Theory of Constraints Handbook - James Cox Iii [15]
But with the first successful cases it became apparent that we had to deal with another challenge. Capitalizing effectively on a decisive competitive edge causes the sales to increase sharply. The resulting jump in sales can easily cause the constraint to swing back into operations—bottlenecks swiftly reappear. If this bounce-back is not properly controlled, it can demolish the competitive edge. To continue to focus, it became essential to know how to sustain the increase in sales and how to synchronize between sales and operations so that the rate of incoming orders will not collapse but continue to grow. It wasn’t difficult to figure out the simple mechanisms that provide such synchronization, but it was difficult to face the fact that to actually implement them the TOC implementation had to be done holistically. At that stage, I underestimated the difficulty of moving from a functional implementation into a holistic implementation and I naïvely assumed that showing that TOC covers all aspects of the organization would be sufficient. The Satellite Program (Goldratt, 1999), the summary of the TOC knowledge in eight sessions7 of 3 hours each, was recorded with that purpose in mind.
Ever Flourishing
A Process of Ongoing Improvement (POOGI) was the subtitle of the revised edition of The Goal (Goldratt and Cox, 1986) and the motto of TOC. Early on, it was noticed that the conventional definition of POOGI (performance goes up as time advances) contains two conceptually different curves8—the red curve, where the rate of improvement grows leading to exponential growth, and the green curve, where the rate of improvement decays leading to diminishing returns. The drive to move companies to capitalize on the resulting competitive edge that stems from the improvement in operations caused us to guide companies to strive for the red curve and to condemn the green curve.
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The biggest obstacle to achievements—setting the objective too low.
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Only when reality demonstrated the absolute necessity of sustaining rapid growth did it dawn on me that the green curve is as essential as the red curve. Actually, we are dealing with two types of performances: financial growth and stability. Companies should strive to ensure that their financial performance will grow by at least a few percent per year, which is equivalent to demanding the red-curve growth. But, to ensure that such growth will be sustained, companies must ensure that the growth will not degrade their stability. It became more and more evident that achieving the red curve mandates the attainment of the green curve and vice versa.
To “make more money now as well as in the future” (the objective stated in The Goal) it is essential to choose carefully the actions that will not only bring growth in the near future but also increase (rather than endanger) the company’s stability for the longer horizon. To fully capture this essential realization, the objective was rephrased to: “become an ever-flourishing company.” Likewise, the paths to reach an ever-flourishing stage had to be laid out in detail. Focus, doing what should be done and not doing what shouldn’t be done, forced us to, again, re-examine and severely alter the conventional wisdom.
At that stage (2002), the knowledge already existed, in sufficient details, to construct the paths for five different types of industries: make-to-order, make-to-stock, project based, equipment manufacturers, and retailers/wholesalers. This knowledge was so vast that it took many years to educate new experts. Even more troublesome was the fact that the transfer of even the relevant section of the knowledge needed for improving a specific company raised numerous misunderstandings. A comprehensive tool for clearly transferring a vast body of knowledge was mandatory.
Strategy and Tactic Trees
The Strategy and Tactic tree (S&T) is probably the most powerful tool of the Thinking Processes. Formally, it replaces the prerequisite