Surviving the recession with breakthrough thinking - Part 3

 [Continuation]

As you and your management team will realize as you work through the Thinking Processes (TPs), this approach to achieving breakthrough thinking recognizes that each challenge you and your organization faces requires a unique approach and a unique solution. Unlike other methods of problem-solving, applying the TPs recognizes the distinct needs, interests, abilities, limitations and power of all of the stakeholders. This capability of the process helps achieve breakthroughs by maximizing the quality and the effectiveness of the solution. Furthermore, the fact the solution will be invented by you and your management team, the likelihood of full implementation is increased. After all, people seldom work against their own inventions.

Discovering the transitional steps

One of the dangers of adopting or adapting a solution from a previous effort or somewhere or someone else is that, in doing so, the “easy answer” too frequently leads your team to also accept an “easy implementation” in which the transitional requirements are never fully understood. Warning! If the transitional steps are not understood – and usually not even clearly articulated – then the transitional steps are never fully developed for implementation.

What your management team may have previously understood as “the problem” and “the solution” have usually been nothing more than cryptic images shrouded in a fog of language leading to lots of action but seldom (if ever) a real breakthrough in improvement. However, if you have undertaken to build and understand the Current Reality Tree (CRT), then you have in your hands a document that depicts clearly and logically what is constraining your organization from making more money tomorrow than you are making today. Chances are that, as a result, you and your managers have a clearer understanding of your organization as a whole than you have ever had previously. You may be feeling a sense of empowerment – a renewed sense of being in control – that you have been lacking as manager for years now.

However, the Thinking Processes have more to offer than helping you clearly understand the “root” of your problem – the one thing (or very small number of things) that is your bottleneck (constraint) to achieving more of the goal. The CRT you have built has helped you answer a critical question for good management: What needs to change?

But two additional questions need to be answered, as well: What should the change look like? And, How do we effect the change? Fortunately, the Thinking Processes supply powerful tools to help your team discover and clearly articulate answers to these questions.

By building a Transition Tree (TrT), your management team will go through a Thinking Process that will help you apply sound logic to determining the transitional steps necessary to move from your organization’s Current Reality to your intended Future Reality. When you are done, your team should have three Thinking Process logical “trees” – a Current Reality Tree, a Transition Tree, and a Future Reality Tree. These three documents represent answers to the three critical questions to which your management team needs sound answers:

1.       Current Reality Tree – What needs to change?

2.       Future Reality Tree – What should the change look like?

3.       Transition Tree – How do we effect the change?

Note that the TrT should become your “road map” to change. This document, you will find, should clearly define the necessary steps to achieving the desired change right along with the rationale for taking these steps. Without such a map it is easy to get lost or lose focus on the breakthrough your team has calculated for achieving more of the goal.

Don’t get derailed

Chances are, while you and your management team are building the Transition Tree, that there will be some that will step forward say, “We won’t be able to do that because….” There are a couple of important points to consider when this happens.

First, keep your focus on what happens most in making more money for your organization. If you can increase Throughput on 97% of your transactions, do not let the unpredictable 3% of exceptions keep you from achieving the breakthrough change for the vast majority of circumstances. Paying too much attention to these exceptions will likely distort your solution.

However, if there is an objection raised that needs to be evaluated and where it could have an impact on effecting the overall change anticipated by the FRT, then there is a Thinking Process for this, as well. Under such circumstance, you and your team should consider what Eliyahu Goldratt called “Negative Branches.” These are smaller logic trees that supply answers to questions such as: “What will we do if…?”

Don’t get stuck

Sometimes – in fact, with some frequency – management teams such as yours get caught on the horns of a dilemma. They find that there appear to be rational arguments for two mutually exclusive paths to the same interim objective in their Transition Tree development.

For example: A manufacturing manager is measured and rewarded on two different metrics – defect rates and equipment maintenance expenses. Of course, he wants to be a good manager and to be rewarded properly for being a good manager, so he wants simultaneously produce quality parts and hold-down the equipment maintenance expenses. He knows that he can reduce maintenance expenses by doing on-demand maintenance only. He also knows that he can achieve lower defect rates if he applies routine preventive maintenance on the equipment under his management. Which of the two approaches to equipment maintenance should he choose?

Fortunately, the Thinking Processes have an answer for this situation, too. The tool is called the Evaporating Cloud and is critical to actually achieving breakthrough solutions.

Summary

To my knowledge, no for-profit organization in the world has ever achieved ascendency in its industry through “cost-cutting” efforts. Companies that grow and gain market share are more likely to be those that have achieved breakthroughs.

There are three basic ways to reach a breakthrough in your organization’s thinking:

1.       By chance

2.       By hiring people who are intuitively breakthrough thinkers

3.       By finding and applying a tool that is proven in drawing out breakthrough thinking from ordinary executives and managers – like the Thinking Processes

Which will your organization choose?

©2010 Richard D. Cushing

The New ERP – Part 27

Recap

This is Part 27 in our series, so let's take a moment to briefly recap what The New ERP – Extended Readiness for Profit has done for us so far in contrast to traditional ERP – Everything Replacement Project.

