New Book Part 23

In my last post we began our series on the Goal Tree/IO Map by discussing its history and why I believe it is such an important tool for everyone to learn. In today's post we will dive deeper into how this tool can be easily created and begin to discuss how it can be used to develop your company's strategic improvement plan.  As a reminder, this material is taken from my newest book, The Focus and Leverage Improvement Book - Locating and Eliminating the Constraining Factor of Your Lean Six Sigma Initiative, published by Routledge/Productivity Press.

Bill Dettmer tells us that one of the first things we need to do is, define the system boundaries that we are trying to improve, as well as our span of control and sphere of influence.  Our span of control means that we have unilateral change authority, while our sphere of influence means that at best, we can only influence change decisions.  Dettmer explains that if we don’t define our boundaries of the system, we risk “wandering in the wilderness for forty years.”

The Goal Tree Structure

The hierarchical structure of the Goal Tree consists of a single Goal and several entities referred to as Critical Success Factors (CSFs).  The CSF’s must be in place and functioning if we are ever going to achieve our stated goal.  The final piece of the Goal Tree are entities referred to as Necessary Conditions (NCs), which must be completed to realize each of the CSF’s.  The Goal and CSF’s are worded as terminal outcomes, as though they were already in place, while the NC’s are stated more as activities that must be completed.

The figure below is a graphic representation of the structure of the Goal Tree, with each structural level identified accordingly.  The Goal, which is defined by the owners of the organization, sits at the top of the Goal Tree, with three to five Critical Success Factors directly beneath it.  The CSF’s are those critical entities that must be in place, if the Goal is to be achieved.  For example, if your Goal was to create a fire, then the three CSF’s which must be in place are, (1) a combustible fuel source, (2) a spark to ignite the combustible fuel source and (3) air with a sufficient level of oxygen.  If you were to remove any of these CSF’s, there would not be a fire. So, let’s look at each of these components in a bit more detail.

The Goal

Steven Covey suggests that to identify our goal we should, “Begin with the end in mind,” or where we want to be when we’ve completed our improvement efforts which is the ultimate purpose of the Goal.  A Goal is an end to which a system’s collective efforts are directed.  It’s actually a sort of destination, which implies a journey from where we are to where we want to be.

Dettmer also makes it very clear that the system’s owner determines what the goal of the system should be.  If your company is privately owned, maybe the owner is a single individual.  If there’s a board of directors, they have a chairman of the board who is ultimately responsible for establishing the goal.  Regardless of whether the owner is a single person or a collective group, the system's owner(s) ultimately establishes the goal of the system.

Critical Success Factors and Necessary Conditions

In the Goal Tree there are certain high-level requirements which must be solidly in place and if these requirements aren’t achieved, then we simply will never realize our goal.  These requirements are referred to as Critical Success Factors (CSFs) and Necessary Conditions (NCs).  [2] Dettmer recommends no more than three to five CSF’s should be identified.  Each of the CSF’s have some number of NCs that are considered prerequisites to each of the CSF’s being achieved.  Dettmer recommends no more than two to three levels of NC’s, but in my experience, I have seen as many as five levels working well.  While the Goal and the CSF’s are written primarily as terminal outcomes that are already in place, the NC’s are worded more as detailed actions that must be completed to accomplish each of the CSF’s and upper-level NCs.

The relationship among the Goal, CSF’s and the supporting NC’s in this cascading structure of requirements, represents what must be happening if we are to reach our ultimate destination.  For ease of understanding, when I am in the process of constructing my Goal Trees, the connecting arrows are facing downward to demonstrate the natural flow of ideas.  But when my structure is completed, I reverse the direction of the arrows to reveal the flow of results. In keeping with the thought of learning a tool and making it my own, I have found this works well for training purposes, even though this is the complete opposite of Dettmer’s recommendations for construction of a Goal Tree.

As we proceed, it’s important to understand that the real value of a Goal Tree is its capability to keep the analysis focused on what’s really important to system success.  Dettmer [2] tells us that a “Goal Tree will be unique to that system and the environment in which it operates.”  This is an extremely important concept because “one size does not fit all.”  Dettmer explains that even two manufacturing companies, producing the same kind of part, will probably have very dissimilar Goal Trees.

