Breaking Business Bottlenecks – The Theory of Constraints

Author: tracysigler | Posted: May 20th, 2011 | | Tags: Eli Goldratt, The Goal, theory of constraints | No Comments »

Could fixing one “minor” bottleneck in your business double your revenue?

What’s the goal of any business? It’s to make money now and into the future. Every business has at least one bottleneck or constraint affecting its ability to reach that goal.

The Theory of Constraints (TOC) was created by Eli Goldratt and popularized by his book The Goal. One of the big ideas in The Goal is that your organization is a system with many interdependent parts. Suboptimal performance in one area can have a huge impact on the entire business. Focus on removing the bottlenecks to improve the overall performance of your organization.

One of my favorites quotes from The Goal is when the mentor character Jonah tells our hero, plant manager Alex, “we are not concerned with local optimums.” Say what? That phrase means that just because there are areas of your process, your business, that could be improved or optimized, doesn’t mean they should be. Are they constraints? If the answer is no, then those “local areas” are not the problem, and making them work better will not move you toward your goal.

“We should be trying to optimize the whole system. Some resources have to have more capacity than others. The ones at the end of the line should have more than the ones at the beginning–sometimes a lot more.”

Theory of Constraints can be rather complicated to implement, but I find it helpful just to be aware how constraints can affect the whole. The five basic steps are:

Identify the constraint (the resource or policy that prevents the organization from obtaining more of the goal)

Decide how to exploit the constraint (get the most capacity out of the constrained process)

Subordinate all other processes to above decision (align the whole system or organization to support the decision made above)

Elevate the constraint (make other major changes needed to break the constraint)

If, as a result of these steps, the constraint has moved, return to Step 1. Don’t let inertia become the constraint.

Of course, implementing TOC is a lot harder than listing some steps. Still, the idea of just working on bottlenecks is rather alluring. There are consultants who do nothing but apply this approach for large companies. That said, there’s something even a “solopreneur” can apply to improve performance, and movement toward “the goal.”

Don’t be afraid to think about your constraints and what can be done to remove them.

More about the Theory of Constraints:
The Goal by Eli Goldratt
Theory of Constraints (Wikipedia)

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