TOC Academy - "Thinkware of Enterprise Success"

Typically an improvement opportunity would exist when lead time of progress is slower than expected and cash used is higher than expected. Also the business results measured in form of customer satisfaction, inventory and profitability are low. The root cause of such situations is hidden deep. People know about it intuitively but are unable to do any thing!

This root cause also manifests in other very common symptoms -

Managers and senior leaders are protecting their turfs. They are not working as a team. Finger pointing, politics, excuses, delays, one-upmanship etc. are common. Additionally they are not able to meet their functional goals.
Employees are measured primarily for their performance in terms of efficiency viz. how well they use inputs (time, cash, resources, etc). And mangers are afraid to keep idle these inputs because of the fear of losing them in future.

This happens because of primary focus on local measurements with an assumption that these local improvements would lead to overall improvement. But the truth is that these local improvement efforts are counter productive because of conflicts in the system. For example if production function is measured for output per hour, it may come in conflict with sales function that is being measured for customer satisfaction. Similarly if the purchase function is measured for cost savings that may come in conflict with quality or due date performance measure for Production.

TOC philosophy suggests that importance of local measurements must be valued in relation to global measurements of the system. Some times losing on local measurement is desirable. For example lowest price quotation for a supply may be sacrificed for delivering on time in a project. TOC tools suggest simple measures to run the business in terms of T (Throughput viz. Sales minus Variable cost), I (Investment) and OE (Operating Expense). Focus is on increasing (T-OE) that is gross profit. Non TOC thinking accepts reduction in OE as desirable. However, if the reduction in OE affects T then it may not be desirable. TOC way accepts increase in OE if it results in greater increase in T.

Improvement opportunity for applying TOC in “Successful Organizations”

The success story of ‘Apple’ and Steve Jobs could be an inspiration for any one. He addressed constraints in way of his mission viz. “To produce high-quality, low cost, easy to use products that incorporate high technology for the individual. We are proving that high technology does not have to be intimidating for non computer expert” (sic).

Any system can be improved beyond limits if we keep addressing the constraints in way of improvement. Constraints by definition limit the capability of a system. The limit of improvement is in the mindset of leadership. They are limited by challenge of creating a ‘shared vision’ with their team because it is difficult to energize in absence of a viable strategy. This challenge is addressed by the “Inherent Simplicity” aspect of TOC that every system has an inherent simplicity that can be exploited to make it grow indefinitely.