In my next post, we will begin the construction of a Goal Tree/Intermediate Objectives Map, laying out the necessary steps for construction.

Bob Sproull

Continue Voting Please

Good morning everyone.  As one of my valued connections and followers of my blog, I am asking that you continue voting for my daughter's effort to win the top prize of $40,000 for Butterfly Bridge.  Butterfly Bridge is a child advocacy center to protect children from child abuse.  Voting is open through May 31^st and the winner is based upon how many total votes they get.  So please vote once a day thru May 31^st.  And also, please pass this on to your friends and ask them to vote.  The vote total is now up to 491 votes, but I'm sure more votes will be needed to win.

Thanks so much for all you do for Butterfly Bridge!  Here is the link: http://wshe.es/QWJ8zhIj

Need you help

Good morning everyone.  As one of my valued connections and followers of my blog, I am asking for your help with a very important effort.  My daughter, Emily Hutcheson, is a Director at Butterfly Bridge and she needs your help.  Butterfly Bridge is a child advocacy center to protect children from child abuse.  As you’ll see below, they have an opportunity to win $40,000 to be used to help fund their organization.  Please find it in your heart to click on the link below and vote.  Voting is open through May 31^st and the winner is based upon how many votes they get.  And please vote once a day until May 31^st.  And also, please pass this on to your friends and ask them to vote.  In the next paragraph, there is an explanation that my daughter posted.

Thanks in advance everyone,

Bob Sproull

Butterfly Bridge has entered the Partners in Progress Video Contest that Wind Creek Hospitality is doing for all of Alabama and North Florida. We are using our mission video from a couple years ago and we think it is a great video! Please vote, vote, vote every day until May 31^st.  You can even use multiple email addresses. The top 7 winners will be chosen and they will all win a certain amount of money, the top prize being $40,000!

Please pass this on to your friends, family, coworkers, etc. We really need some votes!

Thanks so much for all you do for Butterfly Bridge!  Here is the link: http://wshe.es/QWJ8zhIj

New Book Part 22

In my last post we completed our discussion on the various types of constraints that exist within most systems.  In today's post, I will begin a new series of posts on something referred to as the Goal Tree (aka Intermediate Objectives Map (IO Map)). As a reminder, this material is taken from my newest book, The Focus and Leverage Improvement Book - Locating and Eliminating the Constraining Factor of Your Lean Six Sigma Initiative, published by Routledge/Productivity Press.

The Goal Tree

Many people who have gone through training on the Theory of Constraint’s Thinking Process (TP) tools, have come away from the training somewhat overwhelmed and somewhat speechless to a degree.  Some “get it” and some just don’t.  Let’s face it, the TP tools are pretty intimidating and after receiving the training, I have seen many people simply walk away, feeling like they were ill-prepared to apply whatever it is they had supposedly just learned.  Even for myself, when I completed my first iteration of this training, I had this same feeling.  And in talking with others, there was a general confusion about how to get started.  For the average person, the TP tools are just not easy to grasp, so they end up kind of putting them on the back burner, rather than taking a chance on making a mistake using them.

The other complaint I have heard many times is that a full TP analysis typically takes many days to complete, and let’s face it, a regular executive team typically doesn’t have that kind of time to spend on this activity, or at least they feel like they don’t. Well for everyone who feels the same way, or maybe have gone through the same Jonah training as I did, and feel somewhat hopeless or confused, I have hope for you.  That hope for you is another logic diagram, currently known as the Goal Tree.  We say currently, because the man responsible for creating the Goal Tree, [1] Bill Dettmer, originally referred to this tool as an Intermediate Objectives Map (IO Map), but has elected to change its name in recent years.  Before going any further, I want to make sure everyone understands that I am a huge proponent of TOC’s Thinking Processes!

But having said that, I am an even bigger fan of the Goal Tree.  Why?  Because most people grasp what the Goal Tree will do for them right away, and how simple it is to learn, construct, and apply. Many of the people I have trained on the Goal Tree, have emailed me, telling me they wished they had learned this tool many years ago.  They learn it and apply it right away!

