does it take to disrupt that process?  Just one. There’s your dependency. We know Murphy lives, so there is your variation.

Making money – achieving your goal is like managing a chain, where each link (action) and resource (strength) is connected to another. We all know that the strength of the chain is determined by its weakest link. Organizations are like chains. There is always the weakest link. The challenge is identifying that link, then moving the organization to strengthen that link. Since the strength of the chain is always determined by the weakest link, there will always be one, if that is strengthened, there will still be a weakest link.  

That weakest link is the Constraint. It determines your profit, your return on investment, your performance in your market. If you don’t know where it is, you are shooting in the dark. Serious pursuit of the Goal implies serious pursuit and breaking of the Constraint. Putting your attention and resources to improve in other places may improve the local situation but will not improve the global situation.

Since the Constraint only exists in the context of its goal, actively breaking the organization’s constraint or moving the it to a ‘better’ location moves the organization closer to achieving its goal (more and more).

A Bottleneck is Not the Constraint

Often, we see our progress blocked by scarcity; not enough resources to accommodate demand. It may seem like the constraint bounces around the organization without rhyme or reason. This is the evidence that you do not have an internal resource Constraint, but rather, your organization does not know where the Constraint lies and thus, cannot react to it. Bottlenecks are temporary, the real Constraint is difficult to move. It’s expensive. Scarce. 

Engines of Disharmony / the Core Conflict

In the early development of the ToC, the Constraint was to be considered a physical thing, like a machine or some capability. This evolved into thinking of the Constraint is a set of rules or policies that govern the utilization of physical resources.  This realization gave rise to the search for a method to identify these ‘erroneous’ policies, and the Thinking Processes were developed.

Over time, ToC practitioners found that erroneous (sub-optimal) policies are a developed as a reaction to resolve a conflict in the system. I.e., short term action vs. long term action, or satisfying customers vs. satisfying shareholders. Typically, the resolutions are compromises between necessary conditions, sacrificing a bit of each to find an acceptable solution. As organizations become more and more complex, these compromises become the fabric of how the organization is run, and the compromises also become more complex. 

These conflicts, where there is a sacrifice of a necessary condition, are thus related to each other, and can be traced to a single, core conflict. Many problems can be traced to this unresolved conflict.  This conflict and the resulting compromises become the Engines of Disharmony, creating friction in the organization, blocking progress. 

This core conflict becomes the true Constraint. Identifying and resolving that conflict is the holy grail of a ToC based strategy.

Strategic Implications of the Theory of Constraints

The strength of any chain is determined by its weakest link. No chain is infinitely strong, therefore the strength of even the strongest chain is still determined by its weakest link.

Your organization will always be constrained.

Strategists should not be chasing the weakest link; they must decide where that link will be. Your strategy and tactics are to move the Constraint to a location where it propels your organization closer to its Goal now, and in the future. You will be anticipating the movement of the Constraint and building supporting structures to support the sustainment of the location, hopefully before it moves.

Breaking Constraints

Is the Constraint internal to the organization or external? Is it the market size (demand) or an internal capability that prevents you from satisfying all the demand?

I’ll show later that the Viable Vision^[1] strategies are built on developing a decisive competitive capability (edge) or improving an area of operation, then exploiting this new capability to gain market share. For example, if there is excess production capacity (the desired Constraint) or underserved market(s), a strategy would be built focusing on customer facing activities like more sales activity (the current bottleneck) in a certain market segment or new products (a Constraint, but not the one that is wanted) that create more demand for segments where there is opportunity. 

The strategy could be driven to achieving a certain objective, like domination of a market, or introducing a new technology. The execution of the strategy would be based on moving the Constraint from one area of the company, like sales capacity to another area of the company, say, product development. 

Understanding the Constraint today versus the desired location helps decision makers choose the best alternatives, moving the organization in a practical way, closer and closer to its goal.

The Applications of the Theory of Constraints

The applications or solutions of the Theory of Constraints are:

• The 5 Focusing Steps
• Drum Buffer Rope, a production scheduling technique
• ToC measurement systems (Throughput, Inventory, Operating Expense), management financial decision making
• Critical Chain Project Management, project scheduling and execution
• Demand-Pull Replenishment (the Distribution Solution)
• ToC in Sales & Marketing
• The Thinking Processes, analyzing, creating solutions, and implementation for complex systems

From a strategic standpoint, we don’t really need to know the details of these solutions, only the rough contours and effects of them.

