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A Guide to Implementing the Theory of
Constraints (TOC) |
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The Principle of Leverage Theory of Constraints is a systemic/global optimum
approach. Another systemic approach is
known as Systems Thinking. Systems
thinking developed as a methodology for understanding dynamic
complexity. Dynamic complexity is a
short-hand term for dependent cause and effect separated in time and
space. Of course dynamic complexity is
the sort of thing that we have come to expect to occur in the novel serial
processing systems that have developed since the beginning of the industrial
revolution and that today we call business. Systems thinking is also the 5th discipline of
Senges’ book by the same name. This
work, and the work of others such as The Living Company by
Arie De Geus, have helped bring into focus a refreshing view of business
organizations as organic, dynamic, learning and composed of people. This view rejects the older notions of
mechanistic models, reductionist/local optima approaches, and that particular
being known as homo economicus. “Whereas the management curriculum had no
place for human beings, the workplace was full of them (1).” Underlying the concept of systems thinking is the
concept of leverage; “seeing where actions and changes in structures can lead
to significant, enduring improvements.”
“Tackling a difficult problem is often a matter of seeing where the
high leverage lies, a change which – with a minimum of effort – would lead to
lasting, significant improvement (2).”
It should be a simple matter then to locate the leverage points? Unfortunately not. If it was a simple matter of seeing where the high
leverage lies then we would surely be doing it. The problem is “that high-leverage changes
are usually highly nonobvious to
most participants in the system. They
are not ‘close in time and space’ to obvious problem symptoms.” ”Our nonsystemic ways of thinking are so
damaging specifically because they consistently lead us to focus on
low-leverage changes: we focus on symptoms where the stress is greatest. We repair or ameliorate the symptoms. But such efforts only make matters better
in the short run, at best, and worse in the long run (2).” Clearly we need a methodology that allows us to
identify leverage points. Certainly we
have used the language of leverage points to date as synonymous with
constraints, but we must be careful to distinguish between physical constraints
and policy constraints. In an early
section we quoted Goldratt; "We very rarely find a company with a real
market constraint, but rather, with devastating marketing policy
constraints. We very rarely find a
true bottleneck on the shop floor, we usually find production policy
constraints. We almost never find a
vendor constraint, but we do find purchasing policy constraints. And in all cases the policies were very
logical at the time they were instituted.
Their original reasons have since long gone, but the old policies
still remain with us (3).” Thus even if a physical constraint
is looking us in the eye, it is very likely that within one or two iterations
of the 5 focusing steps we will be dealing with the intangible policy
constraints that give rise and find expression as these initial physical
constraints. We need a method to find
leverage points which may well be non-physical. The 5th Discipline although aware of the
problem of finding the non-obvious high leverage points didn’t offer much in
the way of a solution. However Theory of
Constraints does and the methodology is called the Thinking Process. The Thinking Process is a set of tools; graphical
“trees,” which enable us to drill down into our intuition to verbalize the
cause and effect relationships that we observe in our businesses
day-to-day, but which are difficult to
capture in reports, graphs, accounting statements, and project plans. It allows us to capture those non-obvious
leverage points which are separated in time space and to portray their relationships
in a simple and straightforward manner. It is easy to consider the Thinking Process as an
adjunct to the Theory of Constraints, something that is useful for overcoming
initial resistance and ensuring buy-in.
However this is not the case, the Thinking Process is absolutely
integral to Theory of Constraints. The Thinking Process allows us to work through the
sequence of; (1) What to change. (2) What to change to. (3) How to cause the change. The Thinking Process performs a number of functions
often simultaneously. It allows us to
interrogate the situation in a systematic and logically rigorous way, allows
us to analyze and synthesize, communicate the situation, and to generate
organizational knowledge. The Thinking Process enables us to work through the
sequential layers of agreement to obtain an implementable solution. We do this using the intuition of the
people involved – remember some of the cause and effect relationships will be
separated in time and space, but if we include the critical people we will
develop an understanding of the whole problem we are dealing with. Let’s look at verbalizing our intuition and
organizational knowledge creation. If we were to limit ourselves in using the Thinking
Process to recording cause and effect which is already explicitly understood,
albeit separated in space in time amongst individual members, we would in
effect be doing “process mapping” which was common while business process
re-engineering was popular. The real
power, however, comes from verbalizing our intuition – our tacit knowledge –
that which is not yet explicit. “We grossly underestimate our intuition. Intuitively we do know the real problems,
we even know the solutions. What is
unfortunately not emphasized enough is the vast importance of verbalizing our
own intuition. As long as we will not
verbalize our intuition, as long as we do not learn to cast it clearly into
words, not only will we be unable to convince others, we will not even be
able to convince ourselves of what we already know to be right. If we don’t bother to
verbalize our intuition, we ourselves will do the opposite of what we believe
in (4).” The Thinking process meshes well with the concepts
of tacit and explicit knowledge developed by Nonaka and Takeuchi. Specifically “…tacit knowledge contains an
important cognitive dimension. It
consists of schemata, mental models, beliefs, and perceptions so ingrained
that we take them for granted. The
cognitive dimension of tacit knowledge reflects our image of reality (what
is) and our vision for the future (what ought to be). Though they cannot be articulated very
easily, these implicit models shape the way we perceive the world around us
(5).” Let’s repeat that; although they cannot be
articulated very easily, these implicit models shape the way we perceive the
world around us. This is why it so
important to verbalize these factors and the Thinking Process gives us just
the structured methodology to articulate these ideas that we have been
lacking before. However, there is a further equally important aspect
to the verbalization of tacit knowledge – during the process organizational
knowledge is created. “... the
subjective and intuitive nature of tacit knowledge makes it difficult to
process or transmit the acquired knowledge in any systematic or logical
manner. For tacit knowledge to be
communicated and shared within the organization, it has to be converted into
words or numbers that anyone can understand.