Bill Dettmer, who happens to be my favorite author of all time, tells us of his first exposure to IO Maps/Goal Trees was back in 1995 during a management skills workshop, conducted by another TOC guru, Oded Cohen, at the Goldratt Institute.  In recent years, Dettmer has written much about the IO Map (now referred to as a Goal Tree) and now uses it as the first step in a full Thinking Process analysis.  Bill is passionate about this tool and believes that it defines the standard for goal attainment and its prerequisites, in a much more simple and efficient way.  I happen to agree with Bill and believe that the Goal Tree is a great focusing tool, to better demonstrate why an organization is not meeting its goal.  And because of its simplicity, it is easy not only learn, but also, it’s much easier to teach others in your organization how to use it than the full TP analysis.

There are other advantages of learning and using the Goal Tree, including a better integration of the rest of the TP tools, that will accelerate the completion of Current Reality Trees, Conflict Resolution Diagrams and Future Reality Trees, if you choose to use them.  But what I really like about the Goal Tree, is that it can be used as a stand-alone tool, resulting in a much faster analysis of the organization’s weak points, and then a rapid development of an improvement plan for your organization.  I have been teaching the Goal Tree for quite a few years, and can state unequivocally, that the Goal Tree has been the favorite of most of my classes and workshops.

One of the lessons I always encourage my students to do, is that they should always learn a new tool and then make it their own.  That message simply means that even though the “inventor” of a tool typically has a specific use in mind, tools should be continually evolving, and such was case for me with the Goal Tree.  Personally, I have attempted to transform this tool into one that most people grasp and understand in very short order, and then see its usefulness in a matter of minutes or hours, rather than days.

When using any of TOC’s Thinking Process tools, there are two distinctly different types of logic at play, sufficiency and necessity.  Sufficiency-based logic tools use a series of if-then statements, that connect cause and effect relationships between most of the system’s undesirable effects.  Necessity-based logic uses the syntax, in order to have x, I must have y or multiple y’s.  The Goal Tree falls into the category of necessity-based logic and can be used to develop and lay out your company’s strategic and tactical actions that result in successful improvement efforts.

As mentioned earlier, the Goal Tree dates back to at least 1995 when it was casually mentioned during a Management Skills Workshop conducted by Oded Cohen at the A.Y. Goldratt Institute, but it was not part of that workshop, nor did it ever find its way into common usage as part of the Logical Thinking Process (LTP).   It was described as a kind of Prerequisite Tree without any obstacles.” 

Dettmer tells us that he never thought much about it for the next seven years, until in late 2002, when he began grappling with the use of the Logical Thinking Processes (LTP) for developing and deploying strategy.  At that time, Dettmer had been teaching the LTP to a wide variety of clients for more than six years, and had been dismayed by the number of students who had substantial difficulty constructing Current Reality Trees (CRTs) and Conflict Resolution Diagrams (CRDs) of sufficient quality. According to Dettmer, they always seemed to take a very long time to build a CRT, and their CRD’s were not always what he would characterize as “robust.”  He claimed they lacked reference to a “should-be” view of the system—what ought to be happening.  It occurred to Dettmer that the Goal Tree he’d seen in 1995, could be modified and applied to improve the initial quality of CRTs.  As time went on, Dettmer began to realize that the Goal Tree could serve a similar purpose with CRD’s.  In 2007, Dettmer published a book, [2] The Logical Thinking Process: A Systems Approach to Complex Problem Solving that introduced the world to this wonderful tool and I always highly recommend this book.

In my next post, we will continue our discussion on the Goal Tree.
Bob Sproull

New Book Part 21

In my last post I discussed how all three elements of the Ultimate Improvement Cycle work in unison to maximize throughput and profitability.  In today's post, I will discuss the various types of system constraints that must be located before real and lasting improvement to flow and profitability can be achieved.  As a reminder, this material is taken from my newest book, The Focus and Leverage Improvement Book - Locating and Eliminating the Constraining Factor of Your Lean Six Sigma Initiative, published by Routledge/Productivity Press.

Types of Constraints

Until now, we have focused on identifying the physical constraints in a manufacturing process, and how to break them.  But, what if the constraint isn’t located inside the process? What if the constraint is policy related, or a non-physical entity, such as the efficiency metric? Let’s take a look at what this means, in terms of our improvement effort.

