Theory of Constraints Bottom Line Evaluating Change 5 Step

A Guide to Implementing the Theory of Constraints (TOC)
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The Five Focusing Steps – Structured and Strategic

Concepts, just like sports cars or fighter planes, are often at their leanest, fastest, and greatest maneuverability in their earliest form. Later on they often acquire additional bits and pieces that increases their functionality but at the expense of the initial specification. The original verbalization of the 5 focusing steps by Goldratt is a little like the earliest form of a fast and agile sports car. The original verbalization is perfectly adequate and it should be the one that we refer to most often. There are many people who are quick to recognize both the tactical and strategic implications of this concept.

There are however two more recent re-verbalizations of the basic 5 focusing steps that suggests that maybe some people have trouble in initially “seeing” the tactical and strategical duality. Rather than looking past the more immediate tactical issues to the strategic drivers, they tend to focus and become “stuck” on the immediate, but overall less important, tactical implications.

The 5 focusing steps are without doubt structured and tactical; but more importantly they are also strategic in intent. Let’s review Goldratt’s original verbalization and then the subsequent re-verbalizations and see if we can come to a better understanding of the strategic intent inherent in this process.

Goldratt’s Original Verbalization

Goldratt’s earliest published verbalization of the five focusing steps is as follows (1);

(1) Identify the system’s constraints.

(2) Decide how to Exploit the system’s constraints.

(3) Subordinate everything else to the above decision.

(4) Elevate the system’s constraints.

(5) If in the previous steps a constraint has been broken Go back to step 1, but do not allow inertia to cause a system constraint.

We drew a slight modification of this verbalization on the Process of Change page replacing “go back” with “don’t stop” and adding a plural to step 3, to arrive at the following;

(1) Identify the system’s constraints.

(2) Decide how to Exploit the system’s constraints.

(3) Subordinate everything else to the above decisions.

(4) Elevate the system’s constraints.

(5) If in the previous steps a constraint has been broken Go back to step 1, but do not allow inertia to cause a system constraint. In other words; Don’t Stop

We called the 5 focusing steps or the focusing process our “plan of attack.” Then on the Evaluating Change page we started to “subdivide” the process into strategic and tactical aspects. Lets redraw the diagram that we produced.

Very broadly speaking we assigned strategic aspects to those requiring additional investment and tactical to those that could be achieved within existing operating expense. Equally; strategic issues could be argued to be less immediate and tactical issues to be more immediate.

There are however two messages inherent in the discussion on the focusing process on the Evaluating Change page. The first message is that some tactical issues are so simple and so cheap that we should just go out and do them immediately. The change that is brought about by this exploitation is often large as well as very rapid. The second message is that even while we are acting upon these easy leverage points, we should also have in mind where we would like the constraints to reside once the system has “settled” down – once the system has been through a couple of iterations of exploit-subordinate-elevate. In other words; how can we design the system to maximize the goal of the system. This brings us to the first re-verbalization.

Newbold’s Verbalization

Robert Newbold offered a re-verbalization of the 5 focusing steps that firstly recasts the constraints as leverage points, and secondly better explains the strategic nature (2);

(1) Select the leverage point(s).

(2) Exploit the leverage point(s).

(3) Subordinate everything else to the above decisions.

(4) Elevate the leverage point(s).

(5) Before making any significant changes, Evaluate whether the leverage point(s) will and should stay the same.

Newbold argues; “We want to be proactive in controlling where the leverage points are and where the focus of the organization is. This doesn’t mean we stop improving; it means we control the improvement process much better. The implications of this change are far-reaching. Since the leverage points have been selected on a strategic basis, any temporary constraints that arise must be eliminated as a matter of policy. There must be a new organizational policy that reads as follows: Identify, evaluate and, most likely, eliminate any constraints that have not been selected.”

This approach of evaluate and eliminate any constraints that have not been selected as the strategic constraint is essentially a subroutine to ensure adequate subordination of potentially emergent near-capacity constraints; subordinated that is, with respect to the selected strategic constraint.

We can draw a model of this verbalization as follows;

The interpretation here of Newbold’s verbalization is that we now have both a “constraint loop” and a “non-constraint loop” or a “near-capacity constraint loop.” The constraint loop concerns itself with the active selection of a strategic constraint in accordance with the goal of the system.

Let’s digress for a moment into the semantics of this situation. We can’t by definition exploit a non-constraint, so Newbold’s choice of eliminate is apt. If we left a non-constraint or a near-capacity constraint long enough that it impinged upon the strategic constraint, then it would indeed become the constraint for a short period and we could exploit or better still elevate it until is was once more subordinate to the strategic constraint. Of course we don’t want this situation to arise and so we must proactively elevate the incipient near-capacity constraint or non-constraint and ensure continued subordination. Thus evaluate and eliminate expresses this subordination loop well. Newbold’s verbalization makes the strategic intent explicit. However, there is another more recent attempt, lets look at this next.

Schragenheim’s Verbalization

More recently Schragenheim has also offered a re-verbalization of the 5 focusing steps in order to make its strategic nature more explicit (3). We swap back from “leverage points” to “constraints.” The verbalization is a follows;

(1) Identify the system's constraints.

