Dominoes and Root Causes

Have you ever asked yourself how can it be that the small changes TOC calls for can create such a significant reaction, I think I found the answer.

Now, don't get me wrong, I know those changes are extremely hard, but how can you call a change that costs no money and can be done in less than a week, such as changing priorities on the shop floor, anything but a small change? All the TOC solutions are based on these small changes - hold inventory at a different point in the supply chain, start doing things at a different time, change the way you plan, measure different things. These are not technology based solutions (as in "Buy this technology and all your problems will be solved", which we all know doesn't work out like that, ever) but solutions that sometimes need technological support. So the solution isn't based on investment, although it might sometimes be required. OK, I think you get my drift.

So how do they do it? Well, TOC talk and the TP talk are all about causality and using this causality to find the root cause of things. this means they are full of chains and chain reactions. This always remind me of dominoes and that's what led me to this clip:

At first I did not see any connection between this and the TOC chain reactions but then I realized this holds a very basic truth - it takes very little effort to start the chain reaction going and once started, each step releases all the energy stored in it, amplifying the effect. The amplification can sum up FAST. It also confirms what we all know, intuitively,that it's much harder to fix the big things at the end of the chain and much easier to fix the small things at the beginning, which is why TP has you looking for the root cause - the smallest domino. The only main difference from this dominoes example is that real life seems to recharge on it's own, at least partially. You do not have to pick up each and every domino in order to start a new chain reaction.

Do you think the physical explanation hold true for real life situations? please share your thoughts.

The Theory of Constraints Change Process

Everywhere we go people are talking about the need for a change, be it a small, local change like finally maintaining a healthy weight or having a better environment at the office or a big, global change like reducing poverty or illiteracy. Sometimes this talk translates into action - we go on a diet, the boss sends out an email with a new policy, people take to the streets to demonstrate.... sometimes a revolution erupts. But after the dust settles and as time goes by we repeatedly find out that the "after" picture is just as unappealing as the "before" picture. Efforts have been put forth - blood, sweat, tear, sometimes lives, to generate a totally unsatisfying result. In business speak, we'd call that a negative Return On Investment (ROI). Not exactly investment best practice, even if money did not come into play.

A main reason for these poor results is incomplete planning. We've all heard it - fail to plan and you plan to fail. But how do you plan?  Theory of Constraints calls for a 3 stage planning process:

1. Define what you want to change
2. Define what you want to change to
3. Define how to change

I see way too many change processes, at all levels, where people "put the pedal to the metal" half way through stage 1. So we figured out, sort of, what we dislike in the current situation and off we go to "do something about it". Yes, of course I'm as guilty as hell of this, aren't you? 

It's just like a trip or a hike. Step 1 is our starting point, step 2 is our end point and step 3 is the planned route. Notice this is the logical order - if you do not know where you plan to start and finish you can't decide on the route. Of course, we can always go out and stroll aimlessly, but if the starting point has been defined as unsatisfactory then such a stroll, that could easily lead back to the starting point, is counter productive.

What will happen if we go through the whole process before we begin changing things around? I don't have an answer to that, the process seems logical so I would expect a high return on investment, but I have to try it out myself before I can make any statements. In the book "We All Fall Down" Julie Wright and Russ King clearly show the negative loop this kind of behavior creates.

In the mean time, here is an example. The story line represents the order of execution - 1-3-2. See if you can deduct all the stages from the clip and if you can figure out better (or more efficient) solutions.....

Fall from grace

It has been over a year since I last wrote in this blog and while I have plenty of excuses, I'll be the first to admit most of it was just inertia. The other part, the thing that veered me in the wrong direction in the first place, was another round of disillusionment. Now, don't get me wrong, I'm not finger pointing, it is totally my fault that I let this disillusionment take over, but that's just how it goes.

This is not my first round of disillusionment with Theory of Constraints and I consider these just growing pains, mainly since I am going through the process on my own, without a guiding hand. So I thought I may not be alone in this and that it might be a good idea to share my experience, it might be helpful to others.

