Theory of Constraints Handbook - James Cox Iii [607]
The change in Net Profit ↑ Δ NP = ↑ Δ T > ↑ Δ OE
Decisions about developing new services in the practice must also be based upon this formula. If total T increases greater than the OE after accounting for all OE and opportunity costs, we will increase NP. Any Investment required can be expensed over time as part of OE in making the decision. If the primary care has a small laboratory to do simple tests including ECG, pulmonary function tests, blood tests, urine analysis, etc. and the increase in OE after all the investment is less that the increase in T, then the investment is a good decision. On the other hand, if the primary care wants to add imaging service in their practice, they will have to include all the I expenses in equipment, additional personnel, and time of their critical resources like the doctors learning to read CT scans and opportunity cost of not seeing regular patients while spending time in reading scans. If all this adds up to more OE than the increase in T, the decision to invest in an in-house imaging center must be abandoned.
Both Throughput Dollar Days (TDD) and Inventory Dollar Days (IDD) are valuable measures in healthcare as well. Decisions about integrating care with select specialists in health care similarly must take into account TDD. TDD is the Throughput you would have had if a certain specialist, laboratory, or imaging center had completed their work on time. It is a penalty for lateness. IDD is made up of open treatment plans sitting queued in front of a specialist in the integrated network of health care providers with incorrect or incomplete information from the primary care provider, the laboratory, or the imaging center. It is a penalty for earliness (or doing something that should not have been done). The providers in the network who jointly treat patients can develop an informal or formal system of accountability based upon TDD or IDD.
Now that we have seen the approaches to improvement and the measurements to account for them, we will move to S&T and the approach to strategy and tactics for a medical practice.
Strategy and Tactic Tree19 to Implement and Achieve the Viable Vision
As noted earlier, the VV is an approach whereby a company maps its strategy of how to achieve NP within four years equivalent to its annual sales today. The strategy and tactics tree (S&T) is fundamental in mapping out a detailed strategy for achieving this outcome. In the TOCICO Dictionary (Sullivan et al., 2007, 43-44) the S&T Tree is defined as:
” A logic diagram that includes all the entities and their relationships that are necessary and sufficient to achieve an organization’s goal. The purpose of the S&T Tree is to surface and eliminate conflicts that are manifested through the misalignment of activities with organizational goals and objectives.
Usage: Organizational strategy specifies the direction of the activities that purport to address longer range problems and issues. Tactics are the specific activities needed to achieve the strategic objective involved in implementing organizational strategies. Since strategy and tactics exist and must be synchronized within various organizational levels, this logic tree translates high level strategy down to the level of day-to-day operations.” (© TOCICO 2007, used by permission, all rights reserved.)
Strategy tells us “What to achieve” and tactics tell us “How to achieve” it. Goldratt (1990a, 50–51) also points out that the most important part of any system, including a health care system (for-profit or not-for-profit), is the focus on Throughput instead of the traditional focus on cost savings. The VV is achieved by increasing the rate of flow or velocity of patient flow through the system while ensuring a high level of quality/reliability of services as measured