Theory of Constraints and “The Goal”

Two  years after reading Eliyahu M. Goldratt‘s famous book “The Goal” for the first time, I had a second go at it. It proved, again, to be an entertaining and at the same time enlightening read. I will not come up with yet another summary, you will find plenty of those already. Instead I want to point out a few interesting links to other areas.

Let me start with an interesting connection to my article about personal objectives. One of the statements I had made there, was that a global optimum cannot be reached by local optima everywhere; some local deficiencies would need to be accepted to reach the overall goal. (Apart from the common-sense aspect, this is also formally proven in systems theory.) Well, exactly the same point is mentioned in “The Goal” when Dr. Goldratt writes that at the end of the day, only the amount of shipped goods, i.e. goods sold, counts. Any intermediate over-achievements (“We beat the robot”), is really completely irrelevant.

Another interesting link is one with the book “Turn the Ship Around” by David Marquet (see this for a quick summary). Mr Marquet makes the point that in his experience a deciding factor for an organization’s (in his case the crew on a nuclear attack submarine) performance is, whether its members work to avoid individual mistakes or to achieve a common goal. Similar, in “The Goal” there is a paragraph about the success of various changes in a manufacturing context. It is basically about the different intent (and Mr Marquet calls his style intent-based leadership, by the way). Instead of trying to reduce costs, the manufacturing team looked at things from a revenue generation point of view.

In the addendum “Standing on the Shoulders of Giants” a short introduction is given into the Toyota Production System (TPS). One interesting comment in this section is, that other car manufacturers which have also implemented a comparable system, have not achieved the same level of improvement. This is attributed to the guiding principle: Toyota focused on throughput (and by that ultimately on revenue), whereas all the others looked at cost reduction. The analogy to that is a study (source unknown as of this writing) about customer satisfaction vs. profit optimization. Allegedly, those companies that focus on customers not only win on this front. But in the mid- to long-term they also constantly outperform those that focus on financials.

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