Theory of Constraints Handbook - James Cox Iii [294]
In 2005, Goldratt shared the process he uses himself for analyzing companies to determine which few changes are needed now for a company to become an “ever flourishing company.”—a company with exponential performance growth and improved stability. He called the process the Viable Vision (VV) Process and it includes the following six questions:
1. What is the VV growth/improvement target for the company?
2. How much do sales have to increase in order to reach the VV growth target (calculated by determining what price and/or volume increase in sales is possible and subtracting the associated increase in totally variable cost)?
3. Is the existing market large enough to allow the required increase in sales (through either price or volume increase) to be achieved with better exploitation or will it require elevation of the market constraint (with new products into existing markets or existing products into new markets)?
4. How can this increase in sales be accomplished (what conditions, if satisfied, will enable increased price and/or sales volume and what changes are needed to satisfy these conditions)?
5. How much additional capacity, Operating Expenses, and Investment will be required to support this level of sales (by exploiting before elevating)?
6. Can the company (and its suppliers) support the necessary change(s) required to achieve the growth targets (its management, systems, suppliers, cash, etc.). If not, what additional changes are needed to ensure that non-constraints don’t turn into constraints?
This process is aligned with the focusing philosophy that has been applied by many successful CEOs such as Jack Welch, ex-CEO of General Electric. He stated (Pande et al., 2000, 6) that,
The best Six Sigma Projects begin, not inside the business but outside it, focused on answering the question: How can we make the customer more competitive? What is critical to the customer’s success? Learning the answer to that question and learning how to provide the solution is the only focus we need.
The VV Process is also in line with the need to understand the cause-effect relationships of which internal changes are needed to increase and sustain higher value to customers and shareholders recommended by Kaplan and Norton (2002, 69) in developing a strategy map on which a balanced scorecard can be based (a cause-effect map showing the relationship between financial, customer, internal and learning and growth perspectives). At the top of the strategy map should be the financial targets (how shareholders will benefit). Below this should be the competitive edges (how customers will benefit and why customers will pay more or buy more). Below this will be the necessary changes in processes and policies to build these competitive edges, and at the bottom of the strategy map should be the necessary enablers to support ongoing improvement and learning.
TABLE 15-3 Simplified Generic Continuous Improvement Process Using TOC’s TP
TOC’s Thinking Processes
The TPs of TOC were invented to help managers when they get stuck with finding an answer for one or more steps of the 5FS. These TP can also be used in isolation to deal with day-today management challenges,4 but are generally used in combination as part of a holistic analysis on an organization or specific subject matter. Goldratt (1990a) originally grouped the analysis/change process into three questions, starting with “What to change?” However, this might create the impression that all stakeholders already agree on the need for change. Since both a literature review (e.g., Kotter, 1990) and field experience show that this is not always a reasonable assumption, we should add