Aspect	Traditional ERP	The New ERP
Setting the goal	Lack of focus: Traditional ERP often has several goals (read: lack of focus) or a goal that is entirely generic (read: lack of focus). Therefore, ROI is frequently predicated on little more than hope that throwing new technology at the organization will somehow lead to improvement and better profits.	Laser-like focus: In The New ERP began with uniting executives and managers around a singular goal (in for-profit organizations that is typically making more money both now and in the future). Next, The New ERP applies the Thinking Processes to help management understand what is keeping the organization from achieving more of its goal. This gave management a clear view of: What needs to change What the change should look like How to effect the change
Linking ERP objectives to financial goals (IT alignment)	Loosely bound to financial goals: Far too many traditional ERP projects are bound to financial goals only by a tenuous thread of hope in the hearts of managers and executives. Others may calculate an ROI (return on investment) based on broad estimates of overall "improvement," but these are generally not tied to specific effects and measurable expected outcomes.	Tightly bound to financial goals: The New ERP – Extended Readiness for Profit uses what is learned through the application of the Thinking Processes to tightly aid managers and executives in linking measurable execution metrics to the achievement of financial goals. If "revenue is to increase by 12% in the first year," then the management team knows precisely which actions and improvements are expected to lead to these results.
Invention of the "solution"	Solution is a "package" brought from the outside: Traditional ERP frequently revolves around the organization defining their "needs" or "requirements," and then seeking a "package" brought to them from the outside (by a vendor or value-added reseller) to provide them with the "solution." If the executive team or the vendor cannot achieve enterprise-wide "buy-in" by the end-users, then the implementation of the "solution" may be more costly or less effective than intended, or it may fail entirely.	"Solution" is invented by the executives and managers in charge: By applying the Thinking Processes and determining with precision "what needs to change" and "what the change should look like" in order to achieve more of the organization's goal, the management team employing The New ERP becomes the inventor of their own "solution." By inventing their own solution, and by doing so using a rational toolset, "buy-in" becomes automatic. No one fights against their own invention.
Budget setting	See "Linking ERP objectives to financial goals" above	See "Linking ERP objectives to financial goals" above. The New ERP allows your management team to set rational budgets for specific, highly-targeted and measurable improvements so that the budgets make sense relative to the return on investment calculations. All of this is done with relative simplicity and paralysis by analysis is avoided entirely.
Software selection	Wholesale replacement: Traditional ERP – Everything Replacement Project does just what you would expect. It leads to replacing everything – or almost everything – in the organization. It is not focused on alleviating or eliminating organizational "bottlenecks."	Targeted Extensions: The New ERP – Extended Readiness for Profit is focused on effecting change in specific areas that have been rationally identified as being constraints ("bottlenecks") that are keeping the organization from achieving more of its goal. This focused approach means that the whole organization need not be disrupted to bring about effective improvement. Furthermore, very specific technologies selected to achieve very specific ends is the objective in software selection.
Vendor demonstrations	Unfocused review of functionalities: Vendor demonstrations under traditional ERP approaches often occupy days or weeks, sapping time, energy and money from all of the various departmental silos involved. This process alone may increase operating expenses by driving up overtime costs for "catch-up" work.	Tightly focused "proof of concept": Under the New ERP, vendors or resellers are invited to present proofs of concept around improvements that are very narrowly defined. They are also asked to speak specifically – and convincingly – about how their technologies will allow the "client" organization to achieve its goals within the budget prescribed.

What has been accomplished to date under the New ERP concept for the organization applying it (as in the table above) has likely saved the entire organization no small amount of time, energy and money. In addition, they are in a far better position to see actual results in the near future – results predicated on sound logic and real strategies, not hope and guesswork.

[To be continued]

Can Your Company Handle an Onrush of Risk? - Risk Management - CFO.com

Can Your Company Handle an Onrush of Risk? - Risk Management - CFO.com

The application of the Thinking Processes can help your organization deal more ably and successfully with risk. The Negative Branch is a tool specifically designed to help your organization face challenges that might arise in moving toward achieving more your your goal -- to make more money tomorrow than you are making today (in a for-profit firm).

Contact me for more information at rcushing(at)ceoexpress(dot)com.

Curbing Fleet Costs - Budgeting & Planning - CFO.com

Curbing Fleet Costs - Budgeting & Planning - CFO.com

Despite the mindset of cost-cutting in economic hard-times, it can be dangerous. It is possible to cut away "meat" while you think you're slashing only "fat." When you cut away protective capacity, you make recovery more difficult when the economy improves.

Better: Apply the Thinking Processes and increase Throughput while reducing Inventories or the demand for new Investment, and cut or hold the line on Operating Expenses while sustaining real growth in revenues.

To find out how, contact me at rcushing(at)ceoexpress(dot)com.

...

The New ERP – Part 26

Vendor demonstrations

It is an unfortunate fact that, if our foundation is wrong, chances are the rest of the building will not be too great either. This is certainly the case as we come to the matter of vendor demonstrations in a traditional Everything Replacement Project. Consider the typical steps that have been taken to get the firm to the "vendor demonstrations" stage in traditional ERP:

As we have been discussing all along (see prior posts), none of these steps, when undertaken in with traditional ERP in view, are designed to focus the effort on those few things that need to change in order to make the enterprise more effective at producing profit. Instead, an almost egalitarian approach is assumed in which the "concerns" expressed and "requirements" supplied by department X carry equal weight with those expressed by department Y. After all, it is only fair.

This remains precisely why traditional Everything Replacement Projects so seldom deliver really dramatic results in terms of increase profit. And, when they do, it is mostly serendipity that delivers the improvement. Likely it was because three or five things that actually needed to change got some or all of the change they required, and the remaining several hundred things that also changed in the traditional ERP effort did not do enough harm to overwhelm the benefits delivered.

