An update.....

In postings 211, 212, and 213 we discussed the construction and use of the Intermediate Objectives Map and I told you that Bill Dettmer was the person most responsible for popularizing this tool.  I also told you that recently Bill has begun referring to this tool as a Goal Tree.  In the past week or so, I have had some email conversations with Bill about the IO Map and I have agreed that going forward I would refer to this tool as a Goal Tree.  So please erase from your mind the term IO Map and replace it with the term Goal Tree.  And when you think about the structure of a Goal Tree, it makes perfect sense to name it as such.  It's all about identifying those Critical Success Factors and Necessary Condition which must be in place and functioning to realize your organization's Goal. 

 

In closing this brief posting, I want to thank everyone who has visited this blog in record numbers during the month of May.

Bob Sproull

Focus and Leverage Part 215

I was looking at some old files the other day and I came across an interview I did with Joe Dager from Business 901.  If you have ever listened to, watched or read Joe before, you really should because he is very talented.  At any rate, this interview was done shortly after my second book got published (The Ultimate Improvement Cycle) in 2009 and I thought you might reading it.  Joe references Sproull Consulting in the dialogue, but don't go looking for it because it no longer exists.

Integration of The Theory Of Constraints And LSS Presentation Transcript

1. Integration of the Theory of Constraints and Lean Six Sigma Guest was Bob Sproull, author of The Ultimate Improvement Cycle Business901 Podcast Transcript – Joe Dager from Business 901 was the interviewer.

2. The Ultimate Improvement Cycle: Maximizing Profits through the Integration of Lean, Six Sigma, and the Theory of Constraints shows you how to draw the best from Lean and Six Sigma by employing principles drawn from the Theory of Constraints. This approach will ensure that your effort is focused in the right place, at the right time, using the right tools, and the right amount of resources. This multi-pronged approach addresses cost accounting, variation, waste, and performance measurements. However, most importantly, it focuses your organization on the right areas to optimize. About Sproull Consulting Unlike most other consulting companies, Sproull Consulting does not believe that simultaneously attacking every facet of your operation and attempting to implement across-the-board improvements offers the most expeditious or optimum return on your investment dollar’s. Instead, they believe that there are only a few key leverage points in your business that limit your ability to increase throughput, revenue and profits. They identify these leverage points and make them the focus of the improvement efforts. They understand that you have limited resources, and you don't want them wasted on improvement efforts that yield only minimal bottom line improvement. By identifying and leveraging the right area of focus, the improvement results that you realize are significantly better and hit the bottom line at a much faster rate than any other approach on the market today. Integration of the Theory of Constraints and Lean Six Sigma Business901 Product Marketing Lean Marketing

3. Joe Dager: Participating in the program today is Bob Sproull. Bob is an experienced manufacturing executive with a distinguished track record of achieving improvement goals in manufacturing, MRO, Healthcare, Quality, Product Development, and Engineering. He is also the recent author of 'The Ultimate Improvement Cycle,' a book about maximizing profits through the integration of Lean, Six Sigma and the Theory of Constraints. Bob, could you just start by giving an overview of what brought you to writing this book? Bob Sproull: Sure. First, Joe thanks for having me on. I have enjoyed your podcasts for a long time, and I look forward to doing this one. So, what brought me into this? Well, that's a good question, and I promise you I'll try and give you a good answer. Like so many other people, so many other consultants or process engineers or whatever who had been using Lean or Six Sigma, or if you go back far enough, maybe, TQM. But, I found myself at the end of the day looking at the bottom line, and I wasn't really seeing a whole lot of movement in a positive direction. So, what I decided to do is take a look at all the things that I had worked on, and those were both successful and unsuccessful projects. As you'll find out, I'm not a big believer in Lean and Six Sigma projects, but I'll get into that later. At any rate, I discovered that the ones that were successful, and successful meaning that we had good bottom line improvement that seemed to all flow through what we considered the bottleneck. Earlier in my career, I had read the goal, and I really hadn't made the connection between what was happening in the constraint and our bottom line. So, I was asked to take over a failing plant up in Kentucky. I mean, they were really failing; everything from the supplier base was terrible. The bottom line was terrible. I took over and in the first month we lost like $600,000 bucks, so I laid awake thinking, what am I going to do? Then, I had my epiphany. I've got to get into what's being taught in the goal, and if I can focus in on the constraint and apply my improvement to the constraint through Lean and Six Sigma, I think I should see something hit the bottom line because I should improve throughput. Well, that's, in fact, what happened.

4. In a little less than two months, we had a million dollar turnaround on our bottom line, and I blame it all on this new methodology that's the integration of Lean and Six Sigma and the Theory of Constraints. From that point on, I said, "This is it. This is the tool. This is the formula. This is my process of ongoing improvement.“ So, that's really what got me into it, and I decided I had so many successes - I consulted for about 10 years for a company that specialized in the Toyota Production System. And so, I leveraged that experience with what I had experienced in this plant, and wow, the results have just been pretty amazing. That's really why I got into it and why I wrote the book. Joe: I have to compliment you on the book because it was an easy read. But as I read through it, I was bending pages over, and I knew I would have to come back to this. I'm going to have to do this. I'm going to have to look at this again. But, I did not want to break the flow of the reading. So many times when you get a book about a certain process, they go through the steps, and it gets monotonous, you really have to labor through it. But yours was an easy read. Bob: I appreciate that. Joe: I do have to compliment you on it. It wasn't a fiction story by any means. The highest compliment, I can give a book is if you end up on my dirty shelf where the books are all folded and marked up. Yours hasn't made it there, yet. It's still on the side of my desk here because I haven't marked it up enough. I'm sure it's headed in that direction. There is a question that I really have to ask you; why do we need all three? It seems mind boggling. I don't have enough time to implement Lean. I have enough trouble implementing Six Sigma. Now, you throw Theory of Constraints on there. I think I'm headed for failure.