(2) If a constraint can be immediately removed without large investments, do it now and go back to Step 1. If not, devise a way to Exploit the system's constraints.

(3) Subordinate everything else to the above decisions.

(4) Evaluate alternative ways to elevate one or more of the constraints. Predict the future constraints and their impact on the global performance by theoretically employing the first 3 steps. Execute the way you have chosen to Elevate the current constraints.

(5) Go back to Step 1. The actual constraints may be different from what you expected ‑ beware of inertia in the identification of the constraints.

As Schragenheim explains; “Step 4 has been expanded to express its strategic meaning. Without this expanded definition, TOC can be easily regarded as a tactical managerial approach rather than a long-term, strategic approach.”

Let’s try and redraw our model according to Schragenheim’s verbalization.

Here the evaluation stage has been bumped back up a step – although if we look at Newbold’s verbalization carefully we will see that he suggested that we evaluate before making any significant changes. Both verbalizations are consistent in this respect. Schragenheim’s verbalization makes it explicit that more than one potential pathway exits and that the outcome can’t be known for certain until after we have committed to it – hence we can only predict the outcome. When we change one important thing, in this case the constraint, we must evaluate and predict the potential outcomes and then elevate based upon the predicted outcomes while remaining consistent with the goal of the system.

A Comparison Of The Re-verbalizations

Both of the more recent re-verbalizations supplement the original verbalization in making the strategic intent more explicit. In addition both complement each other in the areas that they stress. In Newbold’s verbalization the role of the non-constraints is explicit. In Schragenheim’s verbalization the role of the non-constraints is implicit. In Schragenheim’s verbalization the testing of multiple potential pathways is explicit – “predict;” in Newbold’s verbalization the existence of such choice is more implicit – “select.” In isolation either verbalization is more than adequate. Together they are much more powerful.

A Synthesis

What to do then? Newbold has put forth an important consideration in the development of strategic constraints – ensuring near-capacity constraints and non-constraints do not unintentionally become the constraint. We know how to guard against this using buffer management. Buffer management allows us to ensure the elimination of potential near-capacity constraints and that they remain subordinated to the strategic constraint by timely and appropriate action and maybe expenditure.

On the other hand Schragenheim has also expressed the same notion but in terms of the constraints only. And certainly the 5 focusing steps is a constraint-based focusing process. There seem to be elements from both verbalizations that are desirable. Well, the temptation is too great. We have a simple and robust model to work with. Let’s try and synthesize both Newbold and Schragenheim’s approaches into one.

Let’s see what we can come up with.

This isn’t an attempt to produce a “new” 5 step focusing process; we have one already – the original one. We need a fast agile sports car, not an SUV with air conditioner and ice chiller to boot. The model above is a learning tool. Something to help us in the transition from “tactical” thinking to “strategic” thinking. The 5 step focusing process – our plan of attack, really ought to remain focused on the constraints.

The important points to remember are that we can break constraints early on and at low or no additional expenditure, and also later on as a consequence of considered analysis and maybe capital expenditure as well. We must remember also to simultaneously consider both the chosen or potential strategic constraint and all of the actual and potential near-capacity non-constraints which we don’t wish to become constraints.

Summary

We need to recognize that implicit in Goldratt’s original verbalization is a level of detail that makes the 5 focusing steps not just tactical but absolutely strategic as well. The two more recent re-verbalizations are attempts to illustrate and explain this detail and to ensure that an a priori view of the process as tactical does not become an obstacle to further learning.

Page back up to Goldratt’s verbalization. Consider that “identify” means elements of both identify and select – passive and active. Consider that “exploit” and “subordinate” can contain both short-term (immediate) cash-less decisions and longer term (non-immediate) cash-required decisions.

More importantly consider that the 4th step “elevate” contains a special richness. There are two looping structures that we can invoke here; one is almost passive and the other is active. The active loop is the constraint loop; early on the constraints will “present” themselves in rapid succession, but later on we can make a considered decision – a strategic choice – about where we wish it to be. We do this based upon our desire to move the system towards the goal of the system. Consider then that “elevate” means also “evaluate” and “predict” as well. We evaluate a number of possible pathways and predict the future outcomes before selecting a single pathway to elevate and follow.

The passive loop is the non-constraint loop. It is passive in the sense that once a strategic constraint has been selected – either recently or in the distant past – then the maintenance of non-constraint sprint capacity and therefore sufficient subordination is the major concern. So, once again, we must evaluate and predict – this time for the non-constraints.

Of course the world is messy and we are massively parallel in our thinking so all of this occurs mixed up in execution.

References

(1) Goldratt, E. M., (1990) What is this thing called Theory of Constraints and how should it be implemented? North River Press, pp 3-21.

(2) Newbold, R. C., (1998) Project management in the fast lane: applying the Theory of Constraints. St. Lucie Press, pp 147-155.

(3) Schragenheim, E., (1999) Management dilemmas: the Theory of Constraints approach to problem identification and solutions. St. Lucie Press, pp 5-7.