It is precisely during the time this conversion takes place ‑ from
tacit into explicit, and... ... back again into tacit ‑ that organizational
knowledge is created (5).” The trees
that are the product of the Thinking Process allow us to convert individual
tactic knowledge to explicit group knowledge. In effect the following is occurring; (1) Individuals verbalized their own
tacit knowledge as explicit knowledge. (2) The group internalizes this
explicit knowledge as shared tacit knowledge. (3) Organizational knowledge is
created. Let’s not underestimate the importance of tacit
knowledge as leverage against constraints.
We will develop the idea further in the section on strategic
advantage, but let’s add quote from David Hurst to underline the importance
of the issue; “The most dysfunctional constraints are usually those that are
tacit rather than explicit. Elements
of formal organization such as restrictive rules and policies are at least
easily identified and can be changed.
The more insidious constraints are the strictures imposed by … the
almost invisible influence of culture, and the pervasive effects of growth in
organizational size (6).” Indeed it has been said that the Thinking Process
“may be the most important intellectual achievement since the invention of
calculus (7).” High praise indeed, but
like all things it requires proficiency, and proficiency in this case comes
through practice. However, there
should be no lack of examples to practice on.
There are several very good books available to guide you step by step
through the construction of your own trees in much more detail than can be
attempted here (8-12). The following
pages are really a concise introduction or a ready reminder depending on your
familiarity with the subject. There is a concept in Japan known as nemawashi which you will see mentioned in Western books on
Japanese business. I read nemawashi to mean the suggestion of an idea by the
leadership that percolates down through the company, is made workable, and
then floats back up through the management for approval by the
leadership. Sometimes nemawashi is presented as a very Japanese approach. Well, it is. But we poor Westerners can emulate this
Oriental social norm in a structured way with equal skill. We have the structure within the existing
Thinking Process. What we have been
missing to date is the method to sow the germ of the idea that we wish to
develop. I would have liked to have introduced this thought
much earlier in the page on agreement to change or in the page on leadership
and learning. In fact it is still too
early because the extra piece that we need is called an Intermediate
Objectives Map. Dettmer shows how to
use an intermediate objectives map to set the direction of a company when determining
a company’s strategy (13). The
intermediate objectives map can also be used equally to set the objective for
tactical problems. It is a “stripped
down” pre-requisite tree of the goal or objective and some pre-requisite
necessary conditions. It allows the
leadership of the organization to sow the germ of the idea that they want the
organization to develop. The remainder
of the Thinking Process tools allow for that development of the idea to take
place. Indeed this sequence provides
for something that I will call structured nemawashi. This is the development of true consensus
by the internalization and socialization of a leadership idea until it is
owned by the whole organization.
Dettmer’s constraint management model for strategy is structured nemawashi.
We will discuss this further in the strategy section on the constraint
management model for strategy. The ownership in structured nemawashi comes about
through an understanding of the explicit cause and effect between the
solution that is developed by the organization and the objective that was
originally proposed by the leadership. Let’s consider next then, explicit cause and effect. You might like to consider the Thinking Process
tools as LEGO sets for constructing business solutions, or dare I say it, as
“transformer toys” for adults because too often one tool has a habit of
transforming into another as you work with it. Let’s have a look at the simplest case.
Let’s look at this the other way around. What if we start with the observed effect,
we might call this a symptom.
In most cases, even where we know that there is a
singular common cause, we are forced to treat the symptoms as two separate
problems requiring two separate solutions. It is a characteristic of complex problems that they
require simple solutions to be resolved.