5. Bob: Well, Joe, I can tell you it is not the first time I've been asked that question. So, let me try and tell you actually why I think it's a whole lot easier using this integrated improvement method. In a typical Lean or Six Sigma or Lean Six Sigma implementation, one of the reasons why I think a lot of these efforts fail is because the organization ends up trying to do what I call "solve world hunger." In other words, they try and Lean out every aspect of the business. When, in fact, if you look at the business, every business has key leverage points. So, my thought is rather than trying to improve every single aspect of the business, let's focus on those leverage points, and those leverage points end up being what Goldratt referred to as the system constraints. One of the things that you have to be a believer in, and I know you're a believer in the Theory of Constraints, but one of the things you have to believe in is throughput accounting. By that I mean, if you look at the components of how you make money in the business, you've got basically three things. You can go through an inventory reduction. The second thing is what most companies do is, they focus on reducing operating expenses, and unfortunately that typically comes in the form of layoffs, which I despise. The third component, though, is by increasing your revenue base. So, if you look at those three components, when you reduce inventory, typically that's a onetime improvement in cash flow. If you look at operating expense - my definition of operating expense is any money that you spend to turn inventory into throughput. And you can cut operating expense way too low. You actually can debilitate the organization, and that's what happens to a lot of companies.

6. Throughput, on the other hand, and the definition of throughput in the Theory of Constraints world is new revenue entering the company, and that is really revenue minus total variable cost. That's such things as the cost of raw materials, sales commissions, those things that vary with the sale of a product. So, the bottom line here is... Back to your original question, why is it so much easier? Well, you don't need nearly the army of improvement resources that you might think. I think another mistake a lot of companies make is they go out and train the masses and expect to see bottom line improvement. My belief is you need enough to focus on the constraint until you improve the constraint to the point where it's no longer a constraint. But, as soon as that happens, another one takes its place. Then, you simply move your resources, your improvement resources, to that new constraint, and it becomes a cyclic cycle of improvement. It sustains itself. So, from that perspective, to me it's a lot easier. All three initiatives, Lean, Six Sigma and the Theory of Constraints, not just complement each other, but they enhance each other. So, you get faster bottom line improvement with less effort. So, that's my take on it. That has worked for me in many of the companies that I have implemented this. Joe: I'll buy that because I always heard that if you're not working on the constraint; your work won't be noticed. Bob: That's pretty much wasted effort. Joe: Once that improves, of course, you're always looking forward to seeing where the next one's going to be, and I think you mentioned that in your book.

7. Bob: Yeah, we're prepared for that. We know what's coming down the road. Joe: But then, how do you implement the Lean tools, or where does Lean play the role then? I have identified my constraint. I'm going to start working on it. Where's the Lean Six Sigma come in? Bob: OK, that's a good question, Joe. Here's my take on that. If you look at the primary purposes, if you were just considering a Lean implementation by itself, you're trying to do two basic things. And that is, reduce the inherent waste in the process, but you're also trying to improve the flow of the product. So, if you look at Six Sigma it too has its special focus, and that is primarily to reduce variation. I think Deming told us that public enemy number one is variation. You've got to reduce variation so that you have a more consistent process. So, what I do is once I have identified the constraint and by the way, I typically start an improvement effort by creating a value stream and process map so that it will help me identify where the constraint is. Sometimes, it's not a physical constraint at all. In fact, most of the time, it's a policy constraint. But, once I've identified that constraint, and I simply reduce Lean to reduce waste and improve the flow and use Six Sigma to reduce variation, and if there are defects and so forth. So, it's really a straightforward process, and it really seems to work. Joe: When I talk to the Theory of Constraints people, they say the Theory of Constraints is more of a culture and Lean is a set of tools and Six Sigma is a set of tools. You talk to the Lean people, and they say no, we're the culture. How about the culture of a company, do you try to implement kind of a culture when you did, let's say, the turnaround?

8. Bob: Well, yes, the bottom line here is you've got to convince the leadership of the organization that what you're about to do is the right thing, but you can't just tell them. You've got to show them. You've got to make them be a part of it. If they're not committed, then it's not going to happen. If you stop and think about it, we have been running companies based on the cost accounting world for a long, long time. The presidents, vice presidents, CEOs have all been taught that you've got to use things like labor variances, efficiencies and so forth. One of the things that I talk about in the book is you've got to be willing to let go of that. Now, you still have to keep the books because you've got to satisfy gap requirements, but the bottom line is if you want to make decisions that are going to improve the profitability of the plant, cost accounting is not going to give it to you. First of all, it's always late getting to you; it's a month old in a lot of places, but it's not what you need in your day-to-day decision making. Basically, I ask one question. It is: W I'm about to do, going to improve the throughput of my process? If it isn't, then it doesn't sound like it's a good idea to do it. Joe: One other thing in the book that struck me, really a little different, is that you talked about push and pull concepts. Bob: There's a belief out there that if you start something sooner you'll finish it sooner. It's not true, not true. I'm a huge advocate of pull systems, and I just can't do business any other way. I think push systems have been around since mass production, and it just doesn't work anymore.

