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A Guide to Implementing the Theory of Constraints (TOC) |
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Well,
Just What Is Strategy? Let’s start by defining strategy. And for a definition of strategy let’s
modify a definition of quality that would suit just as well if we swapped the
words. It belongs to Robert Pirsig
(1). Here is the modification; Strategy is neither a part of mind, nor is it
a part of matter. It is a
third entity which is independent of the two ... even though strategy
cannot be defined, you know what it is. As a
definition that is a little devious maybe; but strategy, like quality, has
that characteristic of meaning so many different things to so many different
people. One of the best definitions of
strategy is certainly that of Colonel John Boyd, but let’s leave that
definition until the page on strategic advantage. In the
measurements section we found that we needed to define; the system, the goal
of the system and the necessary conditions to support the goal. We called these our rules of engagement,
but in effect we were defining the direction of the company. Let’s use the direction of the company as a simple definition of
strategy. In a similar way Caspari and
Caspari suggest that strategy is an organization’s path to the future (2). Previously
we looked at the process of change as
follows; (1)
What to change (2)
What to change to (3)
How to
cause the change However, this leaves out an important question. An important question that might easily
remain unanswered if not asked – why change.
Let’s add this to our process of change for a more complete approach. (1)
Why change (2)
What to change (3)
What to change to (4)
How to cause
the change Once we add this initial step we can use the process
of change for whole company strategy as well as operational problems. Answering the question “why change” tells
us something about the direction of the company, even if that direction hasn’t
been clearly articulated yet. “Why
change” is a result of the dynamic tension between where we are now and where
we want to be in the future. Sometimes
we don’t even write down where we want to be in the future, we just “feel”
that we are not doing the right things now in order to be in the right place
in the future. So, step 1 tells us about the desired direction of
the company. Steps 2, 3, & 4 tell
us about the direction of the solution to how to implement it. Let’s list this in bold. In our strategizing we are seeking the
answers to two questions; (1)
What is the direction of the company? (2)
What is the direction of the solution? Let’s use a truck analogy to explain this better. Consider for a moment an articulated truck, the sort
that is common in North America but almost non-existent in Japan. You may know them as “semi trailers”, or
“tractor and trailer”. The key point
is that the cab is connected to the trailer through a frame-mounted pivot
above the driving wheels. The cab is
articulated with respect to the trailer.
Let’s consider the cab to be the “direction of the company.” The driver turns the steering wheel the
direction of the cab changes in accordance.
The trailer, which we will consider to be the “direction of the
solution,” usually just follows on from the direction taken by the cab. Articulated trucks sometimes however have a small
problem, the momentum of the trailer is greater than that of the cab. If the cab makes a sharp change in
direction (and speed) the trailer will jack-knife – and very likely both cab
and trailer overturn. That is to say
that if the direction of the solution isn’t built in accordance with the direction
of the company, or if the direction of the company changes suddenly then you
too might find that your strategy – like an articulated truck – has
jack-knifed. How do we go about formulating a strategy then that
avoids such a situation? Well, we use
our 5 focusing steps for that. Here
they are modified for strategic constraints and using the language of
leverage points (3). (1)
Select the leverage points. (2)
Exploit the leverage points. (3)
Subordinate everything else to the above
decision. (4)
Elevate the leverage points. (5)
Before making any significant changes, Evaluate whether the leverage points will and should stay
the same. In fact in the page on evaluating change we
introduced the concept of strategic constraints and a diagram to represent
this process. We then highlighted the strategic nature of the 5 focusing steps with a discussion on a separate page. On the page on implementation details we
once again discussed the concept of strategic constraints. Strategic decisions occur at both a
physical and a policy level. We drew
the model as follows;
There are two different approaches to strategy
formulation within Theory of Constraints.