When we, then, extrapolate this lack of focus down from "requirements gathering" through "software selection," and "vendor selection," we arrive at the prospect of sitting through vendor demonstrations that are equally unfocused. People from several – perhaps dozens – of departmental silos are invited down to view essentially redundant demonstrations of how the proposed new software will replace the way they presently execute the same basic tasks.

Vendor demonstrations in the New ERP – Extended Readiness for Profit

If you and your management team have been following along with us (see prior posts), then you will immediately see that preparing for vendor demonstrations in the tightly focused environment of the New ERP would be and should be dramatically different. Rather than sitting through long and (usually) somewhat boring vendor demonstrations of how General Ledger, Accounts Payable, Accounts Receivable, or Purchasing works, or even generic (though somewhat more exciting) demonstrations of how the warehouse will operate with the new software in place, the management team in our example company has laser-like focus on crystal clear and measurable objectives. For this team, the vendor demonstrations are not generic, at all. Instead, the vendors are called upon to demonstrate "proof of concept" around tightly-defined metrics.

Rather than giving the selected vendors a 32-page "demo script" that covers elements of every module to be part of the traditional Everything Replacement Project, your well-prepared executive management team has handed off "Proof of Concept" requirements to the selected vendors. A "Proof of Concept" requirement might read something like the following (in our example company):

• Demonstrate how your bar code printing solution can be integrated with our existing inventory system and how bar code label printing will be performed in connection with receipt of goods and manufacturing production operations. Explain how leveraging your existing APIs (application program interfaces) will hold the cost of development and deployment of your bar code printing solution below $X.
  
  
• Demonstrate how ASNs (advanced shipping notices) will be automatically generated via integration with our existing technologies. Furthermore, demonstrate how ASNs will be transmitted to the appropriate destinations by retrieving data from our existing back-office accounting and sales order entry software. Explain how you will leverage your integration engine to hold total cost of development and deployment below $Y.
  
  
• Demonstrate how your combination of hardware and software will lead to essentially paperless pick-pack-ship operations. Further, demonstrate how your solution will permit us to process (on average) N orders per hour through the entire pick-pack-ship process. Show how you will keep the total cost of development and deployment below $Z.
  

Notice that the goals of discovery for vendor demonstrations under the New ERP are two-fold: results within budget. Of course, this implies something on the part of your organization, as well. You should note, for example, that there is no "touchy-feely" language in these "Proof of Concept" requirements. This lack of UI (user interface) formulation suggests that, if you can get to the results you require within the budget you have established – based on return on investment (ROI) – then your organization is willing to adapt their business processes to the demands of the new technologies.

This really makes superabundant economic sense from a business perspective. You and your management team have already identified what needs to change and what the change should look like using the Thinking Processes (see earlier posts). You have also set rational budgets for Investment (I) based on the ROI formula. Now it is up to the technology vendors to demonstrate how they intend to effect the required changes within the Investment budget.

Once your management team has reviewed the "proofs of concept" offered by the vendors, you can make determinations if any adjustments need to be made in the benefit or ROI calculations. Such adjustments, however, should be relatively minor – not a major overhaul of the intended target.

[To be continued]

The New ERP - Part 9

The three things every executive needs to know

If you and your team have completed a Current Realty Tree (CRT), then you have taken the first valuable step in moving toward Extended Readiness for Profit -- the New ERP. You have begun the your revolt against traditional ERP and its Everything Replacement Project approach with all its foibles and pitfalls. And, you will notice, that you have not yet spent one thin dime on new technologies -- unless, of course, you went out to buy a copy of Microsoft Visio to neatly document your CRT.

The really good news is that, having created your CRT, you and your team have also taken a vital step toward understanding the "theory" that underlies how your organization -- your "system" -- presently works and does not work (when it doesn't). You likely also understand better how your system interacts with its environment -- that is, your supply chain and the economy in general.

Your Current Realty Tree is the new "framework" by which you will begin to evaluate all of your future actions for Extended Readiness for Profit.

Remember, there are three -- and only three -- things that every executive or manager must know in order to handle any situation and to bring improvement effectively to any organization:

1. What needs to change
   
   
2. What the change should look like
   
   
3. How to effect the change

By looking at the "roots" of your Current Reality Tree, you and your management team now know exactly what needs to change. If you CRT is accurate and you have been honest with yourself in its development, then your CRT is the answer to number 1 above -- what needs to change.

Furthermore, if you've followed along in all the steps to this point, you have also determined which of the things that need to change will required some investment in technology in order to see significant improvement. More importantly, however, you have likely also uncovered one or more things (roots) that can be addressed immediately and at little or no cost, and these things can start bringing real improvement to your organization to beginning tomorrow. You are already on your way to achieving more of your goal -- to making more money tomorrow than you are today.

One or more of the things you have already discovered may require an investment of zero dollars and may be capable of delivering dramatic increases in Throughput or significant decreases in Inventory -- either of which can be a boon to cash flow and cash velocity.

There is real work involved, however. Looking at the roots of your CRT will tell you what needs to change, but it will still be up to your team to lay out effective means of achieving the change. And, while the CRT is a great starting place, you should likely consider applying more of the Thinking Processes to help you build a logical "road map" for change. Consider building a Transition Tree (TrT), which can really function as that "road map," even though all the ground must still be covered to get to your destination of achieving more of your goal.

