Eli Schragenheim has continued his thinking about handing uncertainty with his latest blog post The current TOC achievements in handling uncertainty. He describes four key elements of how TOC thinks about uncertainty and why they are important. Here is my take on these elements.
Buffers: TOC explicitly calls out time and stock buffers, rather than hiding or not acknowledging them. Explicitly creating buffers and deciding where to put them is a planning decision that lines up with the concept that there will be uncertainty in execution and that we must to plan for it more systemically, rather than assuming we can manage it locally. When buffers are hidden, they are always wasted.
Buffer Management: Now that we have buffers, the execution process makes use of them. Eli highlights a key aspect of buffer management: it only works if the buffers are usually partially consumed. If they are fully consumed, there is nothing to manage. And if they are un-consumed, there is no information from the buffers to guide operations.
Protective capacity: The very common belief that we must have high efficiency everywhere leads us to hide the capacity in internal buffers. Or it leads to the concept of trying to balance capacity. When variability strikes, a balanced system is easily thrown off, whereas a system with those buffers can more easily absorb the variation. And more specifically, the system must have capacity to absorb the variation - there must be excess capacity. And looping back to buffer management, the statistics about buffers can point to the resources/work centers which are often the sources of significant buffer consumption, which then leads to focused improvement efforts - improve the items that are linked to the heaviest buffer consumption and the whole system will improve.
Thin and focused planning: Eli calls out this phrase - never articulated in TOC directly - as another result of the TOC Five Focusing Steps. The mindset in TOC is to focus on the one thing that is limiting the business from achieving more of its goal. We have the buffers to manage variability, in combination with protective capacity. Rather than planning everything down to the minute, getting the flow right and letting people manage the details reduces the planning effort and simplifies even the idea of "replanning."
A superior level of performing well in spite of significant uncertainty will be achieved ONLY when a decision making process is established that verbalizes the uncertain potential results and lead the decision makers to contemplate decisions that would achieve high gains most of the time, but also take into account that in some cases limited damage will occur.
We have generally left the days where people were regularly recommending new blog reading, which I still miss. But Eli Schragenheim, author of a number of Theory of Constraints books and an active participant in ongoing TOC thinking has started writing his own blog. And, as I have heard him speak a number of times, I can hear his voice in his writing style, which is always a plus.
For example, his recent post talks about The problems with “Common and Expected Uncertainty”, which is a familiar complaint that when people use estimates but then report only one number, not the possible range around that number. He articulates a variety of bad effects that result from this common practice, such as this comment about sales forecasts:
The reliance on one number allows top management to judge their sales and operations people, however that judgment is flawed and the sales and operations managers have to protect themselves from the ignorance of top management.
Good stuff. If you care about these topics, go have a read!
There are plenty of job descriptions that make you scratch your head, wondering what they are really looking to hire. The classic one, particularly for people clued into the idea that multitasking isn't such a great thing, are job requirements for "good at multitasking" - particularly when tied to positions that are geared toward continuous improvement or systems thinking.
I came across a job description, looking for a facility supervisor who knows Theory of Constraints. But the key job functions include, "Drive cost reduction and continuous improvement in the attainment of corporate goals." At least there is a mention of meeting customer commitment dates - listed after the cost reduction item. No mention of driving improved performance to attract more customers or more repeat business.
In case it isn't obvious, driving cost reduction and hitting customer commitment dates will often create a conflict for the facility manager. They only want to be successful, after all. On the one hand, they want to be a good steward of the company's funds, so they are driven to reduce scrap, reduce overtime, etc. On the other hand, they want to ensure they meet the customer commitments, so they are driven to do what it, which often requires spending some extra money (overtime; last-minute shipping).
Of course, I have no idea what is the real situation behind the position and the company. And I shouldn't laugh too much - there aren't that many job postings that mention Theory of Constraints so explicitly!
I came across the video from the University of Texas 2014 Commencement address by Admiral William H McRaven in which he describes his training and draws ten life lessons. The story is engaging, and while the lessons out of context sound odd, they make sense in the way he puts it together. Yes, I am aware that this is 9 months old and that others have commented on it when it was first published. I liked it enough to post again.
- If you want to change the world, start of by making your bed.
- If you want to change the world, find someone to help you paddle.
- If you want to change the world, measure a person by the size of their heart. Not the size of their flippers.
- If you want to change the world, get over being a sugar cookie (failing) and keep moving forward.
- If you want to change the world, don't be afraid of the circuses.
- If you want to change the world, sometimes you have to slide down the obstacles head first.
- If you want to change the world, don't back down from the sharks.
- If you want to change the world, you must be your very best in the darkest moments.
- If you want to change the world, start singing when you are up to your nose in mud.
- If you want to change the world, don't ever, ever ring the bell.
