There is a very simple, elegant way of improving anything, from a complex factory production line to something more personal, like improving your tennis.
Determine the constraints, and remove them progressively. It is the key to improvement, that can become a continuous process.
Imagine a production line with three machines through which every product must pass consecutively to complete the transformation. The first has a capacity of 3 tonnes/day, the second 5 tonnes, and the third, 10 tonnes.
The capacity of the system is 3 tonnes/day, it is constrained by machine 1, and spending any resources improving machines 2 and 3 will be an absolute waste beyond the routine maintenance required to keep them working. It does not matter how much you spend on machines 2 and 3, machine 1 remains the system constraint.
This simple observation forms the basis of improvement, best articulated in the book ‘The Goal‘ in which Eli Goldratt articulated his Theory of Constraints almost 40 years ago.
The theory of constraints, summarised is: ‘Any system with a goal has one limit at a time, and worrying about anything other than that one limit is a waste of resources’
Many have still not got the memo.
The two simple questions:
- What is the current constraint?
- What is the best way to address the constraint?
If you go back to the example, adding a tonne/day to machine 1 increases the capacity of the system dramatically, while adding the same tonne to machine 2 or 3 makes no difference at all to the capacity.
I play tennis, a great game for life, but I am now 40 years past my best. However, recently I played a match against someone who was clearly a much better player than me, and won. While a surprise to most, (including me) it was simple. He had a poor backhand, and no matter how good his serve, forehand, and volley, so long as I could reach his backhand, I was in with a chance on every point. That was his constraint, to the point where even a minor improvement in his backhand would see him beat me easily.
Any business system can be analysed in the same way, and doing so enables the most productive allocation of resources to be made.
However, business is far more complicated than a game of tennis. There are functional silos, personal agendas, and ingrained behaviours that have to be navigated, and they are rarely as obvious as a dodgy backhand.
The system for identifying them however is the same: observation combined with data.
The first part of any StrategyAudit assignment is to do a diagnostic, of which the identification of constraints to improved performance is a key component. It normally breaks down into a number of common high level or ‘cultural’ and strategic buckets, shaped over time by the leadership of the enterprise:
- Priority and task management
- Knowledge management
- Customer focus and management
- Continuous improvement and Innovation management
These are then further broken into more functionally oriented constraints, Marketing, Sales, Operational, HR, and so on.
The constraints in these functional areas should be identified, prioritised, and progressively addressed. The hidden constraint at this stage is the necessity for cross functional collaboration, as constraints in one area impact on the constraints in others, and inevitably, behaviours emerge to accommodate.
Back to the simple example.
If the sales function has the ability to sell that 3 tonnes/day of production across a range of differing products that all go through the same three machines, the constraint will no longer be just the 3 tonnes/day on machine 1. It will be the changeover times required on machine 1 between runs of differing products, which reduces the capacity of the machine.
The obvious solution, almost always followed, is to do longer runs of each product to maximise the ‘up-time’ on machine 1, and sell from inventory. However, this solution does not address the constraint, it just consumes extra resources (working capital and storage space) to work around it. Customers suffer with extended delivery lead times driven by the less flexible production scheduling necessary, and drift away. The much better solution is to reduce the changeover times on the machine, while resisting the strident calls from the Sales Manager to invest in greater capacity as a means to shorten delivery lead times. While continually reducing changeover times does have a limit, at which investment may be required, in my experience, it is almost always the quickest, and cheapest way to generate ‘extra’ capacity.
When one of your constraints is existing management practise and culture, give someone who has the necessary experience to address the challenges a call.