[1] Bill Dettmer explains that, “Identifying and breaking constraints, becomes a little easier if there is an orderly way to classify them.” Dettmer tells us that there are seven basic types of constraints as follows:

• Resource/Capacity Constraints
• Market Constraints
• Material Constraints
• Supplier/Vendor Constraints
• Financial Constraints
• Knowledge/Competence Constraints
• Policy Constraints

Let’s take a look at each of these constraints and what they mean to us for our improvement efforts.

• Resource/Capacity Constraints:  This type of constraint exists when the ability to produce or deliver the product is less than the demands of the marketplace. That is, the orders exist, but the company has insufficient capacity to deliver. These types of constraints have been what we have been discussing since we started this chapter and why using the UIC will increase capacity (throughput) to high enough levels. In fact, eliminating this type of constraint, leads directly to the next one.
• Market Constraint: This type of constraint exists when the demand for a product or service, is less than the capacity to produce or deliver the product or service. That is, the company has not developed a competitive edge to realize enough orders for their product or service. Market constraints come about simply because the company is unable to differentiate itself from its competition. So, how can a company differentiate itself? Quite simply, there are four primary factors associated with having, or not having, a competitive edge.  

Quality – In its most basic form, quality is a measure of how well a product conforms to design standards. The secret to becoming quality competitive is first, designing quality into products; second, the complete eradication of special cause variation; and third, developing processes that are both capable and in control. On-Time Delivery – This factor requires that you produce products (or deliver services) to the rate at which customers expect them. This means that you must have product flow within your facility, that is better than that of your competition. As you now know, this involves identifying, focusing on, and improving your constraint. It also involves reducing unnecessary inventory, that both lengthens cycle times and hides defects. Customer Service – This simply means that you are responsive to the needs of your customer base. Customers must feel comfortable that, if their market changes, their supply base will be able to change right along with them, without missing a beat. If the customer has an immediate need for more product, the supplier that can deliver, will become the supplier of choice. Cost – This factor is perhaps the greatest differentiator of all, especially in a down economy. But having said this, low cost, without the other three factors, will not guarantee you more market share. The good news is, if you are improving throughput at a fast-enough rate, the amount you charge a customer for their business can be used to capture it. So, as long as your selling price is greater than your totally variable costs, the net flows to the bottom line.

Let's get back to our discussion on types of constraints.

• Material Constraints: This type of constraint occurs because the company is unable to obtain the essential materials in the quantity or quality needed to satisfy the demand of the marketplace. Material constraints are very real for production managers and over the years they have been such a problem that material replenishment systems like MRP and SAP were developed in an attempt to fix them. However, as you know (or should know) MRP and SAP haven’t delivered the needed fix and as a result companies have spent millions of $’s needlessly, because these systems haven’t addressed the root cause of the shortages.
• Supplier/Vendor Constraints: This type of constraint is closely related to Material Constraints, but the difference is that suppliers are inconsistent because of excessive lead times in responding to orders. The net effect is that because the raw materials are late arriving, products cannot be built and shipped on time.
•  Financial Constraints: This type of constraint exists when a company has inadequate cash flow needed to purchase raw materials for future orders. Under this scenario, companies typically must wait to receive payments for an existing order before taking any new orders. An example of this type of constraint is a weak accounts receivable process whereby companies deliver products, but payments take long times to be received and posted.
• Knowledge/Competence Constraints: This type of constraint exists because the knowledge or skills required to improve business performance or perform at a higher level, is not available within the company. An example of this is a company purchasing robotics, but fails to develop the necessary infrastructure and knowledge to support the new technology. What typically happens is the equipment breaks down and remains down for extended periods of time thus losing needed throughput.
• Policy Constraints: Last, but certainly not least, is the policy constraint, which includes all of the written and unwritten policies, rules, laws or business practices, that get in the way of moving your company closer to your goal of making more money now and in the future. In fact, Dettmer tells us, “In most cases, a policy is most likely behind a constraint from any of the first six categories. For this reason, TOC assigns a very high importance to policy analysis.” The most common examples of policy constraints include the use of performance metrics like operator efficiency or machine utilization where there is a push to maximize metrics in all steps in the process, when in reality maximizing them in the constraint is the only place that matters.