He also summarizes in the last minute with what these mean: Start each day with a task completed. Find someone to help you through life. Respect everyone. Know that life is not fair and that you will fail often. But if take you take some risks, step up when the times are toughest, face down the bullies, lift up the downtrodden and never, ever give up, you can change the world. [I slightly modified the above from the full text of his address.]
Source: Glenn Alleman's often informative blog and his post on What is a Team?
I'm writing from the frozen northeast USA, where we've had more than the usual amount of snow packed into two weeks.
The CIO's Guide to Breakthrough Project Portfolio Performance: Applying the Best of Critical Chain, Agile, and Lean by Michael Hannan, Wolfram Muller, and Hilbert Robinson is a good, short description of how to take ideas from several disciplines and apply them to an overall portfolio management approach. (Disclaimer I know two of the authors, though I did buy the book.)
The authors start out describing the three most important objectives of portfolio management:
- Selecting the right projects
- Maximizing the portfolio's throughput of project completions
- Optimizing the portfolio's reliability of project completions
And the rest of the book clarifies what they mean by each of these objectives.
How to help selecting the right project? The authors discuss the TOC Throughput Accounting idea of "throughput per constraint unit" - basically reviewing how much time projects consume on the system's constraint compared to the value of the project. They also add in a consideration of the investment required to deliver the project, which they calculate as an "effective ROI". Interestingly, there is a similar concept in the Factory Physics approach (I'm reading Factory Physics for Managers).
I also like that they talk about analyzing potential projects from the TOC perspective of how the project will impact the constraint of the overall system. There might be a project portfolio constraint - the resource that limits the ability of the portfolio to flow more and more projects. And there will be a constraint at the business system level - these are not always the same thing. When they are the same resource, care must be taken in deciding on projects: will the operational needs of the finished project reduce or increase the demand on the system constraint? Are projects that require significant capacity from such a resource the best projects to run? If it is unavoidable that the constraint must also be on projects, there are a few strategies: make sure those resources in particular are focused (no multitasking!); make sure all other resources do what they can to support the constraint; and finally, if necessary, develop more of that constraint resource (training, hiring, etc).
So once you have selected the right projects, the focus becomes on ensuring they complete quickly and reliably. The more of the right projects that finish, the more value the portfolio will deliver to the organization. The focus here is has to be on ensuring projects are released to take advantage of the capacity of the constraint of the whole portfolio of projects: don't release more work than the resource can safely handle. Don't force your most precious resource into the situation where they are forced to switch from project to project to project without finishing the work of the moment. (This doesn't mean that they should have only one project - they should have only one TASK at a time.)
The authors describe a series of changes in planning and execution of projects that will create more and more benefit to the flow of work. In the conversation, they suggest an original portfolio that finishes just three projects in 17 weeks could be rethought into finishing sixteen projects in those same 17 weeks. People familiar with CCPM will find the discussion quite familiar: staggered release based on the constraint; reduce multitasking; elimination of internal task promise dates (change to finish as quickly as possible). There are also ideas in the Agile community that can help speed the throughput of projects.
Not only do they use familiar CCPM methods, but they also suggest bringing in the idea of Value Stream Analysis to the project design: particularly for information technology projects, it is often the case that the IT organization is asked to automate an existing business process. Rather than strictly automate it, a VSA would suggest places where the process could be improved to eliminate or reduce the number of steps. Not only does this make the business process better, but the resulting technical component is often simpler and much more in alignment with the needs of the business. And the project can be faster.
Finally, many of these concepts have to do with planning. Execution is just as critical. CCPM project execution techniques and tools help people focus on the key work required to bring projects in on time. In addition, one of the authors of the book, Wolfram Muller, also wrote Taming the Flow, which talks a lot about how to turn these ideas into "ultimate Scrum" to maximize the flow in software development.
And it is in execution where the third objective comes into play: reliable project completion. Again, from CCPM comes the idea of project buffers and using buffer status as a primary mechanism for providing status and focus. There are also scope buffers (backlog management) and budget buffers to help direct money to the places that need it.
And these buffers and the resulting information help at another level. Collecting information over time as to what most often causes significant buffer consumption is a great way to look for longer-term improvement opportunities.
The book isn't going to answer all the questions on how to make this happen, but it is a great introduction to the concepts and gives a good starting path. I particularly like that it shifts the conversation away from project management - implications on managing projects. In a portfolio, it is just as important to be flowing the right work in the right way for overall success.
Finally, they have a nice analogy in talking about "local efficiencies" and task-level promises. They extend the familiar (to me) idea of a project as a relay race. Everyone wants to do their best in the environment they are in. But what does that mean for the leg that the individual runner is on?
No runners are asked to commit to a specific time or speed - and if you did ask them, they would likely look at you like you're nuts, because all athletes know that performance will vary from one race to the next.
