Theory of Constraints Handbook - James Cox Iii [387]
Over the intervening years since Goldratt introduced the thinking process, the trees and their application have evolved and been refined. Although the process was originally intended to solve complex problems by identifying system constraints and facilitating ways to break them, it was inevitable that other applications would emerge. One of these was the use of the thinking process for strategy development and deployment (Dettmer, 2003). However, applying the thinking process for strategy development purposes requires some modification of both the trees and their sequence. To distinguish these evolutions from the original thinking process, the term “logical thinking process” is used hereafter.
FIGURE 19-4 The Logical Thinking Process.
The Intermediate Objectives Map
The most significant modification to the LTP for strategy development is the insertion of a new type of tree—the Intermediate Objectives (IO) Map—at the beginning of the process (Dettmer, 2007). The IO Map is critical to the strategic application. In fact, without it, the remainder of the LTP is nearly useless for strategy development.6
The IO Map is a relatively simple structure, but actually putting one together requires some dedicated thinking. Figure 19-5 shows a conceptual version of the IO Map. An actual IO Map may be found in Fig. 19-11 at the end of this chapter.
The goal indicated at the top of the IO Map is the ultimate outcome for which the system strives. In a for-profit commercial company, this is usually maximum profit. In not-for-profit organizations, such as charities or hospitals, the goal is usually some favorable contribution to society. Goals of government agencies are likewise not profit-oriented, but rather seek the successful provision of some beneficial service to the general population.
Every goal is typically achieved by realizing a set of critical success factors (CSFs). These CSFs are terminal outcomes, or results. They’re considered critical because they’re indispensable to attainment of the goal. In any system, and for any goal, very few CSFs are normally required to declare goal attainment. For most systems, they would number no more than three to five. CSFs represent very high-level outcomes. They are usually somewhat generic to the category of the system under discussion. For example, the CSF for any profit-oriented company would be quite similar, differing primarily only in degree of emphasis. If the goal of a commercial company is to maximize profits, there are really only three CSFs: increased Throughput, minimized Inventory, and controlled Operating Expenses (see Fig. 19-6).
Notice that none of these differs, whether the company is an automobile manufacturer or an insurance company. If these CSFs are realized, then the inevitable outcome is a company that has maximized profitability.7 Where do the specific details of company activities (processes, products, competitive factors, etc.) fall? They lie beneath the level of the CSFs themselves, in what Fig. 19-5 depicts as necessary conditions. It is at the necessary condition level that the unique picture of a particular organization emerges. Figure 19-7 shows how this might look for a typical manufacturing company.
FIGURE 19-5 Intermediate objectives map.
FIGURE 19-6 Goal and critical success factors (commercial company).
The CSFs of a not-for-profit organization or government agency would be somewhat different from those of a commercial company. For one thing, neither usually measures its Throughput financially, but rather in terms of whatever non-pecuniary benefit the organization is in business to provide for society. Minimum Inventory and controlled Operating Expense might certainly be relevant, however.
FIGURE 19-7 IO Map (partial)—commercial company.
The question of where