Hi all,
My TOA counterpart has posted a few thoughts recently on The Goal that, I must admit, showed an unexpected level of understanding of Eliyahu Goldratt’s business classic. He asked for my help, however, in breaking down some of the more challenging concepts so I agreed to step in and write a few posts to help him out.
Unfortunately, I realized that the book is so dense with insights and tactics that a traditional series of ‘book club’ posts was not going to work as well for The Goal as it did for some of our past books. I met briefly with the boss and we determined that a loose ‘Q and A’ format might be the best way to both deliver the lessons of the book while also clearly applying its ideas. We’re not sure about this, of course, but nothing beats a try, so please enjoy our first edition of ‘Ask The Business Bro’.
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TOA: What does The Goal have to say about running an organization?
BB: The book’s singular focus is on maximizing the constraints that determine whether an organization can meet demand. Everything Goldratt says about running an organization ties back to this idea.
The Goal suggests the best way to serve this idea is to implement an ongoing improvement process. The key question that drives this process is always ‘where is the constraint now?’ and the answer is always a series of steps that will break the constraint. Once the constraint is broken, the organization asks again – where is the constraint now?
TOA: Does Goldratt recommend any specific strategies to find the constraint?
BB: No, unfortunately it isn’t as easy as applying a series of steps, but there are some good principles to keep in mind that always help. Broadly speaking, improving flow will always help an operation. Goldratt compares flow to water moving down a rocky river and the process of improving flow to finding and removing the rocks. A poorly run organization might do the equivalent of wading into the river while hoping to stub a toe. A a world-class organization will do the equivalent of lowering the water level until the rocks become plainly visible.
TOA: But what if no rocks are visible?
BB: Then lower the water level again.
TOA: But doesn’t that hurt flow?
BB: Well, OK, I see, look, it’s not a perfect analogy, but then again, what is? One obvious problem with my analogy is the possibility of confusing flow with total output. True, output is related to flow, but not in the way you are suggesting. The point of the comparison isn’t to maximize the cubic footage of the water moving downstream, it’s to ensure that if you put 100 cubic feet of water into the system, 100 cubic feet of water will flow through the system without unexpected interruption. Flow in this case is how quickly the water moves down the river, not the amount of water that empties out into the ocean.
TOA: OK, I see, so flow is like the delivery time of the pizza, not the number of pizzas sold?
BB: Why are you always thinking about food?
TOA: Hey, I’m just hungry for answers here.
BB: Right, well, if that’s the way you want to think of it, then yes, flow in this case is the time you wait for the pizza after placing the order, though maybe a better analogy is to say it is like the entire process of making and delivering the pizza
TOA: I see. I think I understand some of it, the crust at least. If the whole point is constant improvement and the process for constant improvement is maximizing flow, then sure, you just maximize flow, or whatever. But what if the flow is already maximized? What do you do then?
BB: Well, Goldratt points out that since a bottleneck is a resource whose capacity is less than or equal to the demand placed on it, the flow through a bottleneck should be less than or equal to the demand. Your question suggests that there is some spare capacity, so I would suggest finding a way to increase demand.
TOA: So sales and marketing?
BB: I think so. You just have to make sure those teams understand the excess capacity available on the bottleneck resources so that they do not commit beyond what you can actually produce.
TOA: This sounds too simple.
BB: Yeah, sort of, it’s simple in the same way getting a full night of sleep is, at a basic level all we all know what a full night of sleep is, but in reality a lot more goes into it than just blocking out eight hours to lie still.
TOA: Is that something Goldratt wrote?
BB: No, that’s a BB original.
TOA: Makes sense, you don't need any help to know to lie, still.
BB: What does that mean?
TOA: Nothing.
BB: Do you have anything else?
TOA: Yes, so if the cycle eventually leads to the sales team finding new demand for the product and what they need to know is the excess capacity available on the bottleneck, how do you go about calculating that excess capacity?
BB: Wow, that’s a short question but a big answer. I think we’ll need to cover that next time.
TOA: OK, sounds good. Same time next week?
BB: That will work for me.
