11 February 2010

Surviving the recession with breakthrough thinking - Part 1

If there is one thing you need to survive and thrive during a recession, it is a competitive advantage. And if there is one thing that can help you and your organization discover and secure a sustainable competitive advantage, it is breakthrough thinking. But how do you and your management team go about conjuring up a breakthrough? After all, the very word "breakthrough" indicates that there is a barrier between you and "the other side" of the breakthrough. How will you break through?

Become an expert on "the solution," not "the problem"
Over my career of more than 25 years in consulting and senior management, I have met lots of executives and managers that believe that "data" is central to improving a company. They did not have this same thought before computers became widely available to small-to-mid-sized business enterprises (SMEs). It seems that as PC-based computing and storage became faster and cheaper, managers' and executives' hunger for data grew. If some data was helpful, then (it seems they reasoned) all the data would make them infallible in their management actions.

The data are not right
What many of these executives and managers fail to understand, however, is that it is impossible for the data they collect to be right all of the time. To paraphrase P.T. Barnum: Some of the data will be right all of the time, and all of the data will be right some of the time; but, all of the data will never be right all of the time.

You will never possess all of the data
Of course, we need to add to that the fact that no one will ever possess all of the data in any given situation, if for no other reason than that there are hundreds of data elements affecting any given situation that are not quantifiable and cannot be reduced to empirical data points in a computer.

The data are not objective or impartial
Even the data that is collected may not be objective. How the data is collected, the programming that went into the computer application that collects it, the operator who enters it, the people making the measurements, and even the staff that categorize, select and report on the data are all potential influencers of the end result. The reports, dashboards or presentations that many executives will consider as being "neutral," "objective," and "impartial" really may have none of these attributes.

You are wasting time, energy and moneyFor all of these reasons and more, executives and managers that seek to amass volumes of data in order to solve problems are wasting the three things most companies can least afford to use unwisely: time, energy and money. Not only so, but too much data is more often a hindrance than a benefit to breakthrough problem-solving. The executives seeking a solution are more often than not simply buried in the minutia - much of it being unmanageable and irrelevant to the underlying core problem. The result is "paralysis by analysis."

Data-gathering is not accomplishment
Sadly, far too many executives and managers equate information gathering with actually accomplishing something that benefits the organization even though the act cannot be linked to increasing Throughput, reducing Inventories or demand for new Investment, and/or cutting or holding the line on Operating Expenses while sustaining significant growth. This approach to problem-solving frequently reports "progress" without any real accomplishment leading to improvement - short-term or otherwise.

Missing the goal and a frameworkIn management's misplaced attempt to become an expert on "the problem" through data-collection, they have already taken a wrong turn. Management should not be in the business of becoming expert on "the problem." They should be seeking to become expert on "the solution." However, their mistaken belief is that the data will lead them to a solution. This, however, is highly unlikely.

Data is nothing more than documented experience - the organization's history having been captured as data. However, as W. Edwards Deming told us so clearly:

  • "Information is not knowledge. Knowledge comes from theory." 
  • "You should not ask questions without knowledge."
  • "There is no knowledge without theory."
  • "Experience teaches nothing without theory."
  • "If you do not know how to ask the right question, you discover nothing."
Managers busy amassing and combing through data frequently have neither a goal nor a theory in mind. They are, as Deming would say, "Asking questions without knowledge." They are seeking to be "taught" by the firm's experience (as captured in the data) without a theory about what the data should be showing them.

Begin with a goal
It is the awareness of a goal or purpose that will enable managers to determine what data might really be relevant to achieving a breakthrough.

Firefighting does not qualify as a goal
Firefighting might be a requirement, but it cannot qualify as "a goal." I say this because - like real, honest-to-goodness firefighting - the most it can do is minimize damage and restore the "normal condition" of "no fire." It cannot bring progress, let alone lead to breakthrough thinking and competitive advantage for your company.

If your executive team is going to achieve breakthrough thinking, then the breakthrough better be about something more important to your organization's success than how to put out - or even prevent - the next fire in department X. Your thinking had better be focused on the critical matters of achieving more of your goal - and, in a for-profit enterprise, that goal should be how to make more money tomorrow than you are making today. Any other goal is short-sighted: improving quality, improving customer service, and even making happier, more satisfied employees are require making money if they are to be done well and for very long.

So, if the goal is making more money tomorrow than you are making today, what are the right questions to ask and what is the theory (or framework) in which to ask those questions in order that you and your management team might come away with real and practical knowledge leading to breakthrough improvements?

The theory and the goal
Let us begin with this hypothesis: Every for-profit organization has at least one constraint to making more money. Of course, the evidence supporting this hypothesis is that if at least one for-profit organization existed with no constraint, its profits would be approaching infinity. The resulting theory - set forth by Eliyahu Goldratt more than 25 years ago - is called the theory of constraints, or TOC.

There are many nuances to understanding all of the implications of this theory and it is beyond the scope of this present writing to discuss them all. However, it seems simple enough as a concept: the organization - the "system" - is, in a for-profit situation, nothing more than a "money-making" or "profit-making" machine. Therefore, the following two statements should be considered:

  1. The "system" - the entire organization - should be considered as a whole and not managed piecemeal by department and function. It is the "system" that produces profit, not the individual products, processes, departments or functions. The constraint is - or constraints are - related to the "system" and should be addressed in the context of the "system." 
  2. In order for the "system" to make more money tomorrow than it is making today, it is important that the following occur:
    1. IDENTIFY the constraint(s)
    2. EXPLOIT the constraint(s) - i.e., take steps to get the most Throughput available under the current constraint(s)
    3. SUBORDINATE to the constraint(s) - i.e., subordinate all other decision-making across the organization to the governing factors surrounding the constraint(s)
    4. ELEVATE the constraint(s) - i.e., take steps to expand the capacity(ies) of capacity-constrained resources (CCRs)
    5. CHECK to see if the constraint has moved - i.e., see if you now have a different constraint or set of constraint(s)
    6. GO BACK to the first step - do not let inertia set in; enter into a POOGI (process of ongoing improvement)
Now you can start thinking - wisely
Now, with a theory in-hand (the theory of constraints) and a goal in mind (making more money tomorrow than you are making today), you and your management team are actually ready to begin "thinking" toward a breakthrough.

[To be continued]

©2010 Richard D. Cushing

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