I want to mention that as we (in the ToC community) understood these applications better over time, we also understood the ToC better. The ToC wasn’t created or even named until a few years after the Drum Buffer Rope solution was developed. Over the years, we struggled with the essence of ToC, and that has probably contributed to its lack of recognition as a tool for strategists. 

5 Focusing Steps

The Focusing Steps of ToC.  A checklist of sorts.

1. IDENTIFY the systems constraint.
2. Decide how to EXPLOIT the constraint. Maximize its use.
3. SUBORDINATE everything else to the decisions made to your exploitation decisions. Ensure the 99% does not get in the way of the 1%.
4. If, in the prior steps, the constraint has not been broken, ELEVATE the system’s constraint.
5. Go Back to step #1.

This may seem a bit tactical – like you’re chasing your constraint all over in infinite loops. When you first apply the ToC, you’ll find yourself in that mode. As you mature in the use of the ToC, you’ll find using these steps in a more conceptual manner as you develop your strategy, choosing the Constraint rather than chasing it. 

Even so, it does imply a sequence to attacking the Constraint. Know where it is. Don’t waste it. Ensure no other resources are preventing its full use. Then get more, break the Constraint. Find the new one.

Strategically, the focusing steps help you sort the types and sequence of actions you’ll be taking. More on using these in a strategic context later.

Drum Buffer Rope

The main idea of drum buffer rope (DBR) is to find the Constraint in a sub-system – production, then follow the focusing steps. This is what happened in the book, The Goal. 

During this process, the characters redefined operational efficiency and showed the impracticality of monitoring everything during execution and introduces the concept of Time Buffers.

What the DBR scheduling method does (over other models of production management) is significantly improve operational efficiency, reduce production lead times and improve delivery reliability.

ToC Measurement Systems (Throughput, Inventory, Operating Expense) 

Also introduced in The Goal, T, I, & OE were used as simplified financial metrics for decision making. What the system accomplishes is eliminate distortions in decision making over cost allocation methods. The metrics for decision making improve alignment in decisions, resulting in better resource allocation throughout the organization.

Critical Chain Project Management

The method of planning, scheduling, and execution of projects is a local solution (projects or portfolios of projects) that identify the constraint as the longest chain of resources and tasks, with the Goal being the delivery of the project.  The methodology further refines the use of time buffers in processes with greater uncertainty and variation.

What CCPM does is dramatically reduce the time to deliver projects, improve productivity and delivery reliability. 

Demand-Pull Replenishment

Sometimes called the “Distribution Solution” of the ToC, this solution combines time buffering management with a demand-based replenishment mechanism to improve availability with less inventory investment. Often a 50% improvement over traditional methods, it solves the bullwhip effect found in supply chains. 

As with the other solutions, the supply chain is dealt with as a sub-system, with the Constraint being shelf space, and the Goal being sales (of SKUs).

ToC in Sales and Marketing

This application is probably the most strategic in the sense that it considers the needs of the customers in other dimensions besides delivery reliability. When the Constraint is in the market, internal capabilities take a back seat. The application is broken into:

• The Un-refusable Offer (sometimes called the Mafia Offer) 
• The Layers of Resistance (sells the offer)

The definition of Un-refusable Offer (URO)is one that is so compelling, has so much value, is so good, that customers cannot say no when presented with the offer. This offer would be created by having a deep understanding the customer, the industry, and identifying the core problems. 

The unique feature of a URO is that it is a complete solution that solves the customers‘ core problem as it relates to doing business within their industry. It is not a restatement of the unique value proposition, although it most certainly fits that definition. Creating a URO typically requires that a supplier of the offer do something different (e.g., make operational improvements) to address the customers’ core problem. 

The Layers of Resistance is a framework for selling the offer and is often used on its own to create buy in to a new idea or solution. The Layers are:

1. We don’t agree on the problem being addressed
2. We don’t agree on the direction of the solution
3. We don’t agree the solution solves the problem
4. We see that the solution, if implemented, causes negative effects
5. We see obstacles blocking a realistic implementation of the proposed solution
6. Fear of the unknown

The steps are to be accomplished in sequence to gain agreement or buy in to the proposed solution. 

What is thought of as resistance becomes a tool for managing organizational change (or selling a solution) to systematically objections and obtain buy-in. 

