I just finished reading an
excellent article taken from the Spring, 2004 issue of Technology Management by
the Stevens Alliance for Technology Management by Shimeon Pass and Boaz
Ronen. Shimeon Pass is an expert in
applying the philosophy and tools of the Focused Management Methodology in
industrial, service, retail and non-profit organizations and is a partner with
Focused Management Ltd., a leading consulting group in Israel. Boaz Ronen is a Professor of Technology
Management and Information Systems at Tel Aviv University. Dr. Ronen developed the Focused Management
approach for increasing shareholder value, and his work has influenced thinking
and practice related to the Theory of Constraints. Both are well published and have collaborated
on several books.
This paper addresses the
issue of managing a market-constrained hi-tech firm, from the vantage point of
the Theory of Constraints (TOC), first introduced by Goldratt and Cox in their
1992 business novel, The Goal. Acknowledging the market as a severe and
common constraint facing the organization, TOC-based methods and techniques are
helpful in coping with this environment.
In addition, the authors discuss a tool known as the CUT (Cost
Utilization) Diagram. The CUT Diagram depicts
the various resources within an organization as bars with the height of the bar
representing the load on the resource while the width represents the relative
cost of the resource. A further description of the CUT Diagram is provided in this article and the link to it is below and I encourage everyone to read it.
The CUT Diagram in their
article shows that some of the resources are under-loaded while two of them are
maxed-out at 100% which means they have dual constraints.
In 1992 Ronen and Spector expanded
Dr. Goldratt’s 5 Focusing Steps to include two additional ones as follows:
1.
State the goal of the system
2.
Define global performance measures
3.
Identify the system constraints
4.
Decide how to exploit the system constraints
5.
Subordinate the system to the constraint
6.
Elevate the constraint
7.
When a constraint is broken, return to step 3
I’ll come back to these
seven focusing steps, but first I want to re-introduce the Intermediate
Objectives Map (IO Map).
I’ve made several
postings before about the IO Map, so this may not be new to some of you. You may recall that the IO Map was developed
by Bill Dettmer in a paper he published and then again in his excellent book, The
Logical Thinking Process: A Systems Approach to Complex Problem Solving.
Milwaukee, WI: ASQ Quality Press, 2007.
The IO Map is another of the logical Thinking Process tools that uses
necessity based logic. The syntax for
the IO Map is, In order to have “x”, I
must have “y.” The IO Map is seen as
a logical hierarchy with the Goal
listed on top with Critical Success
Factors (CSFs) listed directly beneath the goal. The rationale is that in order to achieve the
goal, all of the CSF’s must be satisfied.
Directly beneath the CSF’s we have Necessary
Conditions (NC’s) that must also be satisfied to achieve each of the CSF’s.
An example of the IO
Map is demonstrated in Figure 1.
Figure 1
In this IO Map we
have stated the goal as Maximum
Profitability with three CSF’s that must be in place to achieve it. The IO Map states that in order to have Maximum Profitability, I must have Maximum Throughput,
Minimum Operating Expense and Minimum Inventory. Without all three of these CSF’s, the goal
will not be achieved. Similarly, beneath
each CSF, there are NC’s which must be in place to achieve each CSF. Now let’s return to the seven focusing steps
listed earlier.
While I adamantly agree with
the 7 steps put forth by Pass and Ronen, I’d like to offer a different Step
1. Instead of only stating the goal of
the system, I’d like to see the first step include the other two key components
of the IO Map. The first step then would
be, “State the Goal, Critical Success Factors and Necessary Conditions of the
system. Perhaps this step is assumed by
the authors, but for a simple guy like me, or perhaps a better description
would be “anal”, I’d like to see this new wording on Step 1.
As you can no doubt tell, I
am a huge fan of the IO Map and all it brings to the table! I’ve used it successfully many times to
improve organizations, so for me, I can’t speak of goal achievement without the
other two components. As many of you
know from Bruce Nelson’s and my book Epiphanized
that both of us a big believers in combining tools, so to me, it’s a natural
course to combine the IO Map with TOC’s 7 Focusing Steps.
Bob Sproull
