Theory of Constraints Handbook - James Cox Iii [609]
An Example
Let us apply this template to an example in Fig. 31-12. The S&T Tree is read from the top down and from left to right. The logic forces us to ensure that important things are not ignored or missed. Quality and reliability of service comes first, then comes marketing, and finally the growth strategy. The staff in the organization must carry out all these improvements. The processes or systems do not exist in a vacuum. Staff executes the tasks and if these tasks are tied to the system’s goal, the system will succeed.
Level 1
The S&T Tree documentation contains two elements: the tree itself as shown in Fig. 31-12, and an information table as shown in Table 31-2. These two must be related in reading the S&T Tree. In the following example, we see at Level 1 in the strategy we have the “Health Care System Viable Vision.” Relating Table 31-2 to it, we have in the upper left corner a reference to Level 1 of the S&T. This reference in the upper left corner of each table links the table to the S&T Tree structure. Here, we find under “Vision” a more explicit explanation of just what the vision is. Then, looking again at the S&T in Fig. 31-12, we see the first level of tactics (2.1 Base Growth and 2.2 Enhanced Growth). Under “Assumptions behind Tactics,” a PA, we see the conditions that must be met in order for the strategy to happen: “Revenue must grow (and continue to grow) much faster than Operating Expense.” The assumptions also make clear that this must be done without exhausting the people who work within the system. Now, under “Tactic” we see the tactics that must be employed at the next level down (Level 2) of the S&T. Here we call out Tactic 2.1 “Quality/Reliable Patient Service Competitive Edge” and 2.2 calling for a special competitive edge in premium markets (Premium Competitive Edge).
FIGURE 31-12 VV S&T, Level 1 VV, Level 2 and 3 base and enhanced growth, and Level 3.
TABLE 31-2 Strategy, Tactics, and Supporting Assumptions for Level 1
If the goal of the practice is to make money within the context of a disease management model and with full ethical responsibility, then it must increase the Throughput of the system significantly greater than the increase in OE to achieve the health care system VV in 1 (” S1”). In order to do this, the health care practice, hospital, or integrated health systems must show the capability of developing a Decisive Competitive Edge (DCE) over its competitors (Tactic 1, the next level down [Level 2] in the S&T). This means that they achieve breakthrough results in quality and reliability of patient care service to ensure Base Growth as in S 2.1. The system has competence to attract high premium patients for Enhanced Growth as in S 2.2.
The necessary assumption (assumption behind tactics in Table 31-3) is that quality and reliable service will improve the velocity of the flow of services without unnecessary delays and without readmissions. In addition to that, the patients will get highly reliable, quality care especially designed to capture the patients’ needs and wants. This will increase customer satisfaction, which will increase the reputation index in the market place and thus result in an increase in referrals to our system.
The sufficiency assumption (Take Note) is that it is not sufficient to have reliable services in order to make breakthrough profits. We must have additional competence to attract premium customers who pay higher than usual fees for our services. Higher premium patients result in a significant increase in Throughput without adding to the OE except for marketing and advertising expenses.
The tactical action plans to achieve S 2.1 are to implement initiatives that help develop DCE over competitors through operational excellence, sales mastery, and capacity expansion.
TABLE 31-3 Strategy, Tactics, and Supporting Assumptions