July
2005 Volume
1 Number 1
|
|||||||||||||||||||||
|
|||||||||||||||||||||
|
|||||||||||||||||||||
|
|||||||||||||||||||||
|
|||||||||||||||||||||
Welcome to
another issue of Archimedia, the System Thinking and Constraints Management newsletter brought to you by The Theory
of Constraints Centre of Australia.
Click Here to
Subscribe!
Introducing System Thinking & Constraints Management
In most large organisations, individuals strive to improve the efficiency and effectiveness of the operational area under their direct control - we collectively assume that the cumulative effect of local improvement will be greater system performance.
Unfortunately, life is not so simple. We know intuitively that actions that make sense in a local context can sometimes have a detrimental effect on the overall behaviour of the system.
The key concept of System Thinking, now familiar to many, is that even in the most complex systems, there are few points of genuine leverage to massively change enterprise performance. However, we are oftentimes constrained by our ability to determine the impact of local changes across organisational boundaries. Frequently there are conflicting demands between doing the ‘right thing’ versus ‘hitting the numbers’ of one’s internal measurement system.
To address these challenges the Theory of Constraints (TOC) approach has been developed and successfully applied in the business context for the last 20 years. The founder of TOC thinking, Dr. Eli Goldratt, has disseminated these ideas in his best selling books including The Goal, It’s not Luck, Necessary but not Sufficient, (for these titles and other TOC training materials see http://www.tocca.com.au/Resources/resourceStore.asp).
Are you managing your constraint?
The Theory of Constraints has grown into a widely used body of knowledge, enabling the insights of System Thinking to deliver breakout business performance. TOC gives managers a way to accurately determine where their root cause problems are, so available resources can be allocated to the place where they will have the most impact on the achievement of organisational goals.
Its all about Leverage
Archimedes’ metaphor
for the power of mechanical leverage ‘Give me a place to stand and I will move
the earth’ applies equally to complex organisations and business systems. The
goal of System Thinking and Constraint management is to understand where these
organisational points of leverage exist and how best to exploit them.
Top 5 Reasons to embed Constraints Management in your organisation
-
Powerful – disproportionate benefits from addressing bottleneck issues that restrict overall business performance
-
Focus – approach does not require ‘everything’ to be fixed; shines a spotlight on the one or two areas where improvement will have major payoffs
-
Proven – has been used in a wide range of industries and situations, has a demonstrated track record of delivering major improvements
-
General – principles are easy to teach and are applicable in most business situations.
-
Sustainable – the emphasis on increasing business throughput and continuous improvement ensures long-term business health as well as delivering short-term benefits.
In the first of a series of 12 articles, Bill Dettmer examines explores System Thinking as a way of understanding complex organizations and society offering significant promise for improving the leadership and management of commercial companies, not-for-profit organizations, and government agencies.
Business & the Blitzkreig
By H. William Dettmer More Information about the author
"There is no question that in our age there is a good deal of turmoil about the manner in which society is run. Probably at no point in the history of man has there been so much discussion about the rights and wrongs of the policy makers…[Citizens have] begun to suspect that the people who make the major decisions that affect our lives don’t know what they are doing… They don’t know what they are doing simply because they have no adequate basis to judge the effects of their decisions. To many it must seem that we live in an age of moronic decision-making."
C. West Churchman
It sounds like Churchman is talking about us today, doesn’t it? The preceding quotation comes from the introduction to his seminal book on System Thinking, The Systems Approach, written in 1968. That’s sad testimony to the fact that few decision makers in the world have learned much about complex systems in the last 37 years. In the immortal words of Winston Churchill, “Man will occasionally stumble over the truth, but usually he just picks himself up and continues on.”
We’ve been “continuing on” for four decades. It’s time to go back and revisit that truth we stumbled over in 1968. We can snicker at the fact that life seemed so much simpler then. The world has “gotten smaller” as travel, communication, the information age, and the Internet have combined to connect people and societies as never before. As economies have evolved from regional to national to transnational to global, our organizations have grown in size and complexity. It is nearly impossible for the people running them to fully understand what goes on “where the rubber meets the road” in nations, governments, and companies.
Analysis versus Synthesis
Since the turn of the century
(the 20th century, that is), the accepted approach to dealing with
increasing complexity is to try to reduce it into manageable “bites”
and address them in isolation. This approach is referred to as
analysis. We analyse a complex situation or issue by trying to break
it down into component pieces and consider each in isolation from
the others. This kind of thinking has its roots in analytic
geometry, where one basic axiom is that the whole is equal to the
sum of its parts. Think about that for a moment. The underlying
assumption behind this conclusion is that all of the parts are
essentially independent of one another.
Click here to download the full
article
From the Field – Client Story
"You miss 100% of the shots you do not take."
– Wayne Gretzky
Faced with a mounting set of business challenges, HPM Industries, a major manufacturer and distributor of electrical products, decided to commit to a full review of its supply chain activities. HPM occupies a top three market position in its chosen segments and is enjoying strong sales growth however along with its competitors its margins are tight and its supply chain was becoming increasingly complex.
Doing
nothing was not an option. Customers were demanding improved levels of service
and the pressure was on to change – business and supply chain transformation
became the highest priority and external intervention was sought.
The TOC Thinking Process logic trees providing the backbone of a communications strategy that would build a shared understanding of the root causes of the current issues, where changes were required and how the proposed changes would fit together to achieve HPM's goals. HPM committed to the full Strategic Navigation activity as the means to unravel current business issues and to develop a shared vision and transformation strategy that would bring focus and coordination to the improvement efforts of all members of the senior executive team.
During the course of the five day Strategic Navigation exercise, many of the senior team reminded TOCCA of their expectation – a clear, simple yet comprehensive roadmap to attaining quantum improvements in EBIT and ROI within three to five years. The HPM CEO, an active participant in the Strategic Navigation exercise, stated:
“Without the benefits of the TOC process and the excellent work provided by TOCCA, the kick-off for HPM’s transformation would not have taken place as rapidly as our customers and our business demanded”.
Geoff Lepinus - CEO HPM