I was first indoctrinated in Theory of Constraints through Dr. Goldratt's business novels, as I believe many others have been.  Business novels make a great teaching tool and I find a business novel creates the best business management book, as they make holistic action easy. They also read a bit like a cook book. When you read a cook book you can visualize everything coming out perfectly. In much the same way, business novels make things look easy even when the characters claim they are struggling. So when I tried to put these enticing concepts to practice I failed, miserably. I blamed the writers of the books, claiming it's easy for them as they control the fantasy world in which the story takes place. "It's like detective books" I told myself, "life doesn't work this way". And with that I put Theory of Constraints aside for many years.

I was lured back in the the Theory of Constraints world by courses I took during my MBA and then I had a chance to hear Dr. Goldratt talk. I was sold, it just made so much sense, it was just so simple it had to be right. This led to my decision to commit to learning Theory of Constraints and now there are plenty more resources available. I went to the Goldratt House for a seminar, read "The Choice", one of my highly recommended business books. Following all this I got the TOC handbook (well, the Kindle ebook, it's much lighter) and started making my way through it. Good read. A lot of useful information and then BAM, the idealization took another hit.

I was reading a chapter about the different uses of the evaporating cloud when it hit me. To me, this is one of the major shortcomings of the Theory of Constraints teaching I have encountered so far. I thought this presents a major set back for self learners and maybe for all newcomers, since it did for me. The problem is simple -  many of the examples available are recycled. The same example is used over and over to explain or present different aspects, without any new spice being added and it just looses traction, it is no longer explanatory. As far as I'm concerned, being that I learn better by doing and so need plenty of examples I can relate to, using the same example to explain the same concept is just as bad. I want new examples so they point to things I have not noticed with the previous ones.

Now, just to be clear, I am not claiming there is but one example out there. Certainly not! I am also not saying all Theory of Constraints thought leaders are doing this. Far from that! I'd also like to admit I understand where this practice is coming from, writing up examples is hard and even harder when you need to keep propriety information under wraps. All that being said, I think that if this is hindering my ability to use the text as it was meant to be used (that is - learn from it), it is my duty to point it out and share this information with the writers of the texts.

So yes, I was acting like a petulant teenager who just realized her idol was merely human, and I had it coming to me, as I really should not have done that. Still, the issue is real to me and I am taking liberty and calling out to all Theory of Constraints scholars - please make sure you give us a wide range of substantial examples.

And if you are on your own Theory of Constraints journey, please remember this is not a cult but a science and as such it has shortcomings. Just like in any other science, the work is never done. So do not idealize, that way you will not experience a fall from grace when things aren't exactly perfect. When you find that imperfection - that's your chance to make your mark in the world of Theory of Constraints, by doing what you can to fix it. I promise I'll try and contribute to fixing the example issue, even though I think I'm far from being a Theory of Constraints scholar.....

How We Communicate is Important

When  was in Kiev (yes, I know you know I went to the conference, but I WAS in Kiev when this happened) I kept thinking of you, the readers of my blog and how I will post this and post that. One thing I thought about was this advertisement clip. The post was clear to me, the subject, the connection to Theory of Constraints, everything. But by the time I got around to digging it up I could not remember what got me going in the first place. It still feels right, though.

I find this clip has a very powerful message about communication and conflict situations. I suggest you watch it first with the audio OFF! Now before you run it again with the audio on, let me tell you these two actresses are doing a great job here. Of course there is a catch, but I won't tell you what it is, turn on the sound and hear for yourself.

{BTW, I noticed a lot of readers view this blog through a translating site, so if English is not for your ears, I've added a transcript below for the translating tool, as the text is relevant}

Here's what I see here, when we find ourselves conflicting with others we many times get into a "fight" mode. Think back about arguments and fights you've had over the years. As soon as the disagreement starts we become entrenched in our own corner, defending our needs or wants or point of view with all our might. This is greatly intensified if, coming into the 'discussion', we predict the other side will not react as planned. We are armed and ready and so we are ready to misinterpret any of her reactions as a declaration of war. Now, as soon as we go into "fight" mode we turn off "communication" mode and thus we stop listening to others and start listening only to our inner voice. We hear only those things that can serve as "ammunition" in the next "round". Do you remember this Magritte painting?

