Theory of Constraints is a “business philosophy” or “management paradigm” that takes into account the existence of constraints, e.g. limiting factors hindering the organization to achieve more of its Goal. It focuses on the one that limits the performance of the whole system and strives to achieve more of the organization’s Goal (patient’s treatments, throughput, sales… whatsoever).
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Theory of Constraints is around since the 1980s but is still barely known. Here are 5 reasons (at least) to explore Theory of Constraints (ToC) and check what good it could do for your organization.
1. Theory of Constraints is not theoretical
The name does not sell and is probably somewhat misleading, but Theory of Constraints is more a body of knowledge than a mere theory and its applications are very real and concrete.
Yes ToC has a lot of metaphoric jargon and it takes some time to get used to it. But after all Lean has a lot of jargon too and makes even people “speak” japanese. Six Sigma has its jargon as well. If you want to share with the community, you have to speak the lingo.
Yet being still “confidential” (this point being discussed later), ToC claims relatively few success stories. Compared to Lean with Toyota, ToC has no such lighthouse, no convincing, undisputable and compelling success story so far. The lack of appealing buzz makes ToC still look theoretical. (In the ToC lingo we call this a Negative Reinforcing Loop.)
2. Theory of Constraints (ToC) is a growth oriented approach
ToC is about breaking the limiting factors and getting more out of the organization’s processes and resources, exploiting wasted precious and scarce capacity.
While many organizations seek survival through cost cuttings and savings – which is limited and potentially deadly – those embracing ToC will challenge expanding their business and growth.
Breaking the constraints is for example drastically speeding up deliveries, getting more out of a very expensive or scarce resource. This could be a factory delivering widgets, a hospital treating more patients or an administration significantly speeding up the delivery of documents.
In project management ToC changes the paradigm and ensures projects to finish on time and more likely within allocated budget.
Any organization achieving its Goal significantly faster and better will soon attract market’s attention and get more demand.
In contrast how many new customers will cost reduction or variability reduction attract?
Which doesn’t mean cost reduction and variability reduction should be disregarded, as we will see right now.
3. Theory of Constraints and Lean make a great pair
ToC is often described as a focusing means/tool/approach (you name it) that is a good catalyst to Lean and/or Six Sigma.
While ToC identifies leverage points and critical root causes of problems, Lean and Six Sigma are great ‘tools’ to exploit the leverage points and solve problems.
The synergy using ToC, Lean and Six Sigma is known as TLS. From what I have experienced, seen, heard or read, ToC is most often used in pair with Lean rather than with SixSigma, or sometimes as a TLS trio.
Good news is all prior investment in Lean or Six Sigma training is still valuable, ToC will simply supercharge them.
With ToC, improvements show on bottom line, which is not always the case with Lean. ToC proposes a structured and logical approach applied system-wide, while Lean initiatives are too often used to chase opportunities to optimize locally, failing to improve globally.
4. Theory of Constraints proposes a consistent framework across all activities
ToC originated in manufacturing and just as many approaches, methods or tools it soon proved usable in other environments.
But unlike some of the others, ToC did not simply transpose into other environments but developed specific tools and approaches for those branches while keeping consistent.
I am thinking about Critical Chain Project Management (CCPM) which revisits project management and corrects the flaws of the Critical Path Method (CPM).
I am thinking about Logical Thinking tackling non-physical constraints such as beliefs, policies or resistance to change.
ToC does also challenge supply chain management, accounting or marketing.
Regardless the various applications, the core concepts of constraints and the scientific approach remain the same.
5. Theory of Constraints is still “confidential”
ToC is not very famous compared or Lean or Six Sigma, but there is an advantage in this ‘weakness’: organizations using ToC and achieving more of their Goal usually outmatch their competitors with a kind of secret weapon.
It happens over and again: a very poorly performing unit achieves a fast, unexpected and surprising turnaround, attracting attention from its peers wondering how this could be possible.
In corporations the now admired unit would share its secret, but it could remain the secret weapon for any organization facing tough competition.
Theory of Constraints is not meant to remain secret, it just failed to get enough attention until now. Those using it to outmatch their competitors will not complain. Those being outmatched or seeking a way to a breakthrough now have 5 reasons to give it a try.