[See prior posts for links to more information about the other Thinking Processes.]

[To be continued]

The New ERP - Part 8

Creating your Current Reality Tree (CRT)

STEP 5:
Once you have completed your CRT, take a close look at the "roots." Roots are those entities at the bottom of the tree that have no arrow leading into them. Generally speaking, you will find that the roots of your CRT will fall into two very broad categories:

1. Things you can change or affect in some way, and
   
   
2. Things you likely cannot change or affect (de facto roots).

When classifying entities into the latter category (de facto) take great care. Do not allow yourself or your team to make excuses by simply saying that "we have no control over that." For example, quality issues from outside suppliers may not be in your direct control, but they are certainly within your realm of influence -- especially if you are a major customer of the vendor.

Once your team has identified all of the roots that fall into the first category, you will likely find that these roots may be further subdivided into three more categories:

1. Root causes for which improvement requires no new technologies
2. Root causes where you may achieve some improvement without the aid of new technologies, but further improvement may also be achieved by applying new technologies as part of an ongoing improvement process
3. Root causes where the most logical and most effective action toward improvement will involve the deployment of new technologies

Most of the organizations we work with find that more of the things they need to change for improvement do not involve investments in new technologies. If this is your case, then "Congratulations!" In less than one day (most likely) you and your management team have discovered how to begin system-wide improvement that

• May be commenced immediately
  
  
• May involve little or no cost
  
  
• Will likely deliver improvements that increase Throughput, reduce Inventories or the demand for new Investment, and/or will probably help you hold the line on Operating Expenses while you grow your business

Equally as important, however, is the fact that if you find the need for new technologies, the cash flow from the non-technology early-win improvements can help pave the way for the investment in new technologies in the near future.

[To be continued]

The New ERP - Part 7

Creating a Current Reality Tree (CRT)

STEP 4:
Beginning with an initial pair of related UDEs (as described in the preceding post), continue building your logic by working out and agreeing upon cause-and-effect connections between the other UDEs as you add them to the whiteboard.

In our example, someone from purchasing has identified an unwritten policy of always buying from the lowest-priced supplier as being one of the things that is keeping the organization from making more money. This is, most likely, an astute observation, especially since it is counter-intuitive. The same party also said that "not including quality criteria" in the organization's purchase agreements with vendors leads to more problems. We've added these as entities 30 and 40 in the figure below.

As you build your logical tree, the arguments regarding the logic should be restricted to the following categories of legitimate reservations:

1. Clarity - Every statement (entity) should be clearly understood as to its meaning and intent.
   
   
2. Entity Existence - Be sure that the entity (UDE) actually exists.
   
   
3. Causality Existence - Does the proposed cause-and-effect (arrow) represent reality? It must be the actual cause and effect in a CRT. In other logical tree forms it may be a planned or desired effect.
   
   
4. Cause Insufficiency - Ask the team, "Does Entity A actually lead to Entity B all by itself?" If not, then you may need to add clarifying entities (as we did in our example in the preceding post).
   
   
5. Additional Cause - It may be true that Entity A causes Entity B, but there may be a additional cause that also leads to B. It is possible that both "If A, then B" and "If C, then B" both exist simultaneously.
   
   
6. Predicted Effect Existence - This technique may validate or invalidate logic by demonstrating how the existing of one thing logically proves or disproves some other proposed reasoning. For example, if someone were to say, "Joe Smith is struggling financially," someone else might say, "If Joe Smith were struggling financially, one could predict that he would NOT be in the process of purchasing a new yacht for $1.5 million."
   
   
7. Tautology - A tautology is a statement that must be true by definition, but does not necessarily indicate a cause-and-effect relationship. For example, if we say, "There are ambulances on the freeway, so there must be an accident," we are not necessarily implying that the ambulances caused the accident. In fact, the presence of ambulances on the freeway does not necessarily imply that there is an accident at all. They could be going about other business, such as transporting a patient not related to any car accident.

It is important to restrict your team to using these kinds of logical arguments relative to the logic in your tree. This prohibits (or, at least, exposes) the introduction of "company politics" into the logic so that you and your team can see "reality" and not some slanted view of what is working and not working in your organization.

Continue building your CRT until you have incorporated all of your UDEs. (On rare occasions we will exclude some UDEs in the construction of a CRT. Generally, the cause for such exclusions is that one or more of the UDEs is really outside the scope of the "system" being considered. For example, if the "system" being addressed is limited to the "sales process," we may omit UDEs related to post-sales actions.)

When topping off your CRT, be sure to get to your statements about not reaching your goal. For example, if your team's goal were (as we suggested) "to make more money both now and in the future," then some of evidences of not reaching your goal might be entities at the top of your tree like: "We do not generate enough Throughput" and "Our Operating Expenses are too high."

NOTE: If you'd like to receive a sample of a full CRT, please contact me at this email address: rcushing(at)ceoexpress(dot)com.

[To be continued]

The New ERP - Part 6

Creating Your CRT (continued)

STEP 2:
Having collected some ten to 20 UDEs from your team, weed out any duplicates and make certain that the UDEs are clearly understood by everyone on the team, rewording them as necessary.

A well-written UDE will contain an "actor" as well as some description of the affects being experienced. For example, your team would need to clarify further a UDE that says only "poor quality." Is the poor quality coming from a vendor or is it your own organization that is producing poor quality? You will need to clarify such a UDE, after discussion, by rewriting it as, "We are getting up to 10% defect rates on widgets coming from ABC Company."