Well, can you agree that an argument is not communication, then?

As stated here, the Theory of Constraints requires change and it requires cooperation from others. To get others to cooperate with the change offered communication must be used to get buy in and commitment. You can't argue your way into convincing them that you understand and that you have a valuable offer.

Great Theory of Constraints resource - YouTube

I'm interrupting my shop floor series to share with you another grate resource - the TOCexpert channel on YouTube.

Hope you enjoy

Satisficing

Theory of Constraint talks a lot about avoiding local optima, about maximizing the system and not its parts. This leads to road runner ethics, to making sure we are not trying to be more accurate than the noise in the system and so forth. The Theory of Constraints solutions tell us what to do at a good enough granularity. The rules are simple. Don't protect every step, protect the system by protecting the constraint, maintain flow. The tools are there. DBR and sDBR, CCPM, Logistics. So what's the problem?

The problem is there is still a void, although it seems to be just a verbal one. If we are not optimizing, if we are not "doing the best we can", than what are we doing? We can't just brush this off as being "just a verbal thing, just definitions", definitions are the starting point of clear thinking, as Dr Goldtratt taught us repeatedly.

There is another reason that makes this important. While the human logic can accept fuzziness, our subconsciousness can't, and that's where it counts the most, since most of our decision making is actually done there, at the most instinctive level. There are no voids in the subconscious mind and there are no gray areas. Like Master Yoda said in one of the Star War movies: "Do, or do not, there is not try". That's your subconscious mind for you.

So, for our subconscious mind not "doing the best we can" is, actually "not doing the best we can" or, if we'll put English grammar aside for a second, "doing NOT the best we can". Which sounds bad, doesn't it?
So, we really need a good name for not optimizing. That name, to me, should be "satisficing", a term I first heard during my MBA from Prof. Boaz Ronen, a TOC disciple in the academic world.
Satisficing means being good enough, not perfect. It has lots of merits. It reduces "analysis paralysis" and stress levels, allows for better flow through faster outputs  (I demonstrated this while discussing the hiring process here) and it sounds good.

What do you think?

Edited to add:
Following the replies I got here and on LinkedIn, I guess satisficing needs a bit more elaboration. Here's an easy example - say I have to prepare a birthday bash for a 6 years old and my goal is to make that 6 years old as happy as possible. I know I'll make a chocolate cake, cover it with chocolate cream and decorate it. Once the cake is ready I can make this cake:   decorated with M&Ms and a sugar paste "Happy Birthday". Time invested is about 1 hr and child is very happy.

On the other hand, I can make this cake: covered with sugar paste and decorated with sugar paste designs. Time invested 4-5 hrs (at least) and child is very happy, perhaps a bit more than with the first cake but not significantly so.

Both cakes are eaten up at about the same rate.


(yep, I made both of these cakes, and other "optimizer" cakes you can see here.There is room for hobbies in this wold, IMHO)

What we see is that I can go for a satisfactory cake or an optimal cake. The result, in goal units of child happiness, will not vary substantially, the only difference is the effort I put in. The first cake demonstrates satisficing - doing the necessary, the sufficient and nothing over that. The second cake demonstrates optimizing - doing the necessary, the sufficient and everything else, trying to be perfect.

One last thought (Thanks Henry for bringing it up) - whatever you do, it has to move you in the right direction. It is not enough to "do it right", you have to "do the right thing right"

I'd love to hear what you think about this.