Just like in knowledge work. And most project work is knowledge work these days.
I haven't completely forgotten knowledge management. My life happens to be tied up in the process side of things these days, but KM hides under the covers of many conversations I have with people. How do we make sure the right people know how to operate?
As such, Arthur Shelley posted his 12 Principles of Knowledge Leadership to a KM mailing list - turns out he wrote this a year and a half ago. Good reference material!
12 Principles of Knowledge Leadership is a great place to start you practice of becoming more successful:
- Enhance performance
- Be the (knowledge) leader you want to serve - Channelling Gandhi there!
As usual, go to his website for more details on each of these. I could argue several of these apply well beyond knowledge management.
Henry Camp has created a nice two-page summary of Theory of Constraints and made it available for all to use. I've posted a copy here (with permission): TOC Reference Sheet. His idea behind creating it was something that people could print and laminate for quick reference.
This covers TOC topics that Henry cares about, which is most of them. He covers the 5 Focusing Steps, the Pillars (he counts 5 instead of 4), Constraints, Layers of Resistance / Buy-In, and easily half of the content is related to the Thinking Processes. Interestingly, he doesn't explicitly include the supply chain or manufacturing applications, which is a bit surprising given his background and success with supply chain implementations.
Henry has been involved in Theory of Constraints for at least 10 years. I met him through his colleagues from IDEA LLC and then at a couple TOC ICO conferences.
Pascal-Emmanuel Gobry has some nice praise for Theory of Constraints and The Goal in This simple theory from an Israeli genius will revolutionize the way you think about business (November 2014, The Week).
TOC is the brainchild of an eccentric Israeli physicist, Eli Goldratt (now deceased), who produced the business novel The Goal, which became an underground bestseller and allowed him to devote himself fulltime to consulting and elaborating on his theory. Once I understood TOC's power, it came as no surprise to find out that Jeff Bezos, the greatest CEO alive today, makes all his senior executives read The Goal.
The brief article is a familiar statement that Bezos has his senior executives read The Goal. The rest of the article does a nice job of describing TOC to people who may not be familiar with it.
What I would love to see is someone dig into HOW Amazon is using the ideas of Theory of Constraints within their operations. Given that they are primarily a sales and distribution organization, I would imagine that the supply chain application is where they would focus. But they have a lot of moving parts. The Thinking Processes, Critical Chain Project Management, Strategy and Tactics, and more could all be valuable techniques within the organization.
Has anyone written that article?
What is the goal of a company? In the Theory of Constraints approach, this is one of the first questions to ask - even before you start down the path of the Five Focusing Steps (5FS).
The first of the 5FS guides one to "identify the constraint of the system," which means you need to understand the system. And the "constraint" is the thing which is preventing the system from achieving more of its goal. Ah, the goal.
Again, in the TOC community, the goal has usually been generalized to "Make more money, now and in the future." This generates a lot of conversation and discussion, as the terms are unclear and people react strongly to thinking that the only goal of a company is to make money. Isn't there some kind of higher purpose? To see how much discussion this generates, have a visit to LinkedIn to see the conversation Is "making money now and in the future" the real goal of a company? It started 11 days ago and already has over 150 comments. This isn't the first time I've seen a conversation like this - and it probably won't be the last.
I happen to like Kelvyn Youngman's discussion of the Japanese Perspective on this kind of goal. Not all cultures see this question the same way. And outside of Theory of Constraints, the question of the purpose/goal of a company is an ever-popular conversation. Steve Denning talks about it in his thinking about Radical Management and in Is the Goal of a Corporation to Make Money? on Forbes. There are many other discussions on the topic as well.
In the last ten years or so, Goldratt and the TOC community developed the Viable Vision concept and modified the goal to become an "ever-flourishing company." (There are two nice videos of Eli Goldratt talking through this topic: Part One and Part Two.)
I've been pretty quiet here lately, though I often wake up thinking of an idea that I would like to get out into the public eye here. My participation on newsgroups and mailing lists has similarly dropped off. And I continue reading business books for which I will write my reviews.
Unfortunately, life intervenes. I have been traveling a lot with client projects, and that often leaves me short of energy. The happy thing there is that I have client projects - and they keep me engaged and challenged.
I hope your 2014 has been exciting and challenging. And I hope that your 2015 brings new adventure and new learnings.
Happy New Year!
A couple recent articles in the India press related to Theory of Constraints. (Disclaimer: I have been working with Goldratt Consulting, which features in these articles.)
Capitalising on the after-market by Chandrashekhar Chaudhari in The Financial Express talks about the TOC approach to replenishment and distribution. I like the emphasis that the replenishment policies should be defined by their consumption rate. Recent TOC approaches have divided products into the fast-moving "head," the middle "belly," and the slow-moving "tail."