Another factor to consider: If you end up with UDEs that read something like "Because we get poor quality widgets from ABC Company, we end up with high scrap rates in Z-machine processing," then you will want to break that down into two UDEs that might read as:

1. "QC reports that we are getting up to 10% defect rates on widgets coming from ABC Company" and
   
2. "We have high scrap rates in our Z-machine process"

The reason for doing this is that the CRT construction itself will define the cause-and-effect logic, as we will see shortly.

Once everyone on the team is clear on the meanings of the UDEs you have collected, you and your team will be ready to move on to the next step in the construction of your CRT.

STEP 3:
In this step you and your team will begin linking the UDEs in cause-and-effect relationships. We usually do this on a whiteboard using the sticky-notes for the UDE entities and drawing in the connecting if-then arrows on the whiteboard.

Since one of the UDEs submitted had a "because" in it, and since we needed to break down that UDE into its components, we have a great place to start building our CRT, using logic already implied in our discussion.

Note that we assign numbers to the entities as we place them on the board. This is merely for the purpose of facilitating discussion and documentation. The numbers become shorthand for referring to an entity (rather than restating the entities whole contents).

One would read this beginning logic as: "IF [10] we get up to 10% defect rates on widgets from ABC Company, THEN [20] we have high scrap rates on our Z-machine processing."

There is additional logic implied in this statement, and everyone may be fully satisfied with the statement as it stands (understanding that the defective widgets consumed by the Z-machine process contribute to the defect coming out of that processing. However, if there are any questions, one might simply add a clarifying entity (as shown below).

Here you will note that we used a letter (rather than a number) to identify clarifying entities in the logic tree. We have also used an oval to encircle the two arrows leading from [A] and [10] to [20]. This oval constitutes an AND JOIN, so that the logic would be read as: "IF [10] we get up to 10% defect rates on widgets from ABC Company, AND [A] we use widgets from ABC Company in our Z-machine processing, THEN [20] we get high scrap rates on our Z-machine processing."

When building your CRT, you and your team may begin anywhere. Pick a couple of UDEs that appear to have some fairly obvious cause-and-effect relationship and place them on the whiteboard and join them with an arrow. Then seek the team's agreement with the logic before moving on to add another entity.

As I said, we typically do this on a whiteboard using sticky-notes. It can get a little messy. Don't let it get too out of hand, as you will need to be able to read your CRT and make sense of it when you're through building it.

However, once you're done with building it on the whiteboard, someone will have to undertake to document the CRT for review and final approval. We generally do this using Microsoft Visio, but any flow charting software (or even the drawing tools in Microsoft Word) could be used to create your final version. When creating a first draft, clean up the language in the entities to make the tree read relatively naturally from bottom to top. Also, rearrange the entities to reduce the number of arrows crossing one another just for general clarity.

[To be continued]

The New ERP - Part 5

Thinking Processes to the rescue

Dr. Eliyahu M. Goldratt introduced the Theory of Constraints (TOC) to the world in his book entitled The Goal, back in 1984. In the 25 years since its introduction, TOC has been applied successfully in a vast array of businesses, industries, not-for-profit organizations and government entities.

Too many executives and managers are stumbled by the use of the word "theory" in TOC. Unfortunately, this is something you'll likely have to just "get over." Dr. Goldratt was a physicist before becoming involved in the world of business, so he calls it a "theory," under the assumption that someone, someday may prove it wrong -- that an exception may be found. To date, however, no such exception has been discovered.

The "Thinking Processes" are five interrelated methods to allow the rational analysis of any system in support of focused improvement leading to ongoing improvement. By applying these tools, it is possible for an organization to construct a rational framework that accurately describes how an organization works and interacts within its industry and the economy in general. The primary Thinking Process to be applied in mapping the system's (organization's) current state is the Current Reality Tree (CRT). The accompanying figure is an example of such a logical tree.

The Current Reality Tree (CRT)
The CRT is predicated upon the fact that, in most organizations or "systems," the many factors that may be identified as "problems" really arise from a relatively small number of "roots" or "root causes." Applying the CRT Thinking Process allows executives and managers to capture and decode "tribal knowledge" about how their organizations function, and what is or is not working in a logical, re-readable written form.

Once placed in the CRT form, using rules of logic, this written document may be used by the entire management team to read, re-read, discuss and modify the logic until everyone is certain that the logic presented in the CRT reflects the "reality" expressed within the organization's operations. Hence, the tool's name is the "Current Reality Tree."

Constructing a Current Reality Tree
While experience in guiding a team through the Thinking Processes is beneficial, there is no magic in creating a CRT or applying any of the other TOC principles. You do not need me or any other consultant to do this. There are a number of good resources available online and in print that may be used to guide your firm through the effort. However, if you want a short-cut to effective, first-time application the Thinking Processes -- if you'd like to make real progress in the first day of your effort -- then using an experienced consultant may be the most cost-effective way of getting there.

Nevertheless, here are the basic steps:

STEP ONE
To begin constructing a CRT, executives should gather a cross-functional team of ten or 15 key people from across the organization. This team should be briefed on the goal of creating a CRT and why it is important to the organization.