The Questions on Technology are thematically similar.

• What is the power (capability) of the new technology?
• What limitation does it diminish?
• What are the old rules that supported the limitation?
• What are the new rules that should be used now with the new capability?
• What technology changes are required to support?
• How to cause the change?

The ToC (constraint busting) has been applied to the sales process itself, breaking the Constraint of sales staff interaction with the customer, enabling massive increases in sales productivity.  This approach breaks a fundamental assumption in sales process engineering, that sales should be the sole responsibility of autonomous agents. 

What ToC does for sales and marketing is to identify ‘blue ocean’ strategies to find new market opportunities and re-think the manner in which the solution is sold to the customer; from articulation of value to communicating that value to customers and markets.

The Thinking Processes (TP)

The objective of the TP is to reliably answer the question of where to focus. It makes clear distinctions between causes and effects, exposes hidden assumptions and identifies the relationships among them. Typically used when one is developing a deep understanding of a system with an eye towards improving it. 

The TP is a set of tools answer the 3 questions of change.

• What to change?  Defining the core problem – the elements that are the causes of the undesirable effects (symptoms). 
• What to change to? Defining the changes to be introduced to eliminate the current undesirable effects without creating new ones.
• How to cause the change? Mapping the actions from the current state to the future state without creating new problems.

The TP consists of the Current Reality Tree and Evaporating Cloud, which is devoted to answering the first question. The Future Reality Tree and Prerequisite Trees are used to answer the second, and the Transition Tree is used to answer the third.

A special category of the TP is devoted to the most recent development, the Strategy & Tactics Tree. It is used most frequently to answer the 3^rd question or in situations where the first 2 questions are not necessarily deeply analyzed. 

These capabilities are the typical starting point of ToC based strategy. Anyone can break a single constraint or implement a single solution. The strategy dictates how to create, capitalize upon, then maintain that decisive competitive edge.

Bibliography

Goldratt, Eliyahu & Jeff Cox, (1984), The Goal; Excellence in Manufacturing, North River Press 

Goldratt, Eliyahu, (2011), Theory of Constraints Handbook Chapter 1 Introduction to ToC, McGraw Hill 

Goldratt, Eliyahu, (2012), The Gestalt of ToC Part 1, YouTube

Goldratt, Eliyahu, (2017), Engines of Disharmony, YouTube https://youtu.be/nnejDyoR_Fg

Cox III, James F., Lynn H. Boyd, Timothy T. Sullivan, Richard A. Reid, and Brad Cartier, 2012, The Theory of Constraints International Certification Organization Dictionary, Second Edition, https://www.tocico.org/resource/resmgr/dictionary/tocico_dictionary_2nd_editio.pdf

Roff-Marsh, Justin, 2015, The Machine: A Radical Approach to the Design of the Sales Function (Book 1), Independently Published

Goldratt, Eliyahu, (2008), The Every-Flourishing Company – Part One https://www.youtube.com/watch?v=fv7SCRNZggk

Goldratt, Eliyahu, (2008), The Every-Flourishing Company – Part Two, https://www.youtube.com/watch?v=ij71X6cxv-I&t=158s

Barnad, Alan, (2016), Applying Theory of Constraints to developing Business Strategy,

^[1] Viable Vision is a strategy with the objective of converting a firm to ever-flourishing. We’ll discuss the different strategy templates associated with the Viable Vision approach in later chapters.

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The goal is to change the rules that are affecting your ability to make MORE.  In my last post, I wrote about challenging the assumptions.  The supply chain or supplier strategy is a great place to start.

What about the material specification itself?  Most material specifications are established by a default rule of thumb established to minimize risk of failure.  The result is a conservative specification that will cover a wide swath of situations.  I seldom see material specifications done to maximize throughput.

What’s available to challenge?  Everything.  Dimensions, tolerances, material specifications, storage requirements, quality checks, etc.  Another place to look is deeper into the supply chain.  What about your suppliers’ suppliers?  What you challenge will be determined by what gives you the most productivity.

When we worked with a boom manufacturer, we found that the output of a particular type of boom was constrained (at all suppliers) by a worldwide scarcity of a key component.  This scarcity was about three links earlier in the supply chain.  We looked for a substitution.  Working with the engineering and supply chain teams at the supplier and the customer, we found another material, which was significantly cheaper, allowing them to purchase three times the amount of the new material for the same price as the old material.  With all the materials in full supply, the boom manufacturer was able to boost output tenfold!