9. Joe: There're two other things that I noticed in the book. You put some basic formulas in there and describe them. Bob: You mean about factory physics? Joe: When you talk about a value stream and value stream mapping, the first thing you mention that you do in most situations is map the current process? Bob: Yeah, you've got to know where you are before you can move to where you want to be. So, I do value stream maps and process maps. In the first step of this Ultimate Improvement Cycle, I also take a look at the performance metrics that is being used. I also then use the value stream map, process map to determine where the constraint is located. So that, to me, is an integral first step to find out what our current reality is. This is the way our process is set up. It really helps you understand why or where you should focus your improvements. Like I said before, I'm not a big believer in solving world hunger. There are leverage points within the process and, unless and until you capitalize on those leverage points, until you focus on them, I just don't see real lasting improvement. Joe: How do you know when you find the constraints? How do you know that you're right? Bob: It depends on the type of constraint it is. I went into a company that makes flexible fuel bladders for the aviation industry, and when I walked in there, there was inventory everywhere. I mean everywhere. If you looked at the process, the process is really simple how you make these. I'm going to simplify it even further for our discussion. Basically, you make a top and bottom of the tank. Then, you join the tank.

10. Now, there are other process steps in there. But, those are the primary process steps. So, on one line, you're making the tops and parallel activity, you're making the bottoms. Then, you get to this joining operation. Well, when I got there - first of all, they were all functional items, so we had to create itself, which we did. Then, improve the flow. But, the inventory backup in front of the joining operation was just incredible. Just to give you an idea, it takes anywhere from one to three weeks to build the top and the bottom. Remember, they're done parallel. When you get to the joining operation, what I found in front of that joining operation was 84 weeks worth of tops and bottoms. Now, imagine if you had a quality issue, and you didn't know it. My goodness, it happened over a year ago. But, what I said and finally, after many discussions convinced the Vice President of Operations to let me actually run the one line. He reluctantly agreed. So, the very first thing I did, you can probably imagine, I shut down the front end of the process where they were pushing tops and bottoms to the joining operation, and I cross trained everybody in the work cells. I asked the question, "Why would they continue to run and build inventory in front of this constraint?" So, that's when I found - remember, one of the first things was asking the question, "What are the performance metrics?" Lo and behold, it was operator efficiency. They were trying to drive operator efficiency as high as they could.

11. So, in every step in the process, they have the operators working as fast as they can to build as much just so they could artificially improve their overall efficiency at the expense of profitability. So, we threw that performance metric out the window and only used it in the constraint, in this case, the joining operation. So, what actually happened is they had been running around 83 percent efficiency. The efficiency actually dropped from around 83 to around 70 percent. But, the profits went from negative 50 grand to plus 200 grand. So, that's why I use the value stream map and the process map and decide on what the metrics are in place because it all tells a story. That's how you find the constraint. In this case, the constraint was not really the joining operation. It was the policy constraint using the performance efficiency metric. Joe: Most of your constraint guys will come in, and they'll say, "We can cut your inventory in half.“ Bob: One of the major benefits of cutting your inventory is you actually reduce cycle time. So, that's really the primary reason. Of course, you get a positive hit on your cash flow. But, the big thing is that you will get a reduction in your cycle time, which translates into better on time delivery. That's the one thing you'll find if you go into a company that's got lots of inventory. You can bet that on time delivery is poor, and that was the case in this tank company. Joe: I've always been amazed that the more inventories you had the worst deliveries you had. Bob: Yeah. You had the wrong inventory anyway.

12. Joe: It always camouflages what is going on. In bad times, you find out the people those running truly a good company because cash is king and the cash tightens up, and if you still have throughput, you're still fine. But, the problem people have is when inventory starts backing up, their cash starts disappearing. They're in trouble. Bob: Yep! You got it. Joe: The Theory of Constraints is such a great principle. Why do you think it's not really, hasn't ever been on par with Lean and Six Sigma? Bob: You know, Joe, I have always given that a lot of thought. In order to really buy into The Theory of Constraints, you've got to give up some principles that you've learned along the way. Not the least of which is, I keep going down to the cost accounting world, that's the reality. I truly believe that it's at odds with, The Theory of Constraints is at odds with, cost accounting - traditional cost accounting. And I think if you look at who runs the company. In many cases, it's the CFO that's making all these decisions because cost accounting says, "This is what we should do." So, I think that's one of the primary reasons why Theory of Constraints really hasn't been as accepted. I believe that this integration is really going to turn out be the definitive improvement cycle going forward. I just believe that with all my heart. That's my take on why. Joe: I've always wondered and I can see that when you say that because Lean addresses waste right away and cost accounting is the champion of that. Let's get rid of the waste. First thing that happens with Lean is Five S, and everybody knows what Five S is, and Muda is and sometimes they'll Five S the heck out of everything for two years. Bob: That's right. You're right, though.

