Theory of Constraints (Dialogue part 1)25.06.2018
Possible dialog between the young entrepreneur (Q) and Expert (G).
Q: When and how did Theory of Constraints or TOC come about?
George’s answer: In 1984 Dr. Eliah Goldrat’s bestseller “The Goal” came out and after that popularity of TOS start to grow. Unlike the Lean philosophy, which has its roots in the Zen Buddhist religion, the foundations of the TOC are based on analytical scientific approaches to problem-solving. All TOC conclusions can be proved logically and mathematically.
Q: What is the relationship between constraints and theories to my practical everyday problems?
G: There is also a constant debate among TOC experts that such a name scares away the entrepreneurs because they can assume that it is something complicated and distant from reality. The name TOC will always remain a popular brand, but one of the key principles of TOC is that every system, no matter how complex it may look, has an inherent internal simplicity.
Q: My business is very complex, the company has many departments, employees, we have many suppliers and very strange customers – what simplicity is there?
G: Just look at the pictures: which of the two coffee systems is simpler, A or B?
When you ask this question to anyone on the street, you will most likely get the answer: “Of course A, because it’s even hard for me to imagine how many different pipes, mechanisms, and electronics there are inside the B machine!”
If you ask the same question to a scientist or TOC specialist, the answer will be: “Any doubts? Of course, B, because to make coffee, just the kind I want, you only have to press one button (espresso, cappuccino, latte, etc.), but when choosing A, I have to do a lot of work and the result is not guaranteed! ”
In other words, the control system is simpler, which, to achieve the desired result, needs to operate (manage, control) as few elements as possible.
There is no need to get involved in discussions about differences in the taste of coffee, nor about the cost of maintaining the equipment. We are all excellent experts in generating various “bets”. All our time, let’s talk about it later.
But imagine what it would be like if you managed to create a business that could be managed with two buttons “Profit” and “Big profit”. Press the selected button and immediately feel exactly the taste you want.
Q: It’s pure fantasy – nothing can be achieved without effort, sweat, and work!
G: Okay, let’s say you have to work hard for two to three years to build a “Profit Machine” (you might have to put in a lot of sweat too – although I don’t like it), but the “button” would get pretty tight and pressed to the end, you should have the constant cooperation of several people. Does it look more plausible now?
Q: Have you seen my business and say that it is possible to get from today’s situation too big profits in two to three years? No, everything happens in a business step by step, even in very small steps.
G: Here are two possible company development curves – Green and Red. Which one do you think reflects a good business development plan?
Q: I think green. This is what all business development plans usually look like. For example, if you bring a business plan with a Red Curve to the bank, you have no hope – it will be rejected as unreal!
G: Well, you’re right about the banks, they always offer an umbrella when the sun is shining, but they’ll take it off your hands as soon as the rain starts!
And yet, if we look at what the development curves look like for the world’s best, most profitable companies, and not only Google, Facebook or Apple, but also thousands of much smaller, less popular companies are on the Red Development Curve. We can also make the list of the largest fast-growing companies in any country and you will find a lot of Rad Development Curve examples. I am sure that among them you will find a significant proportion of those on the pronounced Red Curve, despite the post-crisis situation.
Of course, most companies are walking along the Green Line, but for some of them, it is so green that it resembles a coniferous trail. Do you want to choose this path?
Q: I need to think about it! But you haven’t told me yet what this has to do with TOC?
G: Developing a company in small steps is a very popular idea that justifies any improvements, even if they lead to real problems for the company. Moreover, this idea is based on deep-rooted, centuries-old cultivated cultural and mental paradigms that are very difficult to overcome. The method of small and continuous improvements can only be considered as a temporary policy of deep protection until the basic problem of the system (company) is understood (the “button” that needs to be built and pressed). The longer you delay the postponement of identifying and solving the main problem of the system (company), the more likely it is that soon this company will no longer have any problems with you or any other manager because all the problems will be in the hands of the insolvency administrator. TOC teaches and explains exactly how to find the basic problem of the system and how to solve it quickly by leading the company to the red development curve.
Can we agree that you see the possibility that:
- EACH SYSTEM HAS AN INHERENT SIMPLICITY.
- BECAUSE THE SYSTEM HAS FEWER POINTS OF EXPOSURE TO CHANGE THE RESULT – THE SIMPLER IT IS (and it does not depend on whether we can describe the construction of the system on one page or it requires 100GB).
- A SUCCESSFUL COMPANY CAN DEVELOP VERY RAPIDLY (along the Red Curve), and this is a natural success for all successful companies. And that means there are methods to do it.
Q: Looks like I’ll have to agree!
P.S. Reader, if you do not agree with any of these three conclusions, write your comment or question in the “Contacts” section.