Not only are the technical specifications open to challenge.  Your supplier management rules are open to question, too. Just like the engineers create conservative rules to minimize technical risk, it is common practice to make policies to minimize commercial risk.

Some common things we look at are: batching policies, supplier qualification, supplier selection (sole source is my favorite), price breaks on quantities, delivery frequencies, and more.  Often supplier selection is based on mostly on price, without consideration to supply risk.

When we worked with one supplier, we questioned a long established rule of restricting their purchases from any one supplier to no more than half the supplier’s total output.  This limitation was restricting their output as they were lacking the supplies to produce more.  This easy fix untapped the potential to quickly and dramatically increase supplies, and in turn the factory’s output.

Finding extra capacity is not rocket science, but it does require an eye on the process and a willingness to challenge what you’ve done in the past – sometimes an uncomfortable activity.  I enjoy it, though.  Eli Goldratt, my friend and mentor, said famously, “Sacred cows make excellent steaks”.  I agree.

Read how we sacrificed those sacred cows in the materials and supply chain and in turn, achieved great results in lesson 5 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster. 

The post Reconsider Your Rules on Materials and Suppliers appeared first on Projects in Less Time - Mark Woeppel.

When our consultants find something blocking the process, we use a simple technique to find the hidden assumption(s).  We’re not challenging every assumption, just the ones that create situations that block us from where we’re going.  It does involve asking the question, “Why?”.  Sometimes we ask it 5 times.  But asking “why?” just tells us the “reasons”, not always the assumptions.

A couple of words about assumptions – we’re all familiar with the word game played when someone says “assume” (for those that aren’t aware of that, when you make an assumption, it makes an ass|u|me), but that’s not what I’m talking about here (although I do agree with that statement).  I think of assumptions as a person’s basic understandings of how things work.  This is useful for thinking in terms of cause and effect.  For example, the cause, “I kick you in the shins” will likely result in an effect like, “you will be angry”.  Not very hard, but the assumptions I make in this situation could be, “you don’t like being kicked in the shins” or “your feelings will be hurt by an attack on your person” (actually, this latter statement has another assumption, “when people’s feelings are hurt, they react with anger”.  Each of our processes has causes to create effects.  Sometimes, we don’t like the effects, so, if we want to change them, we should dig into the assumptions around these cause and effect relationships.

In a process, assumptions take the form of management rules (Why are we doing that?  We’ve always done it that way!), understanding of technical process (we have to put a 15 degree radius to allow for a subsequent step), quality requirements (inspection steps), or product specification requirements (dimensions or features).  These are baseline parameters of how the process functions and its boundary conditions.  Most of these are important and needed.  However, over time, these rules and requirements can become like barnacles on our process, no longer needed and slowing down the process.

Our goal is to find the assumptions that are erroneous.  An erroneous assumption is the rule, requirement, or boundary condition that is no longer required. (Why are we doing that?  I don’t know! We’ve always done it that way!).  The only way to find those assumptions is to zero in on the blockages and ask why certain requirements (the ones that are slowing you down) are necessary.

The process we use to find and challenge assumptions is to simply ask why and identify the assumptions that are no longer valid or could be made invalid.  Meaning, not every assumption is a fixed thing.  We can change things around.  Some are not valid in every situation – do we need to take this step for every product or just for specific customers?  Do those policies still apply in this situation?  Can I get the policy changed?  Can I find a different way to satisfy the requirement other than the one in place?

Take, for example, Pinnacle Strategies’ work during the Gulf Oil spill.  When we were working with boom manufacturers, our consultants went to several boom manufacturers to find more capacity.  The companies usually had rigorous specifications from their customers, as the quality requirements were support usage for many years.  However, we wanted as much boom as possible, in as short of time as possible, for a short burst of intensive work.  The companies were building heavy duty products designed to meet a wide variety of situations.  The boom that was needed was for a specific environment, with specific requirements, for a short period of time.  Some features could be left out, thus reducing the time to manufacture and thus releasing extra capacity to make more.

This is our experience over and over.  There is ALWAYS more capacity than you think.  You just have to do a little digging and challenge your assumptions.

Read more about how we achieved great results by challenging the assumptions in lesson 4 in my eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster.

As always if, you have questions or comments please feel free to contact me by emailing me.