13. Joe: And Sigma side, the project always has to be a certain size because Six Sigma takes a certain amount of resources to make it work. To make a successful Six Sigma project, you're always worried about the size because you have to dedicate resources to do a project like that. The thing I wanted to touch on that I found, again, very interesting about your book is that you devoted the last part of it to the logic tree and the logical thinking that Goldratt uses. I read it, and you probably made as much sense to me about how to utilize it and how to build the trees than I've seen in Dettmer's or Goldratt's books. Maybe it was just the practical side of it because you put it in a context that I understand. Bob: But, if you give it to me in real life terms, then I have a much better chance of understanding it. What I tried to do there was show how you could use things like the current reality tree, the evaporating cloud, the future reality tree and so forth. What I didn't want the book to be a lesson on how to do those. By the same token, I had to actually work through an example, a simple example I'll say, too, by the way, just to see how you could use it. The bottom line here is, as you know, you read The Goal many times I'm sure, the goal of every company is to make money now and in the future. But, it also includes other things that other take place. We have to have happy customers. We have to have happy employees. You've got to be able to satisfy those just as much as making money. What the current reality tree does in its most simplistic form is there are all kinds of negative symptoms that you see within a company, Goldratt calls the undesirable effects.

14. And the whole logic is, typically, there are only one or maybe two group causes for all the undesirable effects. And that's what the reality tree does is it ties all those undesirable effects into a nice neat package. Then, you're able to determine what the root cause is, and it works so well, so well. The example in my book is about as simplistic as you're going to get. But, I'm a simple guy. Joe: You would use that over, let's say, a fish bone diagram to find the root cause and the five why's. Bob: Remember the scope of what you're trying to do with a current reality tree, you're looking at what are the things that are affecting me strategically. I use things like causal change and fish bones for specific problems I'm going after. But, when I know that I have a global problem, a total system problem, and those things I just don't think you can get to where you need to be. So, that's why I use the logic trees as we call them. That's exactly what they are for. So, it's not that I prefer them, it's just that I think the level that you're trying to sell requires a tool other than a fish bone, or causal chain, or whatever. Joe: There's only just a pretty small group of people in the world when you sit there and talk about a UDE. I don't know if anybody would know what talking about. I'll have to admit that's one of the areas I struggled with is truly understanding the thinking process that he's developed. Bob, is there anything else you'd like to add here?

15. Bob: There are some very important points, I think, that can be taken away from, not just by a book, but any of Goldratt's books or really improvement in general. One of the things that I think is missing in a lot of companies is placing problem solving and we need to change. Companies that side with a main static to me are companies that are just going to not be here next year, next month, or whatever. But, the problem is I don't think people spend enough time learning key techniques in problem solving. That includes both the strategic problem solving like we just talked about and also problems that occur on an everyday basis. I think another important message is I think people need to move away from trying to optimize locally. That is, for example, in the example I gave on efficiency. They were trying to push the efficiency numbers higher and higher and all they ended up doing is creating inventory because they were focused on a local optimization when you really need system optimization. That's one of the other messages that comes through loud and clear with The Theory of Constraints. You've got to focus on how I am going to improve the system, rather than just pieces of it. I think one thing, as I said I consulted for like ten years and so many times I went into a company and they talked about how they involved their workforce, when in reality, if you really were wanting to involve your workforce and get the sustained improvements that you need, you've got to recognize that the people on the shop floor are your experts. They're the ones that can lead you to new and better processes. They're just full of improvement ideas. But, you've got to listen and you've got to let them lead you down the improvement path. That's probably about it.

16. The other message is this stuff isn't hard. I promise. When I went into this company I'm working with now, they were just shocked and surprised at how easy it is to learn and apply this improvement trilogy, if you will, the integration links, Six Sigma and the Theory of Constraints. So, it's not hard. Don't be scared. It works. Joe: I thoroughly enjoyed your book and talking to you. How can someone get a hold of you? Now, that your book is available, of course, on Amazon. Bob: They can go through my website and that's www.sproullconsulting.com. My contact information is on there. Joe: If anybody would like to download this, it will be on Business901 ITunes store or the Business901 website site.

 

Bob Sproull

Focus and Leverage Part 214

In our final posting in this series on the Intermediate Objectives Map we will demonstrate a simple method you can use to create a focused improvement plan.  The key to creating a focused improvement plan using the IO Map, is to develop the improvement plan around the messages contained within the Necessary Conditions.  You will be able to see the deficiencies that currently exist and create countermeasures for each one.

Before moving on to creating your plan, there is one step I neglected to mention that you really should do prior to constructing an IO Map.  This missing piece is that it's helpful for you to define your span of control and sphere of influence as described by Bill Dettmer in his 2007 paper, The Intermediate Objectives Map.  Quite simply your span of control includes all aspects of your system over which you have unilateral change authority, meaning that it lies within your area of control.  Contrast this with your sphere of influence, over which you have no change control, but one you can certainly influence.  There are things (including people) that you might be able to influence if you can lay out a logical argument and the IO Map provides that roadmap.  Knowing your span of control and sphere of influence will help you later on as you search for solutions, meaning that you will have a much better idea of whose help you might need.  The IO Map is the first step in defining what the system should be doing versus what the system is actually doing.

 

In my last posting I pointed out that the correct direction of the arrows linking the NC's, CSF's and the Goal should correctly be from the bottom to the top of the IO Map toward the Goal.  In this posting you will notice that this is the case.  The direction in this case is intended to demonstrate the "order" of how things happen and the response that is intended to take place.  For example, for the injection (solution), Implement Active Listening, we see that if it is implemented, there should see a positive response on both Ideas Being Solicited and Implemented and Fear of Lay-Offs.  If both of these occur as planned, then the result should be a Stable and Involved Workforce (CSF).  Likewise, when the remaining solutions are in place, the NC's and the CSF's should come to fruition and the Goal should be achieved.  At least that was the plan for this team of executives.