TOC hiring logic from Bill Rhind

Bill Rhind (see profile on linkedIn) of P3 Consulting has kindly prepared this overview of utilizing the Theory of Constraints logic in the employee recruitment process. I found it very clear if you think of a constrained resource group, but Bill pointed out to me that this logic stands for any hiring, not just within a constrained group.  In fact, he feels the real value is in the non-constraint since there are many more non-constrained resources than constrained resources and one often doesn't think of “exploiting” a non-constraint. To top it all off he even included a small and very thought provoking case review.

Thanks Bill!

"What intrigues me is that many HR decisions are still made utilizing "local" thinking. Each hiring decision is generally made in isolation… on an individual, functional, or divisional case by case based and on the merit of each request. In addition, the decision to hire (elevating the system) is often done prior to identifying the constraint, to exploiting the constraint or subordinating to the constraint.

Why do I believe this is generally the case within most organizations? Organizations which I have been part of or visited (and have not implemented TOC) have a FULL list of personnel requests with all functional managers stating that theirs is the most important, and the managers do not have a clear way to accept or reject them. Managers don’t have a value based way to determine the priority or explain why one group was able to hire while another may not (or they hire based upon “local” efficiencies and don’t realize they are actually hurting the system’s overall performance).

I would like to inject that hiring must be considered holistically. Looking at all requests in an organization and prioritizing them based on T, I and OE (T, or Throughput, is the money or goal units generated by the system, I, or Inventory, is the money invested in the system in order to generate T and OE, or Operating Expenses, is the money the system is working on in order to transform in to T) from a systems perspective. There truly can only be one (or very few) most important hire.

In order to tackle this question, I suggest breaking the answer into three parts

1. decision on hiring
2. who (which skill) should ultimately be hired
3. the hiring process

Decision on Hiring

One necessary condition in order to know what is the most important hire is the company knows their system’s constraint (the only true way to know the impact on T). If the constraint for a system is not known, the best one can hope for is impacting delta I and delta OE (which are also often from a local perspective). Of course there may be situations where this is not the case (e.g., a key skill is missing or lost, and without it, even if the position is a non-constraint, T goes to “0”).

I think a key faulty assumption made or a missing process step in hiring is the assumption that a company truly needs another person within the constrained resource group to add capacity. A step that I believe is fundamentally missing in most hiring processes is the step to ensure that we have fully exploited the current capacity of the skill prior to moving to the elevate step. I can think of a few observations/checks which can be made to test the current state:

- What is the level of bad multitasking occurring within the group?
- What percentage of the constrained group’s capacity is the constraint (or CCR) performing the task which only they can perform (e.g., have they off loaded Herbie)?
- Are they working on the most valuable work to the business?

Prior to even considering the hiring of any additional personnel (and adding OE), I would want to ensure that we have, at a minimum, fully exploited the current capacity (it is important to make sure that the measure is not activity based but truly value based, focused on measuring only the amount of capacity where the constraint is doing only the specific work that the resource/skill can provide) and subordinated all else to ensure that the company was not wasting any of it. As all of you know, these steps alone can bring significant increase of flow (25%...50%...or more) within an organization while having a very positive impact on all of the people.

Who (Which Skill) Should Ultimately be Hired

If it is determined that the currently available constrained resources have capacity which is being stolen doing “other” work (work which does not add value from the customers perspective), then I would suggest hiring a person to remove this more general work from constrained resources versus hiring another constrained resource. The benefit of this is many fold:

1. The hired person would cost less OE (I know this is an assumption, but I believe a pretty good one)
2. It would have a much bigger impact on T (and, therefore, NP)
3. Constrained resource generally happier and more satisfied in their work

Take for example a sales group. We have seen instances where a company was interested in increasing throughput and was considering adding additional sales people. It was obvious that the constraint was the market. In which I really mean, the company’s ability to sell more to the market (the market by itself was not the constraint since the company only had about 10% of the market). To check whether hiring sales people was the right decision, we analyzed the sales process and were looking for overall effectiveness. The key here is how does one define effectiveness.

