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Introduction—What Differentiates a TOC Strategy?

Chapter Overview

Definitions and Foundations of TOC Strategy

Overview of TOC Strategy Applications in Manufacturing, Projects, and Consumer Goods Distribution/Retail Organizations

Four Generic Prerequisites/“Injections” for a Lasting Competitive Edge

Desirable Effects of a Good Strategy

Two Forms of Strategy and Tactics—TP and S&T Trees

Integrating Other Methodologies, such as Lean and Six Sigma

Dealing with Human Behavior in a Strategy Summary

Definitions and Foundations of TOC Strategy

Strategy defines what we want to achieve. Tactics describe how we plan to achieve the strategy. If the two become separated, it’s easy to go astray and fail. TOC strategy comes with proven tools, which clearly link strategy and tactics for all levels in an organization. These tools are the key to success because people resources are scarce and management attention is limited. Simply put, the tools are designed to prevent rework.

There is a great danger in simply stating a strategy as a set of high-level objectives. For example, if the top executive team sets a strategy of becoming the most profitable company in their industry, there are many different directions the company could take to get there. They could focus on higher margin products, mass cost cutting and efficiency programs, expanding markets, or increasing market share. The possibilities of misalignment between functional areas and of making mistakes in implementing a strategy point to a need for much greater clarity and depth. TOC provides clarity through a hierarchy of linked strategies and tactics at multiple levels (see S&T example, Fig. 18-1) or through a detailed road map of cause and effect between “injections” (ideas to be implemented) and desired effects (see Future Reality Tree example, Fig. 18-2). In this chapter, I explain both approaches and the differences.

Three Goals or Necessary Conditions of Any Strategy

For any organization, a good strategy will achieve and sustain three essential effects:

1. Increase goal units (e.g., net profit, education units, health units) now and in the future.

2. Satisfy markets (customers, suppliers, community) now and in the future.

3. Provide employee security and satisfaction now and in the future.

FIGURE 18-1 The Strategy and Tactics Tree. (Used by permission of E. M. Goldratt, S&T © E. M. Goldratt.)

FIGURE 18-2 The Future Reality Tree Thinking Process to define strategy.

You could make any one of these your goal. As long as you consider the other two as necessary conditions, your overall strategy will be the same. This means that a strategy is incomplete if it does not encompass, explicitly, all three necessary conditions. For example, in high growth strategies, organizations often don’t cover all the necessary processes to keep the organization stable in terms of customer satisfaction and employee skills and development.

The goal units typically appear at the top of a TOC strategy structure. While it’s up to an organization’s owners or key stakeholders to set their goal, TOC embeds a higher goal—a Process of Ongoing Improvement (commonly referred to as POOGI in TOC)—into its methodology. The assumption is that every organization has a constraint, always, and therefore can continually improve. With POOGI imbedded into a strategy, improvements are sustainable year after year.

However, even with a well-defined goal, organizations, using traditional processes, often don’t achieve it.1 TOC would suggest either that such organizations focused on the wrong initiative (a non-constraint) or that management attention was constantly diverted away from the right leverage point. One current belief is that the biggest constraint to improving any organization is management attention. TOC is not perfect, but the literature and research shows a higher success rate. In my opinion, this is not by accident, but by the power of a TOC approach