Companies resort to Theory of Constraints to stay ahead in the game in The Economic Times talks about several companies that have used Theory of Constraints: Doctor Reddy's Laboratories, Bajaj Electricals, Tata Steel, Godrej & Boyce, Kurlon, and Liberty Shoes. It's a nice sampling of the different applications of TOC in a wide variety of businesses. My only question is why they use the phrase "resort to" in the title - at least in my interpretation this suggests that TOC is a method "of last resort," rather than something you go to first.
And this interview with Rami Goldratt in The Economic Times reminds everyone that TOC is primarily about focus: both what not to do and what to do. The article seems to be disjointed pieces of a conversation, but it gives a quick introduction to many of the ideas that appear in Theory of Constraints: focus, constraints, projects, innovation.
How do you feel about your work place? Are you excited about the people and the work? Or have the well-meaning policies and ineffective "improvements" grown wearying? Even worse, have you started dreading going to work because of all the chaos? Depending where you are, reading a story about such a situation could be painful or it could be very engaging.
Linda Seed finds herself thrust into the leadership of a hospital that seems to be stuck in perpetual chaos in Pride and Joy by Alex Knight (book website). And for me, I found the book quite engaging - I didn't even take time out to write many marginal notes.
Pride and Joy is a business novel written by a long-time Theory of Constraints consultant. The characters in the story do not talk about TOC directly. Of course, they use TOC principles and concepts, but the focus is on telling the story and showing how those various principles might fit into a larger whole. Of course, since this is a TOC novel there is a business that is failing (the hospital), a guru character (Linda Seed's graduate school friend - who works for free!?!), and some minor outside-of-business life plot elements.
Knight does an interesting job of showing the high level process of describing What to Change, What to Change To, and How to Cause the Change which is a core way of thinking within the TOC community. This is also connected to how people react to proposed changed: if they don't understand the "what to change" or the direction of the change, the specific steps to get there are going to look suspect. Not only at the overall view of the organization, but as people or departments come into the picture, Knight shows what happens if you skip steps here (people resist change). And how those same people can become true believers, if you take them through the thinking and incorporate their perspective on building the solution. "Treat people like adults" is a theme that Knight repeats a few times.
While Knight didn't mention Theory of Constraints in this book, he clearly articulated some of the more recent concepts that have come out of the TOC community: flow and core TOC beliefs. He talked about flow - in this case the flow of patients through the hospital - and throughout the story, I picked out several ways in which the Four Concepts of Flow apply (more detail on these in an early blog post).
- Improving flow (or equivalently lead time) is a primary objective of operations. - Shorten the time people are in the hospital (usually waiting for someone) to ideally what is only clinically required.
- This primary objective should be translated into a practical mechanism that guides the operation when not to produce (prevents overproduction). - Difficult to do directly, as the incoming flow to the hospital is not in their control. But they still described a few actions to help this.
- Local efficiencies must be abolished. - There were many examples of local optimizations that significantly damaged the overall flow of patients: batching, blanket budget cuts, etc.
- A focusing process to balance flow must be in place. - They designed a buffer management system designed around the flow time for each patient and used it to drive priorities everywhere.
The other aspect is the TOC core beliefs. The guru character in the story articulates a number of these explicitly as he is talking to other characters, and others of them come out in the story. I'm not sure what these are called exactly, but they largely come out of thinking around "inherent simplicity" of systems. This is best articulated in one of Goldratt's last books, The Choice (my re-review from earlier this year)
- Reality is exceedingly simple
- People are good
- Every conflict can be removed
- There is always a win-win (solution)
- Every situation can be substantially improved
One aspect of the story that didn't get emphasized was a clarity of thinking that came as the characters started describing the problem. Specifically around the goal of the system: why does the system exist? Why do we do the things that we do? The characters in the story went from all the measures and rules to becoming laser-focused on the patient and the policies/practices that get in the way of that focus. I would have been interested in some discussion of how they clarified the goal. Maybe for hospital personnel this is already clear, but I suspect not. Having a well-articulated, shared understanding of the goal of the system helps start the discussion of what to change, what to change to, and how to cause the change. It is often listed as "step 0" of the TOC five focusing steps.
Why Pride and Joy? By the end of the story, Linda Seed and her colleagues are once again excited about the work they are doing. Characters who were considering retirement or career changes are reenergized in their work at the hospital. The place is becoming a point of pride for the characters.
This book is similar to a previous hospital-focused TOC novel, We All Fall Down (my review from 2008). In that story, the TOC elements were much more in the fore. And the specific solution developed in the story went in a different direction because the problem they were solving was different. I kept thinking of that solution in the context of this book, because I suspect it could have been a small part of the larger effort described here as well - but diving into those specifics would have detracted from the story presented in Pride and Joy.