Having gathered the team, the members of the team should be asked select a single "goal" for the system (organization). In a for-profit organization, and where working on the "big picture" for the entire system, we recommend a goal similar to "To make more money -- both today and in the future." (While this is likely not something you want to put on company brochures as a mission statement, it is the true goal of every for-profit organization and every other goal is subsidiary to it. Quality, customer service, market leadership, or any other goal cannot be maintained for long in the absence of making money.)

With the single goal in mind, the next question to set before the team is this: "What is keeping us from reaching this goal?"

Naturally, when this question is asked, you are likely to get different responses from the sales and marketing folks than you will get from accounting or the production department. Ask them to jot down their responses as simple, clear sentences. Generally, I ask them to do so on 3"x3" sticky-notes. Ask them to include an "actor" in each sentence. Also, ask them to NOT include any "because" statements. Simply state the hurdle or blockage to achieving the goal.

Examples might be:

• Salespeople spend too much time in the office doing paperwork
• Our prices aren't competitive
• The warehouse has too many out-of-stocks
• Our lead times aren't competitive
• ... and so forth

In working with the Thinking Processes, we stop referring to these as "problems," right away. We call these "Un-Desirable Effects" or "UDEs" (pronounced: YOU-dee-eez), for short. The reason we do this is because when we have "problems" we want to solve them. But, as we will see, all of these cannot be "solved" by addressing them directly. They are caused by occurrences elsewhere in the "system."

[To be continued]

The danger of "We know!" - Part 3

In this portion of our series, we're going to talk about how to put a "framework" or "theory" around what you already know about your business enterprise. This is not an exercise in "business theory." This is a real and practical approach to gaining effective control of your enterprise after (perhaps) years of "muddling through" with more or less mediocre results.

One of the reasons executives and managers are not able to really "understand" what they "know" about their own organizations is that, since they are unaware of a "tool set" to aid them, they never actually put what management "knows" (we call it "tribal knowledge") about how their organization works -- or doesn't work -- on paper. Therefore, in the absence of such a written document, the managers themselves cannot read and re-read their own logic about cause-and-effect relationships that flow throughout their enterprise.

Our mind makes thousands of assumptions about what we think we know. Our mind processes these assumptions and incoming information so rapidly, we are unable to filter out our incorrect thinking or invalid assumptions adequately. Putting our thoughts down on paper helps us step through the logic that is leading us to certain conclusions.

Equally important, however, is that fact that, if we never get our reasoning down on paper, it is nearly impossible for us to invite others to truly analyze our logic -- to critically review our logic -- in an effort to help us bring about lasting improvement. As a result, not only do we not realize that we have flaws in our thinking about what's happening in our organization, others who might bring beneficial insights to our aid cannot do so because they, too, cannot help us find the flaws in our rationale. This inevitably leads to the fact that these undiscovered flaws in our thinking about how our organization really works -- or does not work -- remain embedded in our decision-making processes.

The good news is that there is an outstanding set of tools that are readily accessible, easily understood, and relatively simple to apply that will help executives and managers lay hold of "tribal knowledge" and reduce it to an understandable framework (or "theory") about how their organizations function in a real and practical way. Others that have applied that tool set have said things like:

• "I have never seen my business so clearly before."
  
  
• "We truly understand our business for the first time."
  
  
• "This process has helped us regain a sense of control over our enterprise."
  
  
• "For the first time in a long time, we are empowered to move proactively toward real, lasting improvement."
  
  
• "We now have a consistent framework for diagnosing problems and planning for improvement."
  

What is this simple, yet amazing, tool set for executives and managers?

It is simply the TOC (Theory of Constraints) Thinking Processes as developed by Eliyahu Goldratt, a suite of logic trees that provide a simple, yet effective, road map for diagnosis and change.

So, continue to say, "We know!" and miss out on the opportunity for real, practical and sustainable improvements to your enterprise, or discover a whole new, easy-to-use and effective tool set for starting down the road to ongoing improvement.

************
Contact me!
************

The danger of "We know!" - Part 2

In Part 1 of this series, I discussed how many executives and managers fail to reap benefits from new methods and ideas -- especially if these new methods and ideas arrive in the form of a "consultant" -- simply because these executives and managers believe that the already know what can be known about their organizations and their industries. This prevents many organizations from growing to their full potential.

W. Edwards Deming put it bluntly: "Information is not knowledge. Knowledge comes from theory."

Unfortunately, what far to many executives and managers have is a lot of information about their businesses and their industries. What they desperately lack is "theory" by which to interpret and understand the information at their disposal.

G. K. Chesterton put it this way in Tremendous Trifles (Beaconsfield, Britain: Darwen Finlayson, 1968): "One of the four or five paradoxes which should be taught to every infant prattling on his mother's knee is the following: that the more a man looks at a thing the less he can see it, and the more a man learns a thing the less he knows it. The Fabian argument of the expert, that the man who is trained should be the man who is trusted would be absolutely unanswerable if it were really true that the man who studied a thing and practised it every day went on seeing more and more of its significance. But he does not. He goes on seeing less and less of its significance."

Think of Sir Isaac Newton and the story of his having begun his development of the theory of gravity because he had seen an apple falling from a tree. Surely there had been tens of thousands of individuals that had witnessed objects falling to the ground under the influence of gravity for several millennia prior to Sir Newton's experience. Yet, no one understood "gravity."

It has only been since Isaac Newton put a "theory" around gravity that men could take what they had experienced with gravity and put it into a framework -- a theoretical context -- that made the experience understandable to them. Furthermore, the framework (the "theory") gave men the opportunity to predict outcomes of certain actions relative to the gravitational affects. This meant that men could plan and execute with some real certainty as to the results they would obtain under "gravity."