 

If we look at the figure below and scrutinize it, we see that there are four primary improvement projects that the team believes, if implemented correctly, will drive improvement to each of the five Critical Success Factors and ultimately achieve their goal.

1.  Implement TOC’s Drum Buffer Rope.  The team believed that this project will impact two NC's and ultimately two CSFs, Highly Satisfied customer by improving the on-time delivery rate and Throughput High and Growing by synchronizing work to meet demand.

2.  Implement an integrated Lean, Six Sigma and Constraints Management, but only at the system constraint.  In so doing, this will automatically drive throughput higher and will continue to do so when the constraint moves.  In addition, the team believed that this project could ultimately drive costs lower, hence the reason for the hashed line extending to it.

3.  Implement Active Listening.  Active listening is the process of soliciting and implementing solutions provided by the subject matter experts, the people building the product or delivering the service.  In our team’s experience, this will also have an immediate, positive impact on the morale of the work force as well as helping to drive down the fear of lay-offs.  Both of these will help create a stable and involved workforce.

4.  Implement Dynamic Replenishment.  One of the keys to profitability is to reduce inventory and avoid part’s stock-outs and the team believed that they should implement a parts replenishment system that was based upon usage rather than on a forecast.  In so doing, the team believed that two dramatic improvements would happen.  First, the overall inventory should decrease by at least 40% and secondly, part’s stock-outs should virtually disappear.  The team had learned from their TOC training that these two benefits occur because part’s replenishment will now be based upon actual consumption and not a forecast.

The hashed lines are intended to demonstrate actions that should have an indirect influence over the appropriate boxed entities.  For example, the team believed that by implementing TLS (i.e. an integrated Lean, Six Sigma and TOC improvement methodology), the product costs should be lower.

 

So here it is, a different way to utilize an Intermediate Objectives Map which is both easy to understand and construct and one that permits the development of a very focused improvement plan based upon how your system is currently functioning.  In Bruce and my experience, using this approach many times, teams that develop and use the IO Map, will emphatically embrace it because it is their plan.  And the good news is, from start to finish it only takes hours to complete, rather than days or weeks to develop.  Before signing off, we want to state once again that we both believe that a full TP analysis is clearly the best way to go, but we also realize that when leadership time/availability and/or support is/are key factors, this method works quite well.

Bob Sproull

 

 

Focus and Leverage Part 213

In our last posting we completed the development of our Intermediate Objectives Map, so now it’s time to see how this same map can be used to assess our organization’s status with respect to our goal of becoming a highly profitable company.  But before we do this, I want to relate a question I received from one of our regular readers about the direction of the arrows in my IO Map.  The question and comment are as follows:  "As one of the readers of your blog Focus and Leverage, please allow me to ask you a small question. in your last posting (Part 212; copied below for convenience), which have been your criteria to determine the direction of the arrows in the IO maps?  My reason for asking is that authors like Scheinkopf and Dettmer place the arrows the other way, towards the goal."  The reader is absolutely correct, since the common method is to have the arrows moving in the direction of the Goal.  I have chosen to have them pointing in the direction upon which the entities were added to the map simply because I have found that people new to the IO Map seem to grasp this method much easier.  Please remember that the correct way, or might I say, the way that conforms to what most other TOC practitioners teach, is to have all of the arrows pointing in the direction of the Goal.     

 

So now that you have your completed IO Map in hand, what’s the next step?  I will warn you in advance that this is where Bruce and I deviate from established guidelines on what to do next.  As per Bill Dettmer’s recommendations you should normally move directly into the creation of a Current Reality Tree (CRT) and/or a Conflict Resolution Diagram as part of a full systems analysis. Both Bruce and I support this approach that is, if you have the time and leadership support to conduct a full TP analysis. But what if available time is a factor and you don’t have full leadership buy-in for a full TP analysis?  Don’t give up because we believe we have a viable alternative that we have both used in numerous companies and organizations.  If time and/or support is/are missing, what we typically recommend is to use your completed IO Map to facilitate a critical discussion on the status or current state of each of the boxed entities, the  Goal, CSFs and NCs.  So how do we recommend doing this?  We use a simple color scheme of Green, Yellow and Red to describe the state of each of the IO Map entities in our current reality.  The figure below is a summary of that exercise for our hypothetical company.

The key on the bottom right hand side of this modified IO Map represents the interpretation of each of the three colors.  If the entity is shaded in green, then the entity is in place and functioning so no changes need to be made.  A yellow box would indicate that although there is something in place, it is not delivering what is needed and requires some tweaking.  A red box represents an entity is either not in place or something is in place, but it isn’t delivering what is needed. The reds and yellows form the basis for your improvement plan.

In our example, because the company is at least minimally profitable, but not highly profitable, the team shaded the Goal in yellow.  The way we recommend using this method is to once again ask a series of questions about how the organization is functioning For example, if you ask, “Are our customers highly satisfied?” you will probably get a variety of responses regarding the level of customer satisfaction.  If you have quantitative evidence, such as a customer satisfaction survey, then you can use it to rate this CSF.  The point is, whenever possible use quantitative data to create the rating for each of the IO Map entities.

