Category Archives: Systems

Science of Business

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A couple of weeks ago, I got to spend some time with Dr. Lisa Lang about one of my favorite subjects, Theory of Constraints. Like many of my favorite subjects, Theory of Constraints is a mindset that leads you to take action (make the right move) that is counterintuitive. In other words, left to your own devices, you would intuitively do exactly the wrong thing.

Theory of Constraints helps us to do the opposite. Theory of Constraints has been around for quite a while, but was most coherently explained by Eli Goldratt in a series of books starting with The Goal. Lisa Lang (Dr. Lisa) spent three years as the Marketing Director for Global Consulting at the Goldratt Institute. During the past two decades she has used Theory of Constraints (TOC) to help companies solve their most serious problems. This week, I will share with you some of our conversations.

TF: When a management team realizes it has a system problem, what mistakes does it make trying to attack the situation?

Dr. Lisa: Most often, the team doesn’t realize it’s a system problem. Because we are taught to manage in silos, or departments, or teams, most often, we attack the problem inside the silo, and don’t impact the system much, if at all.

By silos, I mean, we tackle sales problems separate from operations problems separate from admin problems. This happens, in part, because we have been trained to work inside our own area, indeed, not to meddle in other areas.

If you look at your organizational chart, you know the silos that exist in your company. Silos, in and of themselves are not bad. It’s that we measure each silo thinking that if we maximize each silo then we will maximize the system or the company as a whole and that’s just not what happens.
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Dr. Lisa Lang has many resources on her website www.scienceofbusiness.com. She has made this offer to our readers. If you would like to receive her three hour audio and workbook (usually $199) for $99, please drop her an email at drlisa@scienceofbusiness.com.

We will continue our conversation tomorrow.

PAR

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Corina was puzzled. Her simple Cap Ex budget exercise that took her a week to prepare, now knowing it was a 15 month Time Span task, had caused her to think. That’s the point. Defining the Time Span of the task communicates the “real” complexity of the task. This was not a simple exercise. The Cap Ex budget is a complicated task and will require some deep thought, some research, some data gathering.

“Where do I start?” she asked.

“Do you remember my golf analogy?” I replied.

“You mean PAR?”

I nodded.

“P stands for Purpose, A stands for Action, R stands for Results. First I have to define the Purpose?”

I nodded again. “We cannot go any further until we define the purpose. What is the purpose of the organization?”

“The organization?” she leaned back. “But I just run the plant floor?”

“But if you just think about the plant floor, you will make wrong decisions. What is the purpose of the organization?” -TF

Shrink Wraps in 20 Seconds

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“Yes, I have been looking at this new shrink wrap machine for next year. It picks up a pallet, automatically spins it and shrink wraps it, all in about 20 seconds. It’s pretty cool. It’s on my list of things to buy for next year,” Corina proudly stated.

“Great! But is that where we need to spend the money?” I asked.

“Well, I usually always get to spend what I spent last year. In fact, if I don’t spend it, I will lose my budget the following year and will have to do a song and dance to spend anything.”

“But is that where we need to spend the money?” I repeated.

Corina looked down at her feet, then back up. “I really don’t know. Every year, I go out to the equipment show in Las Vegas and look around. I have a pretty good eye for deals on equipment and I have to justify the trip.”

“But is that where we need to spend the money? Where, in your system, should we focus our attention? Remember, as a manager, your role is to create, monitor and adjust the systems in your area. I really don’t care about neat robotic equipment. I care more about impact on the system.” -TF