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In a more practical sense, if I’m a leader of an organization, how do I know my team is doing the right things?  If I’m a team member, how do I know what actions to take?

Every organization is formed for a purpose.  In order to achieve its purpose and goals, organizations develop around sub-organizations (functions) and processes that accomplish them.  These sub-organizations then have their own purpose and goals, for example; accounts payable’s goal is to ensure the bills get paid.  Presumably, each of these sub-organizations is in alignment with overall goals and objectives of the global organization.

As the organization becomes more complex, it becomes more challenging to maintain this alignment, so the organization establishes performance management systems to maintain alignment of purpose and activity among the constituent (local) organizations.  These systems are often referred to colloquially as “the measurement system” or “the metrics”.  Managers seek the relevant measurements to make decisions and drive appropriate behavior in the enterprise; whether to correct a course of action, direct a new course, or even stop.

The performance management system is the formal and informal process of measuring and responding to the organizational process to achieve its goal(s).   It creates and applies uniform standards, quantifying and managing process performance.

Here are a few things to think about.

Establish the standards.  Create a common benchmark of performance.  This can take the form of a database of work to be done, a common set of objectives, or even an agreed upon set of goals. If you don’t know what the objective is, anything will be acceptable.  So be purposeful and deliberate about determining your direction.  Essentially, the standard are the “why” of what is to be performed.

Know the process.  The process is the “what” of your process – the details that determine your progress towards success.  If you have never mapped the process or supply chain, now is the time to do it!   It’s essential to know the behaviors required and the results of those behaviors – you can’t measure what you can’t quantify.

Create decision gates. Now that you have the process mapped and can clearly articulate the steps towards the goal, you can identify where decisions need to be made.  Quantify the decision process – who can make what decisions and when escalation is required.

Identify the constraint. Now that the process is mapped and all steps are clear, you can see where the bottlenecks are and what is holding up the process or supply chain from moving faster – you can focus on the areas that are most critical.

During the oil spill in the Gulf of Mexico, BP built the largest civilian maritime fleet ever seen (over 14,000 vessels). In the haste of containing the spill, keeping detailed records were not a priority.  Equipment was rented and used with no documentation and boats were commissioned to clean oil with no record of their model or serial number.  This lack of communication and documentation became a big problem when it was time to decontaminate the cleanup vessels.  We employed these lessons to drive the process and completed a task in less than six months that was originally estimated to take years. These lessons worked in the worst conditions, imagine how they could help you now.

Read how we achieved great results by applying uniformed standards in lesson 6 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster.

Also, have a look at some of our thought leadership on performance management here.

As always if, you have questions or comments please feel free to contact me by emailing me.

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This manifestation is not uncommon. Every time we have created a visual project or portfolio board, the team members begin congregating at the board and working together, solving problems, and explaining what they are doing. For the first time they can understand the entire process, see where they are and where they need to go, understand their relationship to the rest of the activities, and help move the entire portfolio to a successful conclusion. And all it takes is the appropriate tool.

Understanding the entire process: When you have the organizational processes depicted on a visual board at an appropriate level of detail for all the team to see, everyone has the same understanding of their route to success. For many, it may be the first time they have seen the organizations processes applied to their work. At a visit to one of my customers last week, again as we were just beginning to post our board, we “caught” team members already using the board to teach fellow team members their process and explaining what they should do next. An appropriate visualization of either a portfolio or a project consistently leads team members to better process understanding and ownership of their activities. The see their efforts as part of a larger process. Visual tools like the ones we often use at Pinnacle Strategies almost require no training to use and provide rapid performance improvements.

Where you are and where you need to go: A good visual board allows everyone to instantly understand the status of each activity and drives your attention to the issues that are or may soon begin impeding progress. Therefore, time is not spent explaining what everyone has already finished or what they are working on, the board does that already. The board allows managers to focus the team on what they need to be doing next. They see the issues, who is working the issues, when the corrective actions should be in place, and most important, when they or others need to be engaged to ensure the projects are flowing rapidly through the system. What team members really like is that the meetings at these boards are normally only 15-20 minutes long. One of our customers said that these meetings were the “most effective of all his meetings”, calling the boards “simple but elegant”.

