How can Theory of Constraints help startups – Purpose, Goal and how to achieve it

I believe most entrepreneurs started with a brilliant idea, a new product, a smart solution, new services… and the underlying desire to write a story on their own, not for a boss.

The startupers then start up as the brilliant new offer needs funding and some structure to bring it to the world.

But how many entrepreneurs started with a higher Vision, a Purpose beyond their product, smart solution or new service?

Once the initial project gets some uplift and before the scarce resources are wasted on inadequate investments, a short pause to think about Purpose and Goal is recommended.

Entrepreneurs, what is the Purpose of your undertaking? What is your Goal?

Make money now and in the future” are probably chanting those who got their basics about Theory of Constraints, first edition.

I don’t think that making money is the main driver for startupers, because if it was, a majority would go for more secure ways to achieve their goal and startuping wouldn’t be that popular.

There must be others drivers, each personal to the entrepreneur. Whatever the Purpose is, it is a Goal that requires some Necessary Conditions to be fulfilled in order to achieve it.

And precisely here Theory of Constraints can help, providing guidance and a structuring process with the Goal Tree!

I described extensively Goal Trees already on this blog, but in short the Goal Tree is a logical network of nested Necessary Conditions, describing what is absolutely necessary to achieve prior to achieve the Goal.

Taking some time to verbalize the Purpose or Goal of the undertaking and listing the first Necessary Conditions will give guidance about what is required and what to focus on. With this high level description of requirements, the entrepreneur can wisely allocated limited resources to what is contributing to achieving the Goal and avoid wasting them on nice-to-haves or totally off-topic things.

The Goal Tree stands out among other tools and methods with its merciless necessary-logic base: whatever does not answer the “in order to achieve… we must…” in a robust and logically sound manner is to be discarded.

Besides its robustness, building the first, most strategic layers of a Goal Tree requires only about a couple of hours, provided the Purpose / Goal is clear…

Once the Tree is built and scrutinized, amended and declared satisfactory, it serves as a guiding map and a benchmark.

Over time, the entrepreneur should check how many of the Necessary Conditions have been fulfilled (turned Green) and what is still to be achieved to get closer to their Goal.


>Related: Goal-Setting Theory and Goal Trees


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How Lean can help startups – Do not repeat mistakes of established companies 2/2

Entrepreneurs, at the beginning of a new venture, have limited means and therefore should be waste-aware in order not to spoil their so limited resources.

>Have you read part one?

Waste is a central Lean concept widely known and documented. Here is the minimum to know about waste:

Waste is consuming resources without value creation.

Taichi Ohno, father of the Toyota Production System, has codified the various types of waste. Himself and his team spend significant time on factory shopfloor to observe and understand how and where waste happens.

Waste comes in 3 major families: Mura, Muri and Muda. These, although originally observed in manufacturing, are generic and transferable to any industry or business.

Variability (Mura) produces unpredictable results, uncertainty and variation in quality and delivery. Variability may lead to redo or correct what has already be done, thus “costing the double”, especially when the first widget has to be scrapped or a file discarded, etc. The impact of variability are dissatisfaction and corrective actions inducing additional costs.

The unreasonable (Muri) is the use of inadequate and / or poorly dimensioned resources, which carry risks on quality, safety or health; having people lifting heavy loads, overloading a transportation cart… Other Muri are more impacting costs, like renting a large office when a small one is enough, using a sledgehammer to crack a nut…

“Operational” waste (Muda) were classified into 7 original types to which an eighth was added later:

  • Waste from overproduction
  • Waste from waiting times
  • Waste caused by transport
  • Wastage due to unnecessary inventories
  • Waste in processes (overprocessing)
  • Unnecessary human movements
  • Wastage due to defects / poor quality

and the eighth: waste of human talent

The bigger an organization, the more opportunities to create waste exist: people and processes work with poor coordination, which means waiting, piling up of Work In Progress (another word for inventory), working on wrong versions…

The bigger the organization the more transportation of physical goods between departments (parts, paperwork, material, documents…) and human motion (walking, handling..), handovers, etc.