If we look at the CSFs, the team decided that four of the five CSFs should be shaded in red meaning that each red CSF is either not in place or simply not functioning well enough to drive higher profitability.  In this hypothetical company it appears as though the only thing this company is doing right is their excellent quality and it’s because they have excellent quality systems in place.  But other than their quality systems, not much else is functioning well.  Let’s look now at several of the NCs that must be worked on to satisfy the CSFs.

For the first CSF, Highly Satisfied Customers, we see that the leadership team believes that three things must be in place to satisfy this CSF:

 

1. They must have high on-time delivery rates and because the company tracked this metric, they were able to use this data to rate this box.  Since it’s shaded in red, this means that their on-time delivery was not at an acceptable level to create highly satisfied customers.  The team further stated that in order to have high on-time delivery rates, they must have buffer management in place and functioning.
2. The team also believed that they must have excellent quality and, once again, because they have records of their outgoing quality that was excellent, the team shaded this entity as green. The team believed that their quality is excellent due to their excellent quality systems, so this entity was also colored as green
3. Finally, the team believed that they must have a high perceived value by the customer and since it’s shaded in yellow, the team didn’t believe this was the case.  The team believed that this was being driven primarily by the price of their products, but it’s probably also due to their poor on-time delivery rates.

In the second CSF, Throughput High and Growing, the team believed that they had significant room for improvement and shaded it red accordingly.  This company had been through TOC training which included a section on Throughput Accounting and they understood that their throughput is driven by managing the system constraint and by focusing their improvement efforts only on the constraint.  The team believed that in order for constraints management to function well, they must have work synchronized to meet demand.  Similarly, if we look at each of the remaining CSFs and associated NCs we have a much better understanding of what actions need to take place in order to ultimately drive profitability higher.

 

In our next posting we will complete our series on the IO Map by determining what ideas or injections need to be put in place to change our red and yellow entities into green ones.

 

Bob Sproull

 

Correction...

For those of you who regularly follow my blog, I inadvertently posted Focus and Leverage Part 213 prematurely.  It will be posted soon, but I apologize for the confusion I might have caused.

Bob Sproull

Focus and Leverage Part 212

In our last posting we said we would look at an example of how to develop an Intermediate Objectives Map so that we can ultimately construct an improvement plan.  In this posting we will walk you through the step-by-step development of our IO Map based upon a real case study.  The company will, of course, remain anonymous.

Suppose you were working for a company who wanted to become a more profitable one.  You assemble the CEO and other key members of his or her staff to develop an effective plan to achieve this goal of enhanced profitability.  After much discussion and dialogue, this group agrees on a Goal as “Highly Profitable Company” and place it inside the Goal box (see partial IO Map below). As mentioned previously, this goal has been written as a terminal outcome that this company has already achieved.  The next layer of the IO Map is the Critical Success Factor (CSF) level.  Like the Goal, the CSF’s (normally no more than 3 to 5) are worded as though they were already in place.  You ask the question,  “What must we have in place if we are going to achieve our Goal?” The first response you is “We know that we must have highly satisfied customers,” so you place the response in the first CSF box.  The next response you hear is “Throughput must be high and growing,” so you place this response in the second CSF box. A third response you hear is, “A stable and involved work force,” so you add it to the third box. The fourth response you hear is that “Operating Expenses must be low and stable,” so you add that one to the fourth CSF box.  The last response you hear is, “Minimal raw material inventory,” and you add it to the fifth CSF box.  This group believes that if these five CSF’s are achieved, then they will surely become a highly profitable company.

It is important to remember that if you are able to achieve your Goal without one (or more) of the CSF’s, then it really wasn’t a CSF.  For example, suppose your Goal was to create a fire.  We know from our early school days that there are three requirements for having a fire….namely fuel, a spark and air.  Fuel, a spark and air are CSF’s for having a fire and if you remove one of them, a fire will not happen.  The same is true for our company example.  Because the IO Map is a necessity–based logic structure, it is read in the following way: “In order to have a highly profitable company, I must have highly satisfied customers along with the other four CSF’s.

Directly beneath the CSFs are a series of Necessary Conditions that must also be in place in order to achieve each of the CSFs. So once again you start by asking the same question as you did for the CSF’s, “What must be in place to achieve each of the CSF’s?” and you place each response inside a new entity box directly beneath the appropriate CSF box.  For example, suppose the first response you hear is, “In order to have highly satisfied customers, we must High On-Time Delivery,” so you add it to the first NC box.    Remember, the NC’s represent actions that must be completed to achieve each individual CSF and form the basis for your company’s improvement plan.  You then might ask, “Is this all we need to have highly satisfied customers?”  Another response might be, “We need excellent Quality and Customer Perceived Value,” so you add both of these to the boxes below the first CSF.  At this point, you continue asking the same question for each of the other CSF’s to accumulate the first level of NC’s (see partial IO Map below). 

So now you have all of the CSF’s and the first level of NC’s, but you’re not yet finished.  Suppose that someone asks, “How are we going to achieve a high on-time delivery rate?”  Where do you display the answer to this question?  It is perfectly acceptable to have more than a single level of NC’s, so if you received an answer to that question as, “We must have Buffer Management in place and functioning.”  You then create another box below the high on-time delivery one and add the buffer management comment to it. When your team is satisfied that it has identified all of the NCs (at all levels) to achieve each of the CSF’s and ultimately its Goal, you then turn to the next phase of how to use the IO Map to analyze your organization’s state.  In a fully completed IO Map you should have 3-5 CSFs and no more than 2-3 layers of NC’s. Please understand that these are guidelines, so you could have more than 5 CSF’s and more than 3 layers of NC’s, but not many more of each.  Here is our completed IO Map.