It became quickly apparent that the sales people were always busy (and one might say efficient); many working non-stop for 50-60 hours per week. Their days were filled with meetings (both internal and external), report writing, following up on sales orders, logging their sales calls, obtaining marketing materials, driving between calls, trainings and, of course, sales calls. Since sales generally are going to be made during sales calls, we asked how much of the day is spent with customers. The general answer for this client (and many others) was 25-50%. As we peel back the activities within the call itself, we asked one more question: “how much time are you spending with the decision makers?” The answer was enlightening, only 5-10%.
Would adding another sales person have an impact…of course, but, in this case, adding a person who’s responsibility would be to provide support to the entire sales organization would be much bigger. In this case, adding one support person provided for an absolute increase of 15% to EACH sales person. This is the equivalent to a doubling or tripling of the SALES FORCE. While I know that there are other possible levers for improving the T, no one of them could deliver more impact on T (while minimizing impact on OE) in the time it took to implement this improvement.

The Hiring Process

A key improvement is to consider the multitude of hiring’s as a multi-project environment. Ensuring that the hiring projects are being released in such a way as to ensure bad multitasking is minimized. Ensuring that Full Kit (strong job description is developed, availability of resources, clear end date, etc.) is fully developed prior to starting the recruiting process. Ensure that the hires are prioritized and released into the hiring process based upon their impact on T, I and OE.

I think by breaking the solution down, a company can now focus and improve the process to deliver value to the business at a global versus a local perspective. The organization can now make much better and quicker decisions on hiring and the hiring will happen at a much faster rate."

10 Places to start Your journey

My dearest darling is very supportive, he even visited this blog. Then he told everyone who would listen that it is not in any language known to man.

If you concur, here are some great places to make your first strides:

1. The book shelf - read "The Goal" and any other business novel or book by Dr. Goldratt (there may be a new one on the way), add "The Choice" after you've read a few of the others; it is a bit harder, even though it is still an easy read.
2. Join Dr. Goldratt's basic workshop "TOC for the Ever Flourishing Company" at the Goldratt House, even people who have been around Theory of Constraints concepts for years told me they found value in this workshop. This is not overly expensive as the workshop costs about $250 but you do need to pay for travel and accomodations
3. Attend a TOCICO event in person in a conference (here is some data on the 2010 conference) or through the web in a webinar. You can also commit to a Theory of Constraints certification process and start taking the exams. Costs start as low as $40 for a webinar, through $100 for an exam to about $2,000 for a conference. Note that some activities require you become a member of the TOCICO which costs about $200 (less for people in academia)
4. Join the Goldratt Schools program. They offer different programs, some are offered only as a whole and in some you can attend only the sessions you are interested in. From what I understood of their web site joining the whole program costs $10,000 up front + another $10,000 success based fee to be paid only if real life results of X10 the basic fee are achieved (meaning you pay $20,000 for real life results of the scale of $100,000, I think that's quite fair, if you can come up with the $10,000 to begin with)
5. Use the self learning tools put out by Dr. Goldratt's team such as the TOC Insights self learning program ($80 per subject, $800 for all) or TOC.TV (this has some free content but is mostly pay per view and subscription based)
6. Use this highly recommended site. I've been referred to this site many times and it always came highly recommended, but I still have to give it a deep scan, so I can't chime in with my point of view at this time.
7. Visit the "Focus and Leverage" blog, written by Bob Sproull. This is a step by step intro into TOC for people and organizations, with a specific focus for those already involved with Lean and 6 Sigma. Bob has reached step 31 by now and hopefully will continue adding steps soon.
8. Take a class at the university, or even go the whole way and get a certification or degree. For example, Dr. James Holt holds classes and has a full certification program at WSU, that are also available as web courses. There are other US universities with Theory of Constraints focus, such as the University of Tennessee. Internationally you can find programs in Poland, Ukrain, Colombia, Taiwan, South Africa, India and more. Many other Universities offer only single courses on the subject.
9. Dr. Goldratt's blog is a great place after you've picked up the basics, full of "golden nuggets" and extensions, it is in Theory of Constraints jargon and a novice could easily get lost. Once you're up to speed, though, it is the place to be.
10. Goal Systems International, a Theory of Constraints consulting firm with some of the biggest names, has very good topic specific articles in the "papers" section of their web site

Road Runner Ethics

Implementing the Theory of Constraints requires everybody behave like the Road Runner (the blue bird). It is either running full speed or standing, there is no other option. It should be the same for all our resources, especially the human one.