The list of examples can go on endlessly. It was all experienced in established companies.

For more details about the Lean obsession about waste, I invite you to refer to the related post.

How can this help startups?

Being waste-aware will help prevent waste. Remember: especially at the beginning resources are scarce and should be used wisely.

It is a question of sound management as well as a showing respect to the prime investors trusting the wannabe company.

It is far easier to prevent waste than to fight to reduce it afterwards, another learning from established companies.

So for instance when planning a layout, it should be done in a way to minimize unnecessary motions, handling, transportation and so on.

To avoid overprocessing and overproduction, think about Minimum Viable Product: the demo widget does not have to be perfect nor to come in huge numbers.

When defining a product or service features, remember that “best is enemy of good”; the customers may not want to pay for all the fancy bells and whistles.

Create a culture of “right first time” to minimize quality issues and the burden of rework or redo.

Wraping up

Waste is burning resources without creating value. Some of these wastes are inevitable and should be minimized, others are avoidable and should be eradicated.

Wastes, their effects and ways to prevent them are widely known and documented, therefore entrepreneurs have interest in using the accumulated and shared experience in order to avoid repeating bad practices.


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How Lean can help startups – Do not repeat mistakes of established companies 1/2

If there is one way Lean can help startups, it is to provide guidance or “Lean inspiration” from the very beginning and prevent them reproducing the same mistakes of long-established companies.

>Lisez cet article en français

Most established businesses are built on an outdated model in most cases: the mass production of low variety products, regardless of the actual reality of their business.

This model is characterized among other things by:

  • an organization built on functional silos
  • hypertrophy of overhead functions called “support”
  • a pyramidal hierarchical structure
  • an obsession about lowest unit cost
  • seeking economies of scale

This set of characteristics influenced the structure, management procedures and the rules of the organization.

Yet most startups are preparing to face a demanding market awaiting highly customized products in small volumes, possibly with specific additional services. They may go for pure services e.g. mobile apps, something relatively new compared to established businesses settled before the Internet or mobile phones even existed.

Consumption patterns have greatly changed. Owning something in full property is no longer the single or even principal modality in some cases, think about pay per view, download on demand, rental, subscription and freemium for example.

Thus, a business in creation must adopt a structure fit for the different upcoming challenges:

  • customer satisfaction, which notably includes timely access to services they request; pre-sale consulting, delivery, after-sales service, installation assistance and / or operation, maintenance, etc.
  • the satisfaction of stakeholders, the partners, suppliers, investors, employees, possibly residents, local authorities, etc.
  • the satisfaction of regulatory and legal requirements, including tax, accounting, social, etc.

and all this in a sustainable way.

This structure will evolve over time, because the requirements are not the same depending on the size of the company, its markets and business volumes.

The difficulties that established companies face when looking to return to leaner structures, should encourage entrepreneurs to remain vigilant and embed Lean into the Vision from the start.

It starts with thinking in terms of value-creation flows rather than operational subdivisions. It is often related to as “value chains” or “value streams” that are built specifically to quickly deliver the value expected by customers, without being disturbed nor burdened by artificial , expensive “additions”, without significant contribution to value creation.

The examples which we can think of are:

  • tending over complicated dashboards and lengthy reports
  • installing quality controls to filter and retain defective products
  • granting statutory functions, well paid but non-contributory
  • multiplying hierarchical levels

Experience shows that once such structures are in place, holders, beneficiaries and “supporters” will find ways and means to justify their continuation and even strengthening them, this is Parkinson’s Law.