In my next post we will look at what I believe is the most valuable of all tools in the TOC arsenal, The Goal Tree.

Bob Sproull

Post References:

[1] H. William Dettmer, Breaking the Constraints to World Class Performance, (Milwaukee, WI, Quality Press, 1998)

New Book Part 20

In my last post I discussed Eli Goldratt's third step in his process of on-going improvement subordination.  In today's post, I will demonstrate how the Theory of Constraints, Lean and Six Sigma work together to counter the weaknesses of one methodology by using the strengths of the others. As a reminder, this material is taken from my newest book, The Focus and Leverage Improvement Book - Locating and Eliminating the Constraining Factor of Your Lean Six Sigma Initiative, published by Routledge/Productivity Press.

There has been push-back by some people on the whole concept of Throughput Accounting (TA).  As a result, they don’t buy into using TA as a reason for integrating TOC, Lean and Six Sigma. So, let’s put the financial side of this integration to the side for a moment. In addition to the financial case made for integrating these three improvement methodologies, there are other rational and logical reasons why this integration works so well. In attempting to answer which of these three initiatives a company should use, or “which tune a company should dance to,” Thompson presents an excellent summary of the fundamental elements, strengths and weaknesses for each improvement initiative. In doing so, Thompson has inadvertently (or perhaps purposely) answered the underlying question of why the three improvement initiatives should be combined and integrated, rather than choosing one over the other.

The first four columns in the table below, reflect the summary of Thompson’s comparison (i.e. the initiative, fundamental elements, strengths and weaknesses). I have added a fifth column, “Counter Balance,” that demonstrates how the strengths of one initiative, counter-balance or compensate for the weaknesses of the others. As a matter of fact, by comparing each of the weaknesses and strengths of each of the three initiatives, we see that all of the weaknesses of each individual initiative, are neutralized by one or both of the strengths of the other two. This is such an important point for those companies that have experienced implementation problems for any of the three individual improvement initiatives done solo. 

Initiative	Fundamental Elements	Strengths	Weaknesses	Counter Balance
Lean	The cause of poor performance is wasteful activity.  Lean is a time-based strategy and uses a narrow definition of waste (non-value-adding work) as any task or activity that does not produce value from the perspective of the end user.  Increased competitive advantage comes from assuring every task is focused on rapid transformation of raw materials into finished product.	1.       Provides a strategic approach to integrated improvements through value stream mapping and the focus on maximizing the value-adding-to-waste ratio. 2.       Directly promotes and advocates radical breakthrough innovation. 3.       Emphasis on fast response to obvious opportunities (just go do it). 4.       Addresses workplace culture and resistance to change through direct team involvement at all levels of the organization.	1.       May promote risk taking without reasonable balance to consequence. 2.       May not provide sufficient evidence of business benefit for traditional management accounting. 3.       Has a limitation when dealing with complex interactive and recurring problems (uses trial and error problem solving)	1.       Six Sigma strength # 3 2.       Six Sigma strength # 2 and TOC strength # 4 3.       Six Sigma strength # 1 and TOC strength # 3.
Six Sigma	The cause of poor performance is variation in process and product quality.  Random variations result in inefficient operations causing dissatisfaction of customer from unreliable products and services.  Increased competitive advantage comes from stable and predictable processes allowing increased yields, improving forecasting and reliable product performance.	1.       The rigor and discipline of the statistical approach resolves complex problems that cannot be solved by simple intuition or trial and error. 2.       The data gathering provides strong business cases to get management support for resources. 3.       The focus on reduction of variation drives down risk and improves predictability.	1.       Statistical methods are not well suited for analysis of systems integration problems.  I can calculate sigma for a product specification, but I am not sure how to establish sigma for process interactions and faults. 2.       The heavy reliance on statistical methods by its very nature is reactive, as it requires a repetition of the process to develop trends and confidence levels 3.       The strong focus on stable processes can lead to total risk aversion and may penalize innovative approaches that by their nature will be unstable and variable.	1.       Lean strength # 1 and TOC strength # 2 2.       Lean strength # 2 and Lean strength # 3 3.       Lean strength # 2
TOC	The cause of poor performance is flawed management technique.  Systems logic is used to identify constraints and focus resources on the constraint.  The constraint then becomes the management fulcrum.	1.       Provides simplified process and resource administration through a narrow focus on the constraint for management of a process as well as improvement efforts (exploitation). 2.       Looks across all processes within a systems context to assure that limited resources are not overbuilding non-constraint capability (the local optimization problem). 3.       Distinguishes policy vs. physical constraints. 4.       Provides direction on appropriate simplified measures (throughput, inventory and operating expense).	1.       Overemphasizing exploitation of the constraint may lead to acceptance or tolerance of wasteful non-constraint tasks within the process. 2.       If the underlying process is fundamentally inadequate no matter how well managed it may not achieve the goals and objectives. 3.       Does not directly address the need for cultural change.  TOC change process is very technically oriented and fully acknowledges the need for TQM and other improvement methods.	1.       Lean strength # 1 and Six Sigma strength # 2 2.       Lean strength # 2 3.       Lean strength # 4