In our next posting we will demonstrate how to use this completed IO Map to assess your organizations current reality with respect to achieving the goal of becoming a highly profitable company.

Bob Sproull

 

 

Focus and Leverage Part 211

Now that you’ve been through a full systems thinking analysis, you can see, at times, how involved and difficult it can be for many people. In fact, many people who have gone through the full TOC Jonah training sessions have come away feeling a bit overwhelmed and sometimes feeling like they simply don’t know where or how to begin.  And even if they do know where to begin, they sometimes are overcome by feelings of uneasiness on their ability to complete a full TP analysis.  Add to this how difficult it is sometimes to convince your company’s leadership to block out several days to perform such an analysis and you probably feel like not even recommending it.

What if there was a way to arrive at some or most of the same conclusions as the full TP analysis without actually going through a full analysis?  What if there was another logic diagram that was easy to learn and construct and one that wouldn’t fill you with anxiety and uneasiness?  Guess what friends, there is such a tool that is both easy to learn and requires only a fraction of the time it takes to do a full TP analysis!!  Over the next few series of postings Bruce and I are going to walk you through how to construct and use this tool.  We’ve written about it in many other postings, but this time we’ll use it in a case study setting to add relevance to it.  The tool I’m referring to is the Intermediate Objectives Map (IO Map) and as we said, even though it has been the subject of other postings, we want to present it in a slightly different light.  But before we do, let’s review the basics of the IO Map.

If you’re like us, you might have gone through a full Jonah course and learned (or at least studied) all of the TOC Thinking Process tools.  Not all Jonah training sessions include the IO Map, but it was included for us.  The IO Map stood out for us because of its simplicity and ease of use.  Since then we have used the IO Map in a wide assortment of industries and in every single instance the leadership team not only understood it, they emphatically embraced it.  The real strength of the IO Map is that on a single document you will have listed everything that must be in place to achieve the goal of the organization.  No other tool does so with such ease and in such a short time frame.

Bill Dettmer, who has written extensively about the IO Map, explained to us that his first exposure to the IO Map dated back to 1995 during a management skills workshop conducted by Oded Cohen from the Goldratt Institute.  In more recent years, Dettmer has recommended that the IO Map, which he now calls a Goal Tree, should be included as the first step in a Thinking Process analysis.  He explains that this is because the Goal tree defines the standard for goal attainment and its prerequisites in a much more efficient and well-organized manner.  We believe that the IO Map is perhaps the best focusing tool to better demonstrate why an organization is having problems achieving its goal.  Other advantages of using an IO Map include a better integration of the rest of the TP tools that will accelerate the completion of Current Reality Trees, Conflict Clouds and Future Reality Trees.  Although both Bruce and I believe that Bill Dettmer is absolutely correct in recommending the IO Map be used in conjunction with the other TP tools, the other thing we like about IO Maps is that they can be used as a stand-alone tool.  We believe that using it in this manner will result in a much faster analysis of the organization’s weak points or areas that an organization should focus their improvement efforts.  In the next few postings we will discuss the IO Map as a stand-alone tool.

When we use the logic based TOC Thinking Process tools there are two distinctly different types of logic at play, sufficiency and necessity type logic.  Sufficiency type logic is quite simply a series of if-then statements.  If I have “x”, then I have “y”.  On the other hand, necessity-based logic trees use the syntax, “in order to have “x”……I must have “y.” The IO Map falls into the necessity-based category.  For example, in order to have a fire, I must have a fuel source, a spark and air which are called Critical Success Factors (CSF’s).  If the goal is to have a fire, you must have all three components in place.  If you remove one of the CSF’s, you simply will not have a fire.

The hierarchical structure of the IO Map consists of a single Goal, several Critical Success Factors (CSF’s) which must be in place to achieve the goal and a series of Necessary Conditions (NC’s) which must be in place to achieve each CSF. The Goal and CSFs are written as terminal outcomes as though they were already in place while the NC’s are written more as activities which result in each of the CSF’s.  In our next posting we will use a fictitious setting to construct an IO Map and then begin discussing how we can use it to develop an improvement plan.

Bob Sproull

Focus and Leverage Part 210

So there you have it….the full suite of Thinking Process tools from the Theory of Constraints.  All of these tools can be used in standalone situations, or together they form a comprehensible problem-solving and change management system. Their basic purpose is to decode and translate the insight of a team of people into detailed problem analysis and then create a viable solution.  The good news is, all of the tools are based upon logic and common sense to help teams facilitate communication, teamwork and agreement.  Agreement on a win-win solution that is.  We started this series of postings on the TP tools by presenting a fictitious company named the Dome Company (Focus and Leverage Part 193).

We started with the realization that we needed to answer three critical questions:

1.  What do I need to change?

2.  What do I need to change to?

3.  How do I cause the change to happen?

In attempting to answer the first question, we performed an assessment of our current reality by identifying and describing our organization’s current reality.  We did so by identifying the organization’s Undesirable Effects (UDE’s pronounced oodees) and then linking as many UDE’s through sufficiency based logic. We constructed a Current Reality Tree (CRT) to ultimately find Dome’s core problem(s) and answer the question of what we needed to change (Focus and Leverage Part 194 and 195).