Cost world, which demands maximal efficiency at every point, leads people into conflicts - conflicts with fellow workers (that don't want to work their hardest ALL the time but don't want to look "bad" either) and conflicts with the system that requires they achieve opposing goals (no over time, on time delivery AND maximum utilization). These conflicts lead people to slow down their pace of work, make sure they look busy (I once saw a shareware that helps cover up the fact you are not really doing anything?) and often times leads them to make the wrong decisions.

Throughput world focuses on global optima, not local optima, and thus accepts the fact that most resources should have idle time. This means that being active isn't always being productive. But to get the most out of the system we need to have all our protection where we need it - at the constraint. Anywhere else it is wasted as it is not protecting the system. Therefore, even though a resource has over capacity and is not constraining the system, once it there is work to be done - it should be done ASAP. Knowing that working hard is not penalized (=rests are allowed when there is no work) should lead everyone to that direction. So there are no conflicts between fellow workers (no one should feel bad or threatened by co-workers working hard when they are not), no conflicts with the system and the road is paved for making the right decisions.

Meep Meep

Theory of Constraints - Science or Art? Both

A great case study of Pinnacle Strategies's work in helping BP overcome the oil spill in the Gulf of Mexico.

It shows the principals of the Theory of Constraints are generic and scientific, meaning they can be applied to a wide range of situations, these are not rigid rules. The execution should be custom made and can be viewed as an art.

Thanks to Mark Woeppel for sharing this on LinkedIn's TOC Learning Group

ABC and Theory of Constraints in a Non Profit Environment

In this thesis done in the Air Force Institute of Technology, ABC costing and Theory of Constraints are reviewed, compared and used in order to improve the performance of an organization that is not for profit. In this case the maintenance unit of the air force (AFMC).

This is a very through report, over 150 pages long, that covers all the basics before it dives in.

First important take away is that for a non-profit organization a primary challenge is to define its purpose in a way that will allow management to measure it. This is done in for-profit organization by the definition "to make money now and in the future" which is measurable  Defining the purpose correctly, so it can be measured, is imperative, as it allows the managers to measure and compare decisions in terms of their impact on the goal.

Comparing Theory of Constraints and ABC product mix decision

In an article published in the Int. Journal of Production Economics in 1999, authors Kee and Schmidt compare the product mix decision you get from ABC and from Theory of Constraints and find them both lacking. Their conclusion is that ABC gives the best results when overhead and labor costs are completely discretionary whereas Theory of Constraints gives the best results when these expenses are fixed. They go on to suggest an extended model to cover the middle ground.

This is an academic publication, so ease of reading was probably not a goal for the authors. It is long and the models are translated to mathematical representation. Still, it is quite easy to understand.

Since my knowledge of ABC is non existent (the "know I don't know" quadrant of the Johary window Dettmer talks about in the article in my first post), I'll not go into this. The way Theory of Constraints is represented, though, is very troubling in my opinion. It may be that Theory of Constraints has evolved since that time, I'm not blaming the authors but they presented Theory of Constraints as a rigid system that forces labor and overhead costs be fixed. I do not think this is true. Theory of Constraints looks at cost through a different paradigm and so classifies them differently then the traditional cost accounting systems. Since modern day businesses face labor and overhead costs that are fixed and not negligible at all, the basic Theory of Constraints models make these assumptions but if these are actually true variable costs, at least to some extent, a correct Theory of Constraints implementation will have to adapt to that. So I have to conclude the article is based on incorrect assumptions and therefore leads to incorrect conclusions.