Let’s look at several examples on how these counterbalances work so well.  In the above table, we see that Weakness 1 in Lean, “May promote risk taking without reasonable balance to consequence,” is counter balanced by Six Sigma Strength 3, “The focus on reduction of variation, drives down risk and improves predictability.” One thing we know for certain is that as we reduce variation in our process, we reduce risk and our ability to predict future outcomes improves dramatically. This is the cornerstone of statistical process control, which means that risks can be minimized if we rely on this Six Sigma strength to do so.

Continuing, Lean Weakness 2 tells us that we may not provide sufficient evidence of business benefit for traditional Cost Accounting. This weakness is countered by both Six Sigma Strength Number 2, the data gathering provides strong business cases to get management support for resources and by TOC Strength Number 4, provides direction on appropriate simplified measures (Throughput, Inventory and Operating Expense). As we have stated many times before, traditional Cost Accounting induces us to make incorrect decisions, so by adopting Throughput Accounting practices, from the Theory of Constraints, we will have sufficient evidence to make changes to our process, assuming we are focusing on the constraint operation.

Lean Weakness 3 states that, Lean has a limitation when dealing with complex interactive and recurring problems (uses trial and error problem solving) and is countered by Six Sigma Strength 1, the rigor and discipline of the statistical approach resolves complex problems that cannot be solved by simple intuition or trial and error and TOC Strength 3, (distinguishes policy vs. physical constraints). One of the Six Sigma tools that permit us to solve complex interactive and recurring problems is Designed of Experiments (DOE). DOE’s identify significant factors that cause problems, and identifies insignificant factors that do not. TOC Strength 3 helps us in two ways. First, if the problem we are facing is a policy constraint, we use TOC’s Current Reality Tree to identify it, and TOC’s Conflict Cloud to solve it. Both of these strengths will compensate for this weakness in Lean.

Now let’s look at one of the Six Sigma and TOC weaknesses and see how they are compensated for by other strengths. For example, look at Six Sigma Weakness 2, the heavy reliance on statistical methods, by its very nature is reactive, as it requires a repetition of the process to develop trends and confidence levels. This weakness is off-set by Lean strength 2, directly promotes radical breakthrough innovation, and by Lean Strength 3, emphasis on fast response to opportunities (just go do it). Likewise, TOC Weakness 3, TOC’s inability to address the need for cultural change, is off-set by Lean strength 4.

In the same way, if we compare all of the weaknesses in Lean, Six Sigma and TOC to the strengths found in the other initiatives, the three initiatives not only complement each other, but they rely on each other. The table above, is from Steven W. Thompson, Lean, TOC or Six Sigma Which tune should a company dance to? It is from an article in e-newsletter, Lean Directions.  So, in addition to the demonstrated financial benefits of this symbiotic trilogy, we now see evidence from a logical perspective, as to why they should be implemented in unison as a single improvement strategy.

In my next post, I will discuss the various types of system's constraint that you must identify and deal with as you continue on your improvement journey.

Bob Sproull