We then moved on to the next TP Tool, the Conflict Resolution Diagram (Focus and Leverage Parts 198 199, 200 and 201) to firmly cement what we believed was our core problem.  We identified a conflict and then identified injections on how to break the existing conflict, but we need the help of another tool, the Future Reality Tree to test the injections.  Both of these tools helped us begin to answer the second question, what do I need to change to.  In other words, we needed to describe a strategy to define and attain a desired future state.

In Focus and Leverage Parts 202, 203, and 204 we presented and constructed the Future Reality Tree, a tool to help us answer the question of what to change to.  The FRT uses sufficiency based logic (i.e. If this...., then that….) and is a tool that provides a platform to test ideas and look for the merits and also the possible negative effects that might be created in the future.  We told you that many times people will have a seemingly good idea to solve a problem and the FRT allows you to test the merits of the idea before taking any action to implement it.  In other words, the FRT provides a means to look for any negative effects that might appear if, and when, the new idea is implemented.

Once an answer has been isolated that appears to create the Desired Effects for the future we must determine how best to implement the idea.  We then presented The Prerequisite Tree (PRT) which allows for the logical links, and thinking, to determine what steps will be necessary to implement the idea (injection) and make it a reality (Focus and Leverage parts 205, 206 and 207).  The PRT becomes the transition tool to move the thinking from “What to change to” to “How to cause the change to happen”.

What the PRT facilitates is to determine what tasks (IO’s) are required to achieve the “objective” you want.  We also determine what the obstacles are for why you can’t make the objective happen RIGHT NOW!  With the obstacles defined we develop the Intermediate Objective (IO’s) that, if in place, will remove the obstacles.  We explained that with the obstacles defined we needed to develop the Intermediate Objective (IO’s) that, if in place, will remove the obstacles.  We said that with the IO’s defined we now have the list of tasks that must be completed to get to the objective.  Even with the IO’s defined it can be daunting to look at the list and say, “Where do I begin?” We told you that if the necessity logic is correct, the structure of the PRT defines the intrinsic order of task completion.  Now the mystery is solved!  Now you can see exactly where to begin the concept of “how to cause the change to happen.”

Our final TP tool that we explained was the Transition Tree (TT) presented in Focus and Leverage parts 208 and 209.  The TT is used to finally answer the question of how to cause the change to happen.  The TT provides the detailed description of the Desired Outcomes (DO’s) that will help us gradually evolve the changes we envision to occur in reality by accomplishing the Defined Actions. 

The Transition Tree demonstrated what actions you need to take and in what order you need to take them.  We told you that there is no mystery, if we give you the place to start and the action to take.  Transition Trees are really very simple.  The important part about constructing a TT is to make the action at a level that you can do right now.

We finished our TT discussion by explaining that there is also a possibility that a negative branch could be associated with a TT.  We told you to keep your eyes open for possible negative branches that could come from action(s) you take or, from desired effects that are either achieved, or missed, because of a negative branch.  If such is the case, an alternative action is needed to overcome the negative effects.

While the Thinking Process Tools are highly effective, one of the down sides is the length of time required to complete a full systems analysis.  Even though the end is clearly worth the means, not every organization is willing to push on and complete the full analysis.  This is clearly one of the primary reasons why TP analyses have had a difficult time being accepted and used by organizations.  In our next series of postings Bruce and I are going to demonstrate an alternative method which significantly shortens the length of time to assess and ultimately improve your organization.  I will warn you in advance, the hard core TOC aficionados will not agree with our methodology, but all I can tell you is that it works.  Stay tuned for this next series.  I am going on vacation for the next several days and plan to spend quality time with 4 of my 6 grandbabies.

 

Bob Sproull

 

 

 

 

Focus and Leverage Part 209

In this posting we will complete the construction of the Transition Tree and finally answer the question of how to cause the change to happen.  Just as a reminder of where we finished the last posting:

If we look at the objective and ask “What actions will be required to achieve the objective” we can build a list of those actions.

 
1.  Do an analysis of training needs/time required.

2.  Make a presentation to get management approval.

3.  Have the staff available to create the training.

4.  Conduct the training.

What need are you trying to fill by taking action number 1?  What would be the desired outcome from taking this action?

 

You can keep building the TT by asking, “If the training needs are defined and you take another action, then what would the desired outcome be?  Is it something that you want?

 

If the training approach is available and approved by management, what would the next desirable outcome be?  What action would you need to take to achieve the desirable outcome?  Is there an additional need to fill?

 

 

The desired outcome could be the “Best training courses are developed.”  An action you would take is to determine staff availability to create the training, with the need being adequate time to create the training.

 

We can continue building the TT until we find a DO that connects with the objective.  An additional action would be to actually conduct the training for the employees.  Once the employees have the information (training), then they have the necessary training.  The TT defines the actions (steps) required by YOU (or someone you assign) to make the Objective real, which in turn makes the IO real from the PRT.

Now you know what actions YOU need to take and in what order you need to take them.  There is no mystery, if give you the place to start and the action to take.  Transition Trees are really very simple.  The important part about constructing a TT is to make the action at a level that you can do right now.

There is also a possibility that a negative branch could be associated with a TT.  Keep your eye open for possible negative branches that could come from action(s) you take or, from desired effects that are either achieved, or missed, because of a negative branch.  If such is the case, an alternative action is needed to overcome the negative effects.
In our next posting we’ll summarize what the full Thinking Process Analysis can do for your company or organization.  We will follow that posting with a short-cut of types.....the IO Map.

Bob Sproull