John Tripp was one of the trainers on my ‘Strategic Business Analysis’ course in 1987, where I was first introduced to systems thinking through Eli Goldratt’s ‘Theory of Constraints’ (TOC). The experience had a profound effect on me and we have remained friends ever since.
The course used role-play exercises based on a traditional, Black Country steel mill on the edge of survival. I can still taste the thrill of discovery from that Tuesday evening 30 years ago, “This place is a gold mine. No investment needed. Just new thinking.”
The training helped us to appreciate the harm caused by the widely held belief that the pursuit of efficiency is the path to improved performance. It may seem obvious that efficiency is a good thing but its single-minded pursuit can be highly detrimental to effectiveness.
Many companies continuously strive to cut costs, for example and don’t realise that they are compromising on quality or delivery until their customers stop buying.
Goldratt called this belief ‘Cost World’ thinking which he contrasts with the ‘Throughput World’ of TOC. Here, the focus is on flow – of inputs, through processes and sales, all the way to the delighted customers’ hands. This approach reveals the enormous cost of sub-optimisation, of acting on the parts without taking account of the impact on the whole.
John’s response to our inquiry follows. Extracting it from our personal email correspondence, I find myself having to translate the jargon with which we are both familiar but which will be new for most readers. So the blue text here is mostly interpretation rather than conversation.
John: There are some interesting ‘clouds’ in this area.
David: The ‘Evaporating Cloud’ is one of many TOC tools for distilling the essence of a dilemma and ‘evaporating’ it. Rather than having to compromise, conflicted parties both find their expectations exceeded.
John: My experience is, ‘new man, new methods’. “Why did they hire me if they did not want me to change things to my way of doing things?”
David: Consistent with our premise.
John: Often new managers don’t even look to see what is good and what is bad. They will use existing assumptions such as, “Inventory is bad. Cut all buffers …” etc. etc.
David: ‘Inventory’ and ‘buffers’ are key concepts in TOC. More generic assumptions might be, ‘Cut costs. Make small compromises if you have to’.
Serious questions about the training needs of managers: knowledge, skills and attitude!
John: Then there is our assumption that many people were touched by and changed by say TOC or Lean. Is this true? Or were they fewer than we thought who actually understood what has changed and why?
David: The ideas which bring about transformation are counter-intuitive. So we, who manage to embrace them, tend to get (over-)excited and passionate and to imagine everyone else must feel the same.
On the other hand …
John: We have the history of expectations, when my manager leaves, I expect the new manager to change everything. So why fight it? It’s not my job!
David: …you can’t blame anyone for being pragmatic!
John: Eli tried to create a relationship with SAP and other system companies to embed TOC rules in the system and hence the company. It never happened hence we still fight ‘Cost World’ thinking everywhere.
David: SAP is a global, integrated ‘Cost World’ software system used for purchasing, costings, payroll, production control – you name it! It fits much better with managers’ intuition but doesn’t help them change the way they think.
John: The odd thing is you are right. The way we try to introduce TOC is head and shoulders above other approaches. Evidence: “It’s the best training I have ever been on”, type of feedback. Over 13 years in ABB TOC is always top of the charts as ‘most important learning’ and ‘best session’. But the underlying implementations and changes are still ‘Cost World’ as it is that which the bosses in the City reward.
David: Never mind the ‘happy sheet’ feedback, John. The commercial impact is amazing, no? In three months, my modest project at the electrical fittings company, wiped out the perpetual late delivery list, stopped 300 customers from constant ‘expediting’ and enabled £1M of overdue sales to be invoiced.
They didn’t need to buy the £0.5M machines they were thinking about and the constant re-scheduling stopped altogether to the huge relief of the production manager.
Conclusion – more thinking needed
John: We need to think about the different types of (unfortunately and almost exclusively) men who impose the change… We need to think through the different objectives people have for introducing change and new tech. We need to think much more deeply about ‘comfort zone’, which was almost pushed aside by Eli and I think others. There seems little if any attempt to help people understand disruptive change. Probably because the people introducing it only have a limited awareness of what it will do.
TOC of course has a very positive approach philosophy and processes for dealing with change but again we need to develop the ideas with the “people” target identified.
John adds, “Sue and I helped organise the 2011 world championships in the UK. (I was chairman). Obviously, I used TOC. We are still the only world championship event ever to make a profit. 10% on turnover.”