It is therefore easier to be vigilant and to control the development of such (often called supporting) functions:

  • put in place only what it is a strictly necessary condition for the satisfaction of non-negotiable demands or requirements, by customers, markets or regulation
  • keep them “minimum” from the start rather than fighting desperately to restrict them later
  • do not hesitate to dismantle or convert them if the original requirement disappears or can be satisfied by a more flexible, more efficient or cheaper alternative

>Move on to part two


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Discarded the bloody app, feel better now

It was the one which inspired me my post: “Minimum Viable Product or just crap?”, it kept upsetting me over and over while claiming to be the top app for social media management.

I got rid of it and feel much better now.

Not only can I get beyond the limitations, but I have a much more reliable app now.

Yet for one problem settled this way, how many others are still bothering out there?

How many times did you experience a change in software or a mobile app (probably called “iteration” to make it sound trendy), allegedly improving user experience and driving you crazy instead?

It seems to be the new normal in IT development to issue half-baked unstable and bugged new versions, expecting customers to “give feedback”.

I gave my definitive unspoken feedback: I quitted! My time is too precious to “help” f___g developers finish their messy job.

By the way, got my answer: it was no Minimum Viable Product but just crap.


PS: Yes I know, in the first days of the year we should be kind and express good resolutions, but it feels just soooooooooooo good to slam this virtual door on this piece of…

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Eli Schragenheim on How can Theory of Constraints help Startups?

Startups are hype. I started asking myself how long known methodologies or management philosophies like Lean or Theory of Constraints can possibly help starting companies?

When Eli Schragenheim visited our offices in Paris, France, in October 2015, I fetched the opportunity to ask him this question: How can Theory of Constraints help Startups?

In this video, Eli shares his views.

Recorded in Paris, France, October 2015 in the offices of Marris Consulting.


>More of this series


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How can Theory of Constraints help Startups? Introduction

Startups are hype. I started asking myself how long known methodologies or management philosophies like Lean or Theory of Constraints can possibly help starting companies?
In this series, I’ll try to answer this question.

More posts to come on this subject. Follow me on twitter to keep informed.


 

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How Lean can help startups – Introduction

This post is an introduction to a series of articles dedicated to Lean and start-ups, more specifically: how Lean can help start-ups.

Lean was revealed as “Lean Manufacturing” before spreading to virtually all business sectors and evolve to Lean Management.

Lean has long been seen as an approach (approach or philosophy) specific to existing businesses seeking to transform and adapt themselves to their new competitive environment. Yet if Lean was indeed born in an already established business in bad shape (Toyota), its principles, methods and tools are not limited to these kind of cases.

It is therefore likely that, although not yet much reported in the literature, cases of Lean applications can be found in the early foundation stages of new companies or during the takeover of firms.

It would be very surprising, considering the fame of Lean, that entrepreneurs would not have heard of, or would refrain to inspire themselves from Lean.

How can Lean help startups?

Let’s remind the Lean principles in the context of a startup:

  1. Define value (created) from the perspective of the customers, users or beneficiaries
  2. Create corresponding value stream
  3. Ensure smooth and fast flow of value to the customer
  4. Meet the expectations and demands (pull flow from customer)
  5. Strive for perfection

For this to be possible and viable, an entrepreneur must allocate the proper resources and refrain from the temptation to develop or deliver unnecessary features. This would most likely lead to resource consumption without creating value in return, what is usually considered waste in Lean lingo.

A start-up may seem Lean by definition:

  • With limited resources available, entrepreneurs are assumed to be naturally inclined to be careful with resource management, reasonable and acquainted with the (Lean) concepts of waste
  • Time-to-market (i.e. speed) is obviously a critical success factor, just as is the speed at which the financial flow from sales is returning, hence an assumed entrepreneur’s obsession with flow and speed

But this is not certain. Common sense is less common than one might think.

Moreover, all entrepreneurs have not necessarily been exposed to the benefits of Lean. Finally, even familiar with Lean, entrepreneurs do not necessarily think about its application in the context of a starting business or the creating of a spin-off.

That’s the reason for this series of posts: How Lean can help startups


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