A chain is no stronger than its weakest link
This is the main underlying principle of TOC or the Theory of Constraints. You know when that clever little improvement you made to that process seemed to work at that moment, yet didn’t speed up your overall project at all? Can you remember a time when you put a lot of effort into something in one area only for a small problem in another area to reduce, block or delay your expected result?
If so, then this little piece of handy management science might be helpful to you.
Dr. Eliyahu M Goldratt is an Israeli physicist who moved into management theory and consultancy. The theory was aimed at large scale manufacturing in particular. However the fundamental principle behind TOC could be of benefit to many people and in many areas of their lives, not least the running of their businesses or websites.
Most business owners ask ourselves, ‘what are all the great things we could do to improve our sales/be more awesome?’. It’s a positive thought, looking outward and upward for untapped opportunity. So in our own case of SelfAssemblySites, to improve sales we could say
- We could do a big drive and marketing push on Facebook
- We’ve been neglecting our YouTube channel, we should release 5-10 videos to increase traffic from Youtube.
- Pinterest stats show it converts better than Twitter or Google+ so we should really put more resources into building that up
On quick review Pinterest appears the best option. We could dive in and get moving on it immediately. Or should we?
All of these things could be positive for our organisation but implementing any of these, fundamentally misses an important point. They don’t seek out, identify or address the single greatest limitation that slows us getting to our objective. Let’s return to that in a moment.
Blogger at ‘Unstupid Marketing Newsletter‘ and big time TOC advocate, Linus Rylander put it like this with a really apt analogy. Let’s say in a car assembly line each process takes 3 minutes. So installing the seats takes 3 minutes, the dashboard takes 3 minutes and so on with 20 other parts. Then suddenly installing the rear window takes 9 minutes, now you have a problem. Everything behind the rear window process gets backed up and delayed. No matter what improvements you make to all the previous steps in the chain it won’t matter. You can install the seats twice as fast but you won’t have the benefit. You still have a limitation in the channel, a bottle neck. The output of the whole system will only be every 9 minutes.
That’s the point of maximum leverage, the point where each small improvement will really be felt. You can either find ways to reduce the process to 3 minutes. Or go another direction and create three bays for installing the rear windows thereby allowing an output every 3 minutes.
Theory of Constraints says that once you identify the main thing holding you back, you divert any and all resources, time and manpower available to clearing that constraint. All improvements in any other area won’t add up to the same as reducing or eliminating this one core problem, so you better direct everything toward fixing it.
Remember there is only one main thing at a time holding you back. The theory goes that there’s always one more detrimental than another. Concentrate on that one thing, then the next one and so on, until you have flow in your assembly line. It creates a practical method of continual improvement.
Don’t just take my word for it. Dr Goldsratt’s client list is impressive; Ford, Motorola, General Motors to name a few. At Boeing he achieved a 75% reduction in lead time, a 60% reduction in WIP inventory; and a 150% increase in throughput and an on-time delivery rate that approaches 100%.
TOC Plays Well With Others
This could be seen as a sub section of the 80/20 princple; a small number of factors create a disproportionate effect or result. 5% of your clients generate 50% of your profit on the positive side. On the negative, only 3% of your clients result in 50% of your complaints, frustration and general trouble. Author of the 80/20 Principle Richard Koch, would be in line with Theory of Constraints in thinking that removing that 3% disruption will lead to a lot more free time and resources to take care of your better clients. Koch generally focuses more on the positive small things that have a big effect, but also suggests that reducing the power of the negatives are important too.
TOC is also a little similar to Critical Path Analysis in project management. When worked out, you can see which porject tasks can be done in parallel to each other without too much trouble if they’re running late or early. Crucially it also highlights which are the critical points of most damage to progress should they get delayed or stalled. It allows project managers to take appropriate action to reduce delays and problems in those areas.
So the primary benefits of the TOC way of thinking are that they highlight the greatest constraints that are stopping you doing what you want to be doing. They change your direction and focus of thought from all the things you can do, to reducing the key things holding you back from moving forward. (I know it’s based in management, but if it’s not part of a self-help book empire already, I’ll soon make sure it is!)
The secondary benefits are that they help you separate that which will have a noticeably positive effect in moving you forward and that which are really just the ‘bright shiny object‘ distractions. It helps you put your energy into work that will see greater returns.
Finding Our Limitation
In the case of the SelfAssemblySites example above, we now shift to look at the big picture. With this viewpoint it becomes clear that the single greatest limiting factor in achieving our stated goal of increasing sales, is not traffic but the text and layout of our Join page. We could gain significant benefit in even slight improvements and that’s why we’re working with a copywriter on that page.
So what’s the single biggest bottle neck holding you back?