Wednesday, August 6, 2014

Focus and Leverage Part 367

In my last posting I indicated that I would be discussing some of the Theory of Constraints system analysis tools.  I also told you that I would rely heavily on the Intermediate Objectives Map (aka Goal Tree).  So with this I mind, here is today's posting.
Many people who have gone through a TOC Jonah training session have come away overwhelmed and sometimes feeling like they are unable to apply what they’ve learned.  Let’s face it, the TOC Thinking Process tools are just not easy for some people to grasp and apply, so they kind of put them on the back-burner rather than taking a chance of doing something wrong.  Well, for everyone who fits into this category, I have hope for you.  What if I told you there was a logic diagram that is actually simple to construct and one that you would feel confident using?  Would that be of interest to you?  There is such a tool and it’s called an Intermediate Objectives Map.  Yes, I’ve had other posts about this tool in the past, but I want to show you a different way to use the IO Map.  But before I do, let’s review the basics of the IO Map.

I remember going through the Jonah course and of all of the TOC Thinking Process tools I learned, the IO Map stood out for me because of its simplicity.  Since then I have used the IO Map in a variety of different settings and in every instance the leadership team not only understood it, but actually embraced it.  The beauty of the IO Map is that everything that must be in place to achieve the goal of the organization is included on a single sheet of paper.

Bill Dettmer tells us of his first exposure to IO Maps back in 1995 during a management skills workshop conducted by Oded Cohen at the Goldratt Institute.  In recent years, Dettmer has recommended that the IO Map, which he now refers to as a Goal Tree, should be the first step in a Thinking Process analysis.  He believes this because it defines the standard for goal attainment and its prerequisites in a much more efficient manner.  I believe that the IO Map is a great focusing tool to better demonstrate why an organization is not meeting its goal.  Other advantages of using an IO Map include a better integration of the rest of the TP tools and will accelerate the completion of Current Reality Trees, Conflict Clouds and Future Reality Trees.  The other thing I like about IO Maps is that they can be used as a stand-alone tool which results in a much faster analysis of the organization’s weak points or in conjunction with the other TOC TP Tools.  In this posting we will discuss the IO Map as a stand-alone tool.

When using the logic based TOC Thinking Process tools there are two distinctly different types of logic at play, sufficiency type logic and necessity type logic.  Sufficiency type logic is quite simply a series of if-then statements.  If I have this, then I have that.  Necessity-based logic trees use the syntax, “in order to have this……I must have that. 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. If the goal is to have a fire, I must have all three components.  Take away even one of the CSFs and I won’t have a fire.

The hierarchical structure of the IO Map consists of a single Goal, several Critical Success Factors (CSFs) which must be in place to achieve the goal and a series of Necessary Conditions (NCs) which must be in place to achieve each CSF. The Goal and CSFs are written as terminal outcomes that are already in place.  Let’s look at an example of what an IO Map might look like.

Suppose that you were working with an organization who wants to become a highly profitable one.  You assemble the CEO and key members of his staff to develop an effective plan to achieve this goal.  In the IO Map drawing below, after much discussion, you agree on your Goal as “Highly Profitable Company” and place it inside the Goal box. This goal statement is written as a terminal outcome as though it’s already been achieved.  In the IO Map below, the Goal is stated as “Highly Profitable Company” which is the desired end state.  You think to yourself, “What must I have in place for our goal to be realized?” You think, “I know that we must have highly satisfied customers for sure and that our throughput must be high and growing,” so you place both of these in separate CSF boxes.  One-by-one you continue listing those things that must be in place to achieve your goal and place them into separate CSF boxes like the figure below.  In an IO Map you should have no more than 3 to 5 CSF’s.

Because the IO Map uses necessity–based logic, it is read in the following way: “In order to have a highly profitable company, I must have highly satisfied customers as well as the other four CSF’s.  Directly beneath the CSFs are NCs that must also be in place to achieve each of the CSFs. So continuing to read downward, “In order to have highly satisfied customers, I must have three different NCs as described in the IO Map above.  Remember, the CSF’s are written as terminal outcomes, as though they’re already in place.  You continue reading downward, in order to have, for example, high on-time delivery rate, I must have buffer management in place and functioning.  The NC’s represent actions that must be completed to achieve each individual CSF and form the basis for your improvement plan.  In like manner, your team completes all of the NCs until you are satisfied that what you have in place on the IO Map will ultimately deliver the goal of the organization. Typically in an IO Map, there are three-to-five CSFs and no more than two-to-three layers of NCs.  OK, so what happens next?
Here’s where I’ve departed from the traditional TP tools in that the next step would be to use the IO Map to construct a Current Reality Tree.  And although I totally support this approach, when time is a factor, I continue on with the IO Map in this way.  I typically facilitate a critical discussion on the status or current state of the Goal, CSFs and NCs.  I use a simple Green, Yellow and Red coding system to describe how each of the IO Map entities exists in our current reality.  The figure below is a summary of that exercise for our hypothetical company.

Notice the key on the bottom right hand side of the IO Map and you’ll see that a box shaded in green indicates that the entity is in place and functioning so no changes need to be made.  A yellow box indicates that there is something in place, but that it needs improvement.  A box shaded in red means that the entity is either not in place or that something is in place, but it isn’t functioning.  It should be obvious that any entity shaded in red has a higher priority than one shaded in yellow.

In our example, because the company is at least minimally profitable, but not highly profitable, it is shaded in yellow.  If we look at the CSFs, four of the five CSFs are shaded in red meaning that each 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 it’s shaded in red, this probably isn’t happening or at least not to the level to highly satisfy their 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. They must also have excellent quality and because this entity is shaded in green, the team believes that their quality is excellent due to their excellent quality systems.
  3. Finally, they must have a high perceived value by the customer and since it’s shaded in yellow, the team doesn’t believe this is the case.  The team believes that this is 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 red shading indicates that this company has significant room to grow.  This company had been through TOC training which included a section on Throughput Accounting and they now understand that their throughput is driven by managing the system constraint and by focusing their improvement efforts only on the constraint.  The team now believes 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.

The key to creating a focused improvement plan, using the IO Map, is to develop the improvement plan around what the Necessary Conditions are telling us.  If we look at the figure below and scrutinize it, we see that there are four primary improvement projects which, if implemented correctly, will drive improvement to each of the five Critical Success Factors and ultimately achieve our goal.

  1. Implement TOC’s Drum Buffer Rope.  This project will impact 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.
  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 my experience, this will also have an immediate, positive impact on the morale of the work force.
  4. Implement Dynamic Replenishment.  One of the keys to profitability is to reduce inventory and avoid part’s stock-outs and by implementing a replenishment system based upon usage rather than a forecast.  In so doing, two dramatic improvements will take place.  Overall inventory will decrease by at least 40% and part’s stock-outs will virtually disappear.  These two benefits occur because part’s replenishment will now be based upon actual consumption and not a forecast.

So here it is, a different way to utilize an Intermediate Objectives Map which is easy both to understand and construct and which permits the development of a very focused improvement plan.  In my experience using this approach, the team that develops it, will embrace it because it is their plan.  And the good news is, from start to finish it only takes less than a day, rather than days or weeks to develop.
Bob Sproull


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