Understanding the relationship to the rest of the activities: In addition to taking ownership of their activities, the board facilitates one other behavior that is almost always essential to project success – teamwork. At another customer site where we had posted a board, the production team was overloaded with “other” assigned work (multitasking is fun isn’t it). Their workload was having a direct impact on the project they were meeting at the project board to discuss. Classically, in this organization, the production and engineering resources did not have “close” relationship. But something great occurred at the board. When everyone saw the same problem and recognized it’s impact on the overall project, they began working together to come up with a solution. In this case, the engineering manager offered up some of his resources to assist. This was unheard of in their organization since this was not “their” responsibility. The engineering manager clearly saw the bigger picture and they worked as a team solving problems and moving the project forward. By the way, the picture at the top is where it happened.

Visual boards have proven effective in a lot of environments. In portfolio and project management, they are beginning to prove essential to both the effective and efficient execution of projects. At Pinnacle Strategies, we have been using and perfecting these tools for a number of years. ViewPoint is our proven methodology for developing, implementing, and sustaining these tools. You can read more about Viewpoint here.

To learn more about our project management methods, download our newest ebook Blindsided! Five Invisible Project Threats Successful Managers Must See.

Duke Porritt is the Pinnacle Strategies lead for ViewPoint solutions. In this role, Mr. Porritt is responsible for developing and implementing ViewPoint delivery processes, establishing training programs for both internal and external customers, and establishing essential quality assurance processes. Mr. Porritt is a Project Management expert with over 25 years of experience developing and executing management solutions and facilitating organizational change. He is highly proficient at analyzing organizational issues and guiding leaders to effective process improvements in all facets of management. His extensive background has made him a recognized expert at applying the Theory of Constraints (ToC), Lean, and Six Sigma methodologies to organizational issues. His specialty is implementing Critical Chain Project Management.

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Why is this so important? Can’t we just start with, say, “The goal is to deliver machine X”?

Unfortunately, such vaguely defined goals leave a lot of room for interpretation and chances are different people will come up with different interpretations to fill their perceived void. Others get lost and lose their motivation.

In our practice we often find that many problems in project planning and execution have to do with the lack of a clearly defined goal, turning a project to a plaything of change requests, complete “rescoping”, unclear priorities, demand management and similar things. How are you supposed to deliver in time, within budget and scope under such conditions?

To avoid these issues, start with a clear definition of the project’s goal that is consensus among stakeholders. You will find a simple tool to be helpful. It is called ODSC, for Objectives, Deliverables and Success Criteria for three goal dimensions. It is powerful for verbalizing and agreeing on a project’s target.

Before we go into that – who do I mean by “stakeholder”? You should go rather wide than narrow and involve project leaders, managers, members, senior management, even customers and suppliers.

Objectives – The first dimension states the purpose or objectives of the project. Why is it important to the stakeholders? What problem or demand is to be addressed by the project? Would the objective solve this problem or meet the demand? Always take the throughput (performance) of your organization into account.

A discussion will reveal many different facets, in New Product Development these may range from turning a technological breakthrough into a product, to increased profit margins, to opportunities for fostering the corporate image. To ensure a broad perspective and consensus from all stakeholders, you should look for six perspectives: financial, process, employees, customers, corporate culture/philosphy, and corporate social responsibility. So the objectives of our example may be:

The post Where Are You Heading? appeared first on Projects in Less Time - Mark Woeppel.

Having been the individual responsible for many such initiatives, I’ve learned (often the hard way) that it pays to “stack the deck” at the beginning of the project while enthusiasm still runs high.  While most of the suggestions in this article are in no way revolutionary or ground-breaking, thinking about how each of these complimentary tasks contributes to “stacking the deck” is most certainly a worthwhile exercise in building a good foundation for a successful initiative.

Commit to the Effort in a Project Charter.  A Project Charter is a document typically signed by at least the Initiative’s Sponsor (person allocating budget) and the Project Manager (person responsible for planning and executing).  The Charter identifies things like project scope, project objectives, major stakeholders, and team member authority levels.  Additionally, I strongly recommend that your charter articulate the vision of the end-state as well as the metrics upon which the effort’s success will ultimately be judged. Risk areas that could impact your success should also be highlighted.

Having a signed project charter has saved my ‘back side’ on a couple different occasions.  Especially on longer projects, a Charter can be used to remind those with short memories what they signed up for at the project start and help motivate them to play their part.  It is also a useful document to align players that may change after the project gets kicked off.  Identifying risk areas such as this up front prepares you to negotiate contingencies for when Murphy strikes.

