What is the Theory of Constraints? This is a question I get a lot, particularly since I am taking a new job in Theory of Constraints consulting soon. One short answer to the question, "What is Theory of Constraints?" is that it is a mechanism to immunize your company and yourself against the turbulence of the world. That's a good start, but not quite all of it.
I finally made the time to watch the video, only to discover that it doesn't completely answer the question. Instead, it is Goldratt discussing an outline for a 4-day seminar Eli plans to give to describe the Theory of Constraints to the general business community. [Doing a little research shows that this has been turned into a 3-day seminar entitled Now and Into the Future on 2-4 March 2009 in Scottsdale, Arizona.]
The meat of the discussion is the 30 minutes or so where Goldratt discusses the outline of his planned seminar, stopping frequently to ask, "Will I have defined TOC at this point?" I don't think the seminar will leave people with the sound byte definition - that isn't the intention. The intention is to leave people motivated to go out and do something. Or to etch the belief that it WILL work into the participants and give them the ability to make it happen.
The outline for the four days looks something like this (I've been looking for a transcription of this outline but cannot find it):
- Challenge the perception that major change takes time.
- Show that speedy improvement generates cash quickly. In fact, it MUST generate cash quickly, otherwise it gets bogged down in too much analysis.
- Show that this breaks the "cut costs vs. invest" conflict.
- How is it possible? Stand on the shoulders of giants like Henry Ford and Taiichi Ohno, who have shown that it is possible. Common sense is not so common.
- What about the impact on Wa (interpersonal harmony). A company isn't just about making money, it is also about the people. Making money at their expense is not sustainable.
- Is it possible to immunize against unforeseeable shake-ups (like the current economic mess)?
- Put it into perspective. These things are happening. China and India are shifting the center of consumption (2 billion additional consumers).
- Bad times started long ago. Shrinking lifetime of products. Biggest companies don't know how to handle it.
- Shorten the whole process. From raw material to supplier to producer to distribution to consumer. Ohno saw it with shortening the Order-to-Cash cycle, but now we must look at the whole chain. This is the only way to immunize the company - and its network.
- Examples and connect back to Day 1. Introduce some examples via Strategy & Tactics without going into detail.
- Communication challenge is not small.
- Lisa Scheinkopf's "five questions" to ask oneself. (Note to self: need to dig up Lisa's five questions.)
- Demonstrate the Strategy & Tactics tree as a tool
- Build an ever-flourishing company. It must grow and it must be immunized.
- Explain ALL of the existing S&T Trees (projects, retail, ...). This will extend into Day 4.
- The Choice. Finish the day discussing Goldratt's new book, The Choice, which extends the idea of ever-flourishing to the individual. "What is a meaningful life."
The measure of success will be in the number of companies that go from the seminar and do something. And the results should be evident in a month.
There is another, much shorter, video where Goldratt summarizes the concepts that the seminar will cover, Goldratt's Response to the 2008 Crisis.
Goldratt’s approach can help companies free up much more cash and generate more profits than any of the current cost-cutting activities will accomplish; and with the same actions, strengthen and begin to immunize companies from future crisis.