A Guide to Implementing the Theory of
Is Theory Of Constraints A Strategy?
This is more of a personal page than most and it revolves
around the question; is Theory of Constraints a strategy? Well, my initial and unsophisticated
intuition told me it was. And that was
a reaction especially to the knowledge provided by an understanding and
implementation of drum-buffer-rope. Drum-buffer-rope
is certainly a competitive advantage – but does that make it a strategy? Surprisingly the strategists appeared to
say no! I was confused. Nowadays, I think that it was the
strategists who were then, and are now still, too narrow in their understanding.
Let’s revisit the argument for drum-buffer-rope in
particular, and then later develop it to embrace the marketing, sales, and
other non-logistical components of Theory of Constraints.
During the late 1980’s and early 1990’s American
industry in particular became acutely aware of the time and quality
advantages that just-in-time (JIT) and total quality management (TQM) afforded
companies (1, 2, 3). In an article in
the Harvard Business Review and later as a book the concept of “competing
against time” or time-based competitive advantage was established (4).
Drum-buffer-rope through its focus on increasing
throughput also substantially reduced overall lead time and improved product
quality; more so and more rapidly than other methods available and thus
appeared to be a perfect mechanism to attain this “new” aspect of competitive
advantage. Surely therefore one could
develop a business strategy on such operational effectiveness – just as
others before have used novel financial or marketing aspects to gain a
Operational effectiveness is not a strategy it was proclaimed
(5). “Operational effectiveness was
necessary but not sufficient.” The key
to this argument was that the rapid diffusion of best practices soon rendered
any advantage useless. In fact, “the
most generic solutions – those that can be used in multiple settings –
diffuse the fastest.” I ask you, do
these guys live on another planet?
What about just-in-time? Stunningly effective, absolutely generic,
but with slow and very limited diffusion.
Why is it that with industry standard machinery and freely available
know-how such a technique has been quite limited in its uptake (even in those
industries to which it is most suited)?
To help to solve this paradox we should consider what David Hurst has
to say (6);
“…The lean production process had given Toyota
control of fine scales of detail as yet inaccessible to its
mass-production-based rivals. The
customers could tell the difference and called it ‘quality.’
…Toyoda and Ohno did not invent a technology so much
as they invented a social process that changed the
technical system. Their subsequent
success was the result not just of introducing new technology but of
introducing a new sociotechnical system.”
What does drum-buffer-rope do? Especially the 3rd step of the focusing
process – subordination – it introduces a new social process that changes the
technical system. This is why
just-in-time and drum-buffer-rope are both true strategies. It is impossible for competitors to mimic
the solution even when they know it well.
They must actually implement it.
And to do that they must be prepared to also change their social
In order to change the social process we need to
reframe our environment from the former reductionist/local optima approach to
a systemic/global optimum approach.
In fact, you might recall in our discussion of accounting
for change Jones and Dugdale have already, and independently, argued in a
similar fashion that ABC accounting and TOC are different socio-technical
systems (7). In fact they went as far
as to suggest that they are different moral systems. Thus it seems that from two different
angles; the similarity between just-in-time and drum-buffer-rope, and the
dissimilarity between ABC and Theory of Constraints, we can argue that Theory
of constraints is a new socio-technical system.
To the extent that most businesses are unable or
unwilling to change their social process, both just-in-time and
drum-buffer-rope by virtue of their operational effectiveness remain true
We might conclude that when generic solutions are
transferred easily that they are modifications or extensions of existing
solutions within the predominant paradigm – the reductionist/local optima
approach. Conversely when transferal
isn’t easy we might suppose that the solution is part of a different paradigm
– in this case the systemic/global optimum approach.
So yes, absolutely, drum-buffer-rope is a strategy.
A proper implementation of the logistical parts of
Theory of Constraints; drum-buffer-rope, distribution/replenishment, and
project management, means that a company should be able to offer a greater
range of goods more quickly and more profitably than its competitors. Essentially it becomes a flexible supplier. Flexibility is a crucial attribute to
Upton argued that there are 3 aspects to flexibility
(2) Product range.
(3) Uniformity of Performance.
Where; mobility is the plants ability to change
nimbly from one product to another, product range varies from small numbers of
different products to large concurrent amounts of similar products, and
uniformity of performance means the same levels of quality and quantity
regardless of product or volume (no sweet spots). Plants with good mobility have good product
range and good uniformity of performance.
Coincidentally Upton based his research on as uniform an industry as
he could find – paper mills. If you
can imagine a set-up on a paper machine, a machine that occupies a factory
itself, you will begin to appreciate the concept. Although Upton argued for flexibility at a
plant level, I believe it is generic to corporate levels as well.
The logistical components of Theory of Constraints
pass the flexibility criteria. But
what of the non-logistical components?
Let’s return to David Hurst once more (6);
“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.”