Conduct a Stakeholder Analysis.  Going through a written exercise of identifying the stakeholders and understanding how the project will affect each person and their role in the organization is time well-spent.  A major part of a Project Manager’s job is to convince others to accomplish project-related tasks.  In today’s matrix organizations, the Project Manager often does not have direct authority over many of the resources assigned to the team and must negotiate conflicting priorities and/or objectives.  A Stakeholder Analysis helps one articulate what these priorities and competing objectives might be.

As a practical matter, I typically put together a matrix for my personal use (or the use of a select few trusted team members) that lists what is important to each impacted stakeholder and what my engagement plan with them will be.  This is especially important for those who may perceive the initiative as threatening (or maybe just cumbersome), but you should also do this for those who will be positively impacted.

Develop a Formalized Project Plan.  In a major initiative, a formalized project plan can be your best friend.  A good project plan will break down the project into bite-sized tasks for your team members and establish the linkages that tie the work together.  It will also guide progress with estimated task durations and strategically placed buffers to account for the uncertainties that are inherent to project work.

There are undoubtedly some guys who ‘have done this a 1000 times’ and can successfully pull off a successful major initiative with an ad-hoc management style.  For those of us who are less risk averse and want to ‘stack the deck’ in our favor, a good project plan will serve as an effective communication vehicle both early in the project and later….after things haven’t gone according to plan.

Read some of our case studies here to see how these implementation realities helped achieve great results for our clients.

Cory TerEick is Pinnacle Strategies’ Engagement Manager specializing in the Oil & Gas and Aerospace industries. In this role, he is responsible for delivering results and sales while leading an international team of expert consultants working at various client sites around the world.  Mr. TerEick is a results-oriented problem solver with a track record of helping clients overcome significant challenges and driving high impact, transformational change. He is a recognized expert in advanced project management methodologies as well as mega-project design, execution, and turn-around. Mr. TerEick is especially skilled in operations diagnostics, process re-engineering, and portfolio-level strategic planning.

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The goal is to change the rules that are affecting your ability to make MORE.  In my last post, I wrote about challenging the assumptions.  The supply chain or supplier strategy is a great place to start.

What about the material specification itself?  Most material specifications are established by a default rule of thumb established to minimize risk of failure.  The result is a conservative specification that will cover a wide swath of situations.  I seldom see material specifications done to maximize throughput.

What’s available to challenge?  Everything.  Dimensions, tolerances, material specifications, storage requirements, quality checks, etc.  Another place to look is deeper into the supply chain.  What about your suppliers’ suppliers?  What you challenge will be determined by what gives you the most productivity.

When we worked with a boom manufacturer, we found that the output of a particular type of boom was constrained (at all suppliers) by a worldwide scarcity of a key component.  This scarcity was about three links earlier in the supply chain.  We looked for a substitution.  Working with the engineering and supply chain teams at the supplier and the customer, we found another material, which was significantly cheaper, allowing them to purchase three times the amount of the new material for the same price as the old material.  With all the materials in full supply, the boom manufacturer was able to boost output tenfold!

Not only are the technical specifications open to challenge.  Your supplier management rules are open to question, too. Just like the engineers create conservative rules to minimize technical risk, it is common practice to make policies to minimize commercial risk.

Some common things we look at are: batching policies, supplier qualification, supplier selection (sole source is my favorite), price breaks on quantities, delivery frequencies, and more.  Often supplier selection is based on mostly on price, without consideration to supply risk.

When we worked with one supplier, we questioned a long established rule of restricting their purchases from any one supplier to no more than half the supplier’s total output.  This limitation was restricting their output as they were lacking the supplies to produce more.  This easy fix untapped the potential to quickly and dramatically increase supplies, and in turn the factory’s output.

Finding extra capacity is not rocket science, but it does require an eye on the process and a willingness to challenge what you’ve done in the past – sometimes an uncomfortable activity.  I enjoy it, though.  Eli Goldratt, my friend and mentor, said famously, “Sacred cows make excellent steaks”.  I agree.

Read how we sacrificed those sacred cows in the materials and supply chain and in turn, achieved great results in lesson 5 in our eBook, Achieving Top Performance Under the Worst Conditions: 7 Lessons Learned from a Disaster. 

The post Reconsider Your Rules on Materials and Suppliers appeared first on Projects in Less Time - Mark Woeppel.