Precisely the same is true of business.

Executives and managers have all manner of data in their hands relative to the performance of their enterprises. What they lack is a "theory" by which that data may be abstracted and understood for the purposes of effective management. A framework that will help them bring simplicity out of the complexity before them.

In all too many cases, the missing "data" for beginning the process of ongoing improvement is to be found within the organization at all. The missing component for executives and managers is quite often this simple point: there is a simple method available to help organizational leadership logically analyze what they already know internally.

In the absence of a "tool set" that helps management bring forth "knowledge" from their "information," executives and managers tend to continue "tinkering" with their businesses. They make changes here or there to see if the change helps.

Sometimes such change seems to help, other times the change actually makes things go worse than before. Still other times, the change is made and their is no perceptible affect on the organization at all.

This is no way to run a business -- or any other kind of organization!

Executives and managers are yearning -- sometimes without even recognizing what is lacking -- for a simple, effective tool to help them gain control of their enterprises once again.

[Next time: Gaining Control]

Contact me!

...

The danger of "We know!" - Part 1

As a consultant, I meet folks in business very frequently that are pretty much convinced along one or more of the following lines:

1. "We already know about our business." By this owners and managers mean to express the sense that they already understand how their business works and what it will take to make the business better.
   
   
2. "There might be some room for improvement, but the returns on any improvement we could make would be so small, it's not worth the effort." This statement or mind-set by owners and managers is a restatement of the so-called "law of diminishing returns."
   
   
3. "Our business (or industry) is unique, so we have to work this way." This is an argument suggesting that a consultant, being an outsider to the business or the industry, can't possibly bring any valuable insight. Furthermore, even if he or she does, we probably couldn't make the recommended changes anyway.

On far too many occasions, when I meet such owners and managers, I am simultaneously witnessing an organization that started off great, grew rapidly, and still has the entrepreneurs that started the firm in the driver's seat. They are also, quite often, over-the-hill.

I'm not talking about the owners or managers being over 40 (or over 50) years of age. I'm talking about the fact that their once booming organization is now in a state of coasting on its earlier success or even in the early stages of decline. Sometimes management hasn't even recognized that fact yet. They may be thinking that they are just in a temporary slump, that things will inevitably pick up again, and their firm will regain its earlier vigor.

Sadly, the chances of such a revitalization are usually slim.

While it is unequivocally true that a consultant can never learn everything about an enterprise that the owners and management know from all their years in their industry and in their own business, it is equally true that there are more things that are similar about human organizations than there are things that are different between human organizations.

Among the key things that are TRUE about all human organizations is that they all rely upon the same three scarce resources:

1. Time
2. Energy
3. Money

Furthermore, contrary to popular opinion, managing the first two -- time and energy -- is more important than managing the third (money). This is true simply because if you had unlimited time and unlimited energy, you could have all the money you wanted or needed.

For this simple reason, focus is everything. As organizations grow and expand, the entrepreneurs who manage them start to lose focus, and they do not have within their knowledge or skills a set of tools to help them focus again on those few simple things that will revitalize their over-the-hill firms.

Having gained, perhaps, many years of experience in their industry and with their own firm, they frequently find that their experience really does not contribute that much toward discovering effective responses to the new challenges their firm now faces. What is missing is a method for discovering a new theory or framework that clarifies how their grown and expanded organization now works -- or doesn't work -- at making more money.

[Next time: Why is it so difficult for owners, executives and managers to discover how to effectively change their companies for ongoing, vital growth?]

Contact me!

...

Getting more of what you want - Part 7

So, let's suppose that you've decided that applying the TOC Thinking Processes might really help your organization bridge the chasm -- successfully make the leap from entrepreneurial to enterprise. What kind of results might your firm expect from a sound and diligent application of TOC-based continuous improvement?

Here's a summary from an independent study as the results were published in a white paper available from AGI - Goldratt Institute:

• Mean reduction in lead times = 70%
• Mean improvement in on-time deliveries = 44%
• Mean reduction in cycle times = 65%
• Mean increase in combined financial variables performance = 63%
• Mean reduction in inventory levels = 49%
• Mean increase in revenue/throughput = 73%

If you'd like to get started on a path to improvements like these, contact me today at rcushing(at)ceoexpress(dot)com.

Thank you.

Contact me!

...

Getting more of what you want - Part 6

So, what is this "tool set" that can help the entrepreneur and his management team decode the complexity of the growing enterprise in order to extract simplicity out of its seemingly endless layers of complexity?

The answer is: The TOC (Theory of Constraints) Thinking Processes.

As Victoria Mabin of the School of Business and Public Management of the Victoria University of Wellington states: "[T]he TOC Thinking Processes... are a suite of logical trees that provide a roadmap for change, by addressing the three basic questions of What to change, What to change to, and How to cause the change. They guide the user through the decision making process of problem structuring, problem identification, solution building, identification of barriers to be overcome, and implementation of the solution." [Emphasis added.]

This tool set is not new, as Mabin makes clear: "The TOC has evolved over [more than] 20 years.... [and] is now used worldwide by companies of all sizes.... [M]any managers who routinely use TOC believe they understand their businesses for the first time.... [T]hey gain a sense of control and of being able to act proactively.... TOC empowers managers by providing a consistent framework for diagnosing problems." [Emphasis added.]