Hurst isn’t talking about constraints in client or
vendor organizations; he is talking about constraints in our own
Now consider the marketing and also sales components
of Theory of Constraints. What do they
address? Constraints. Whose constraints? Our own organization’s constraints!
It’s not enough to be logistically flexible; one
must also remove internal constraints.
Which ones, tacit or explicit?
The tacit ones. Is that
easy? No! More importantly, is it easy for your
competitors to imitate? Absolutely
Let’s illustrate the difficulty for competitors to
imitate – in this instance a systemic/global optimum approach brought about
by a leaning organization in the steel industry – pretty standard stuff
surely? “A close look at Chaparral
reveals an organic learning system so tightly coupled that CEO Forward says
he can tour competitors through the plant, show them almost ‘everything and
we will be giving away nothing because they can't take it home with
them.’ His confidence derives from the
fact that the knowledge management organization is comprehensible only as an
organic whole (9).”
If you are operationally flexible and remove
internal constraints that are almost impossible for competitors to imitate,
does that constitute a strategy?
Both the logistical and non-logistical components of
TOC constitute real strategy.
It’s good that we used a learning organization
example. Did you also notice Hurst’s
use of the words tacit and explicit to describe internal constraints? We saw the same terminology used by Nonaka
and Takeuchi much earlier to describe the externalization of individually
held tacit knowledge and the creation of explicit organizational knowledge as
a consequence (10). Organizations that
create explicit organization knowledge are learning organizations – they have
what Goldratt would call an on-going process of improvement. Nonaka and Takeuchi didn’t have a mechanism
for this knowledge conversion; but we do – the Thinking Process. We can generate strategic advantage in the
non-tangible aspects and it remains totally invisible and inaccessible to
In fact we can also generate strategic advantage in
the tangible aspects and be quite sure that it will also remain invisible and
accessible to others even though it is plain to see. Bottleneck awareness, exploitation, and
elevation isn’t anything new to the reductionist/local optima approach – even
thought the implementation usually falls far short of the real
potential. We saw this in the page on
process of change, we tried to envisage the reductionist/local optima approach
All the elements of the
systemic/global optimum approach are there but subordination is ignored. The real cultural change is subordination –
subordination of the local optima to the global optimum. Of course we also drew this;
And of course we also know how to
do this. It is a reframing from the
reductionist/local optima approach to the systemic/global optimum
approach. And we know that such a
change is a change in meaning only.
Thus we can generate strategic advantage in the tangible aspects of
our business and it remains invisible to others. They are block by their own understanding.
We can produce a new sociotechnical system – and it
is a change in meaning only.
Let’s leave the last word to Air Force Colonel, John
Boyd, someone for whom strategy really did mean life or death on a personal
level in active combat as well as at the level of the nation-state (11).
He defined strategy as "a mental tapestry of
changing intentions for harmonizing and focusing our efforts as a basis for
realizing some aim or purpose in an unfolding and often unforeseen world of
many bewildering events and many contending interests."
Its aim was "to improve our ability to shape
and adapt to unfolding circumstances, so that we (as individuals or as groups
or as a culture or as a nation-state) can survive on our own terms."
Theory of Constraints allows us as individuals and
as organizations to shape and adapt to unfolding circumstances so that we can
survive on our own terms.
(1) Schonberger, R. J. (1982) Japanese manufacturing
techniques: nine hidden lessons in simplicity. The Free Press, 260 pp.
(2) Womack, J. P., Jones, D. T., and Roos, D. (1990)
The machine that changed the world.
Simon and Schuster, 323 pp.
(3) Schonberger, R. J. (1986) World class
manufacturing: the lessons of simplicity applied. The Free Press, 253 pp.
(4) Stalk, G., Jr., and Hout, T. M., (1990)
Competing against time: how time-based competition is reshaping global markets. The Free Press, 285 pp.
(5) Porter, M. E. (1996) What is strategy? Harvard Business Review, Nov-Dec, pp 61-78.
(6) Hurst, D. K., (1995) Crisis and renewal: meeting
the challenge of organizational change.
Harvard Business School Press, pp 120-123.
(7) Jones, T. C.,
and Dugdale, D., (2000) The making of "new" management accounting:
a comparative analysis of ABC and TOC.
Proceedings of the Sixth Interdisciplinary Perspectives on Accounting
Conference, Manchester, U.K., July, pp 20-21.
(8) Upton, D. M., (1995) Flexible
Manufacturing. Harvard Business
Review, Jul‑Aug pp 74-84.
(9) Leonard-Barton, D. (1995) Wellsprings of
knowledge: building and sustaining sources of innovation. Harvard Business School Press, pg 7.
(10) Nonaka, I.,
and Takeuchi, H. (1995) The knowledge-creating company: how Japanese
companies create the dynamics of innovation.
Oxford University Press, 284 pp.
(11) Hammond, G. T. (2001) The mind of war: John
Boyd and American security.
Smithsonian Institution Press, pg 161.
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