The Goal by Eliyahu Goldratt (October 2017)
Ah, finally, I get around to posting this one...
I first read The Goal in the winter of 2012 after having a VP recommend the book to me on a business trip (those were the days). He considered the book ‘an MBA staple’ and he thought I would find it very useful in the context of understanding our organization’s ongoing operational challenges.
I suppose I can’t be entirely sure about the MBA bit (though a great friend did read the book himself as part of his MBA coursework) but the VP was one hundred percent right about the latter – The Goal was filled with immediately applicable ideas for our company and I leaned on many of Goldratt’s insights over the next few years as I grew into my role. I will dig into the specifics over several upcoming posts so that you can have a better idea of how to apply Goldratt’s ideas to the real world.
For today, however, I just want to focus on the main idea of The Goal. It’s a tough concept to distill into one sentence but I’ll give it a shot anyway – the slowest rower determines the speed of the boat. If that thought feels a little too casual for a business concept, let's try this one - an organization's singular focus should be on maximizing utilization of all resources that enable it to meet demand.
The Goal uses the concept of bottleneck resources to drive this point home. A bottleneck is any resource whose capacity is less than the demand placed on it. As an example, suppose you are hosting a breakfast at your home. If your guests collectively demand eight coffees and your coffee maker can only produce two cups at a time, then your coffee maker is a bottleneck for your ability to produce coffee in a timely fashion for breakfasts serving more than two people.
Now reader, you may protest – but why can’t I just run the machine four times? And I agree here, in a sense my analogy assume your guests will storm out if they aren't handed the first coffees, but I must note that what works in your kitchen might not be the same thing as what works in the market. An organization’s goal at all times is to ensure the flow of production through a bottleneck resource never falters because each minute lost waiting at a bottleneck is a minute lost to the entire organization. To put it another way, making six customers wait for a coffee risks losing their business.
Let’s think about another example that more closely illustrates the business application – a pizza restaurant. A pizza restaurant with a daily demand for twelve pizzas per day will maximize revenue if it is able to produce twelve pizzas per day. To keep it simple, let's further assume that as long as the pizza is delivered on the same day, it's no problem. If it takes the oven an hour to produce a single pizza, then the pizza oven must work for twelve hours per day to meet demand. If anything happens during the day to cause the oven to work for less than twelve hours, the organization will lose a pizza order at the rate of one pizza per lost hour.
Another way to think about this is that once the oven works for less than twelve hours on a given day, there is absolutely nothing the organization can do to make up the lost time. This is the feature that distinguishes a non-bottleneck resource from a bottleneck. A non-bottleneck has options to make up for lost time because the demand is less than its potential output. A bottleneck, on the other hand, simply must get the job done on time if it wants to meet the demand placed on it. In the above example, the oven is the bottleneck on any day where there are more than twelve orders.
The way bottlenecks are defined in The Goal does not rule out the possibility of there being multiple bottlenecks in any organization. However, there is usually one resource whose capacity shortfall in comparison to demand is the greatest among all the other bottlenecks. This resource becomes a constant target of management attention as it seems to find new ways to prevent the organization from meeting demand. The only way to meet the challenge is to increase the capacity of the bottleneck and to repeat this process for each new bottleneck that emerges (or for each old bottleneck that returns). The nature of how bottlenecks change as an organization elevates the capacity of its resources defines the ongoing improvement process that underlies The Goal. At all times, a capable operations team should ask itself – where is the constraint now and how can we break it?
If the organization is successful in identifying and breaking each new bottleneck, eventually the constraint will move outside the organization when demand for the good or service is less than the organization’s maximum production capacity. At this point, since by definition an organization is able to sell every good or service it provides, it is appropriate for an organization to use traditional efficiency measurements – such as sales less material divided by man-hours – to drive decision-making and increase profits. If demand ever exceeds production capacity again, however, the organization must be ready to subordinate all operational decisions to breaking the next bottleneck.
The simplicity of the main idea covered by The Goal hides the depth of its power. Over the years since I first read this book, I’ve found myself noting its applications in a variety of different environments. In a series of upcoming posts over the next few months, I’ll look into these in more detail. We’ll go to my favorite ramen restaurant, talk about when to ignore a running injury, and consider how the bottleneck concept applies to workplace ergonomics. Before all that, though, I’ll start with a traditional reading review or two and maybe, just maybe, ask The Business Bro for his thoughts on the book.
Until then, thanks for reading.
Tim