Now, even though I'm a consultant and I get paid for helping companies make effective decisions by applying the TOC Thinking Processes, let me say up front: You don't need me to apply the TOC Thinking Processes. You could attend a workshop or do self-study in order to learn how to apply these tools in your business.

The workshops will likely cost you $5,000 to upwards of $10,000. Self-study and trial-and-error might take you some months -- or even years. There are, however, a good number of books available to guide you through this process.

So, while you don't need me to leverage these tools, connecting with me might be the fastest and lowest-cost method of getting to solutions you need in the very near future. If you'd like to connect with me, email me at rcushing(at)ceoexpress(dot)com.

In our next post, we'll talk about what kinds of results are typical with the application of TOC principles.

[To be continued...]

Contact me!

...

Getting more of what you want - Part 4

In prior posts in this series, we have talked about why organizations frequently face significant challenges in getting more of what they really want -- to make more money tomorrow than they are making today. We have linked this to what we call "making the leap from entrepreneurial to enterprise."

We have also identified the underlying issue as being the loss of that view once held by the entrepreneurial leadership of the firm -- namely, the view that the whole company is one integrated "system" with one unifying goal. Instead, departments and layers of management erode that thinking away into ultimate oblivion in the minds of the entrepreneur.

The question we are facing now, in this post, is: If executives and managers have recognized the negative symptoms in their organization, and they surely have a desire for improvement, what is actually keeping organizational leadership from clearing away the barriers to making more money?

There are really multiple answers to this question, and the true response will -- naturally -- vary from organization to organization. However, consider these as a small sampling:

• Firms that are already suffering from poor performance -- or performance below management's expectations, at least -- are often so consumed with trying to meet short-term objectives that they do not have time to back away from the details to even consider the "system" as a whole. All of management's time, energy, and way too much money is being consumed in activities like meeting month-end sales goals, expediting production, tracking down late shipments from vendors, or getting late shipments to customers out the door. There is just no time to step back and figure out why everyone is pulling their hair out but profits keep declining.
  
• The organization has grown to be so large so fast (say, from 12 up to 55 employees in one year or so) that the entrepreneurial management just can't figure out which "lever to pull" to get the results it wants. What used to be a simple decision now seems overwhelming in complexity.
• The entrepreneurial leadership has some ideas that might improve the company, but they can't figure out how to come to final decision because it just seems too hard and too complex to figure out the balance between the risks (investment) involved and the rewards (profits) that any given change might bring to the firm.

Consider this: If a small firm has just 5 people working in it, there are 120 different permutations of interactions between those 5 parties. Add a sixth person into the mix and that number jumps to 720 ways they might interact. If you get to 10 employees, the permutations jump to more than 3,000,000; and with 15 the number is 1,307,674,368,000. Of course, this doesn't even count interactions with customers and vendors.

It's no wonder that entrepreneurs with great ideas and great companies can readily be overwhelmed by apparent complexity as their organizations grow. No wonder the once confident entrepreneur-executive can no longer which "lever to pull" to get the result he or she desires.

Fortunately, the number of things that any executive or manager needs to know in order to manage effectively is a very small number. I'll tell you just how small in the next post.

[To be continued...]

Contact me!

...

Government-Induced Economic Discontinuity

There is considerable upheaval in the U.S. economy right now, and your business could be in jeopardy if you do not have a framework and method by which to come to grips with the discontinuity that is likely to be introduced by federal government actions over the next several months.

Consider these facts:

1. Over the last 50 years, the federal government has controlled about 20% (+/- 2%) of our gross domestic product (GDP). They have done so through some direct controls as well as through the letting of government contracts for defense and so forth. However, with Congress pushing for a plethora of new programs, the drive toward a nationalized health care system, and the results of various so-called "economic recovery" actions being the virtual "nationalization" of some segments of some industries, we may see the federal government directly or indirectly involved in up to 50% of GDP in the near future.
   
   
2. Since about 1948, the federal deficit has hovered around 2% of GDP. Now, however, with so-called "recovery" bills pending and acts that have already been passed that run into the trillions of dollars, we could easily see the federal deficit leap to 15%, 18% or even 20% of GDP.
   
   
3. For nearly 30 years the Federal Reserve has grown the money supply at about 4% a year. That has changed dramatically! The Federal Reserve has doubled the money supply between October 2008 and January 2009 alone.

In essence, the U.S. may rapidly become "Europe" if politicians in Washington have their way -- and it is likely that this is largely unstoppable at this time. If we use for comparison Germany and France as "typical" Euro-zone nations, we find that in these countries the national government controls 40 to 60% of GDP and that these nations are dominated by massive social programs.

What are the results for business economics?

• Slower growth - the economies in these nations grows at a rate equal to about one-half or two-thirds that of the U.S. economy

• Higher inflation -Euro-zone inflation is about 10% higher than that of the U.S. over the last 20 or so years

What does all this mean for you and your business?

This government-induced economic discontinuity means that you and your business will find that "the rules have changed." You will discover that management tactics that may have worked before may no longer have the same positive effect.

In revolutionary times like these, my very best advice is for you to be sure that you and your management team have a sound framework of understanding by which to analyze and interpret the new reality in which you find your enterprise. I strongly recommend the application of the highly rational and easily understood "Thinking Process" tools as developed by Eliyahu Goldratt.

Contact me!

(c)2009, 2010