Both make extensive use of the Thinking Process. How much of the Thinking Process appears
visible to the participants depends upon the person who is providing the
collaboration. These approaches are; (1)
The Holistic
Approach. (2)
The
Constraint Management Model for Strategy. Let’ examine each in turn. Many companies have a pressing operating or
marketing/sales problem. They desire a
quick and immediate solution. The
temptation in the past has been to provide the training for the necessary
logistical or non-logistical solution to gain immediate relief. However, most often this simply moves the
problem – the constraint – to a new area, an area that was previously not aware
that it was a problem. What is this
likely to produce? Resistance! Rather than have a haphazard step-wise process, it
is better to develop a system-wide strategy and tactics at the highest level
at the beginning in order to deal with emergent constraints before they
become a reality. This is the focus of
the holistic approach (4). In effect,
aligning the direction of the company and the direction of the solutions. The “why change” in the holistic approach is
generally contained within the 8-set self learning program CD-ROMs. But one could also use Goldratt’s novels to
the same effect – it just takes more time.
These present the current status in a generic and non-threatening way
and create the desire to move in a systemic/global optimum direction. The Thinking process, especially the use of
the 3 cloud method and communication current reality tree is the key tool in
obtaining the alignment on what to change, what to change to, and how to
cause the change. One might say that in this instance the general
direction of the company is, initially, well known but the direction of the
solution, and its implementation is not known. Other organizations – not-for-profit especially, may
find it difficult to initially verbalize the direction of the organization/company,
and without a coherent unified direction of the company it is impossible to
nail down the direction of individual solutions – be they Theory of
Constraint-based or otherwise. This is
the focus of the constraint management model for strategy (5). The constraint management model for strategy
addresses the question of why change through the use of a strategic
intermediate objectives map – essentially a cause and effect diagram of the
absolute necessary conditions required to enable the organization to move
towards it’s goal. The beginning of
what to change is obtained by determining the mismatches between these
essentials and the current reality.
The current reality tree is the tool that achieves this. The constraint management model for strategy is an
elegant synthesis from a number of approaches and concepts; one of the most
important concepts is Boyd’s OODA loop.
Boyd considered exploiting mismatches a key to survival and growth. “Indeed, the identification of mismatches
is responsible for much of the world’s progress (6).” The constraint management model for strategy allows
you to “bring your own” direction for the company and maybe your own
solutions as well. It uses the
intermediate objectives map and current reality tree as key tools. As you become more familiar with the Theory of
Constraints and its various solutions, tools, and philosophy, take some time
to hunt out the work of Robert Simons (7, 8).
He proposed business strategy based around the concept of 4 levers of
control, they are; (1)
Beliefs
Systems – the core values of the organization (2)
Boundary
Systems – the risks to be avoided (3)
Interactive
Control Systems – strategic uncertainties (4)
Diagnostic
Control Systems – critical performance variables. The Theory of Constraint logistical solutions,
buffer management, constraints accounting, and the thinking process
(especially the holistic approach and constraint management model for
strategy) provide the mechanisms to pursue this original framework. Develop your strategy first – and tactics will
follow and flow from it. If you
develop your tactics first you will stall within a couple of iterations
because the whole organization will not understand the direction that a part
of the organization is trying to take (force). We need a systemic/global optimum approach
to our strategy as well as to our tactics. (1)
Pirsig, R. M., (1984) Zen and the art of motorcycle maintenance: an inquiry
into values. Bantam Books, pg 240. (2)
Caspari, J. A., and Caspari, P., (2004) Management Dynamics: merging
constraints accounting to drive improvement.
John Wiley & Sons Inc., pg 257. (3) Newbold, R. C. (1998) Project management in the
fast lane: applying the Theory of Constraints. St. Lucie Press, pp 149 & 152-155. (4) Goldratt, E. M., (2002) The TOC Self Learning
Program. 8 set program. Goldratt Marketing Group. (5) Dettmer, H. W., (2003) Strategic navigation: a
systems approach to business strategy.
ASQ Quality Press, 302 pp. (6)
Hammond, G. T. (2001) The mind of war: John Boyd and American security. Smithsonian Institution Press, pp 172-173. (7)
Simons, R., (1995) Levers of control: how managers use innovative control
systems to drive strategic renewal.
Harvard Business School Press, 217 pp. (8)
Simons, R., (1995) Control in an age of
empowerment. Harvard Business Review Mar-Apr, pp 80-88. This Webpage Copyright © 2003-2009
by Dr K. J. Youngman |