If we try to resolve a complex problem with a complex solution, we can
be sure that we haven’t addressed the underlying causality and the real
problem hasn’t been removed. The Thinking Process tools allow us to derive simple
solutions to complex problems and to implement these solutions. There are different Thinking Process tools or trees
for different occasions. Most often
you will encounter them in a structured sequence as you try to move from your
current reality to your future desired reality. In this respect it is useful to re-read the
page on agreement to change. In fact
let’s repeat a table from the page on multi-layers accessed off the page on
agreement to change. Treat this as a
kind of road map for choosing the right tool for the right occasion.
Note that the transition tree isn’t specifically
dealt with here, but it is covered in detail in the texts. As you read through the following pages
refer back to this table and to the page on agreement for change. The concepts are strongly interrelated. There is a group of concepts know as Categories of
Legitimate Reservation (17).
Essentially they provide the rigor for checking the validity of the
cause and effect construction. The concepts
are; clarity, entity existence, causality existence, cause insufficiency,
additional cause, predicted effect existence, and tautology. McMullen considers; “Their titles alone say
a lot. Their simple and systematic use
delivers more. You start using them
right away by figuring out what they mean from their names, or you can
consult logic-tree reference sources to read pretty much what you’ve already
figured out yourself from just thinking about the names (18).” In fact there are a number of published sources of
the categories of legitimate reservation.
For completion, these concepts are explained on a separate page. When you start to build your own trees
check the categories of legitimate
reservation until you feel that you have internalized
them. And of course the best way to
check a tree’s validity is to give it to someone else to read. The Thinking Process is integral to the systemic
nature of Theory of Constraints and allows not only analysis of problems, but
also the construction of solutions and the communication and effective
implementation of those solutions.
Over the following pages we will examine 4 different tools, the
current reality tree, the cloud, the future reality tree, and the
pre-requisite tree. We will also
examine some derivatives, the negative branch reservation, the 3 cloud
approach, and the communication current reality tree. We have seen some of these trees already,
now we will learn the basics of how to construct them. (1) De Geus,
A., (1997) The living company: habits for survival in a turbulent business
environment. Harvard Business School
Press, pg 82. (2) Senge, P.
M., (1990) The fifth discipline: the art and practice of the learning
organization. Random House, pp 12, 64,
& 114-115. (3) Goldratt,
E. M., (1990) What is this thing called Theory of Constraints and how should
it be implemented? North River Press,
162 pp. (4) Goldratt,
E. M., (1990) What is this thing called Theory of Constraints and how should
it be implemented. North River Press,
pg 3. (5) Nonaka,
I., and Takeuchi, H., (1995) The knowledge-creating company: how Japanese
companies create the dynamics of innovation.
Oxford University Press, pp 8-9. (6) Hurst, D. K., (1995) Crisis and
renewal: meeting the challenge of organizational change. Harvard Business School Press, pp 123-124 (7) Noreen,
E., Smith, D., and Mackey J. T., (1995) The theory of constraints and its
implications for management accounting.
The North River Press, pg 149. (8) Dettmer,
H. W., (1997) Goldratt’s Theory of Constraints: a systems approach to
continuous improvement. ASQC Quality
Press, 387 pp. (9) Dettmer,
H. W., (1998) Breaking the constraints to world class performance. ASQ Quality Press, 288 pp. (10)
Scheinkopf, L., (1999) Thinking for a change: putting the TOC thinking
processes to use. St Lucie Press/APICS series on constraint management, 255
pp. (11) Lepore,
D., and Cohen, O., (1999) Deming and Goldratt: the theory of constraints and
the system of profound knowledge. The
North River Press, pp 121-148. (12) Smith,
C., In: Smith, D., (2000) The measurement nightmare: how the theory of
constraints can resolve conflicting strategies, policies, and measures. St Lucie Press/APICS series on constraint
management, pp 143-176. (13) Dettmer,
H. W., (2003) Strategic navigation: a systems approach to business
strategy. ASQ Quality Press, 302 pp. (14) Goldratt,
E. M., (1996) My Saga to improve production, Avraham Y. Goldratt Institute, 7
pp. (15) Smith,
C., In: Smith, D., (2000) The measurement nightmare: how the theory of
constraints can resolve conflicting strategies, policies, and measures. St Lucie Press/APICS series on constraint
management, pp 156-159. (16) Bakker, P., (2000) Notes from the 4th Annual
TOC For Education International Conference, Monterrey, Mexico, August. Seminar delivered by Rami Goldratt on the 9
layers developed by Efrat Goldratt. (17) Noreen,
E., Smith, D., and Mackey J. T., (1995) The theory of constraints and its
implications for management accounting.
The North River Press, pg 161. (18) McMullen,
T. B. C., (1998) Introduction to the theory of constraints (TOC) management
system. St. Lucie Press, pg 73. This Webpage Copyright © 2003-2009 by Dr K. J.
Youngman |
