Use the Theory of Constraints to Create a Viable Vision

Any complex system is based on inherent simplicity

Strategic Vision is Viable

Viable vision is the opportunity of a company to have, within four years, annual net profit equal to its current total sales. Any complex system is based on intrinsic simplicity. Capitalizing on the inherent simplicity empowers incredible improvements within a short time. The more data needed to designate fully a system, the more complex it is. Enumerating reductions in total systems costs that are often heart to the customer company is also difficult. Most companies, even small ones, are complex and accordingly challenging to manage. The few elements commanding the performance of the system are the restrictions or advantage points —the Theory of Constraints.

When I scrutinize a company, I am rather fulfilled only when I clearly see how it is possible to bring the company to have, within four years, annual net profit equal to its current total sales. That is what I mean by a “viable vision.” In emergent markets such as China and India, clients want decent quality products that are simple to install, use, and maintain.

I am careful when sharing this anticipation with the top management; I expose the reasons why I believe this vision is viable. I share my analysis of what is obstructive performance. Using logic, I deduce the steps that will eradicate that block. Then I detail the steps to take to capitalize on that breakthrough. In this way, the reaction of top managers is, “This is common sense. Why aren’t we doing it?”

Capitalizing on Strategic Simplicity

Any complex system is based on inherent simplicity. Capitalizing on the inherent simplicity enables implausible improvements within a short time.

The more data needed to describe fully a system, the more complex it is. These infringements come at a significant cost to the organization, since too much time spent on day-to-day details can endanger future growth.

How complex is the system you manage? How many pages are needed to describe every process and the relationships with each client? Most companies, even small ones, are complex and thus tough to manage.

We manage a complex system by dissecting it into subsystems that are less complex. However, this can lead to miss-synchronization, harmful local optima, and the silo mentality. Since our systems are compound, we might think that all we can do is to improve synchronization and nurture collaboration between the subsystems. Public corporations are required to maximize their return to shareholders—not to customers. If this is the only option we contemplate, we will believe that achieving a major jump in profit within a short time is a rarity. We will think that creating net profit equal to current total sales in less than four years is unrealistic.

Leaders of successful innovation exertions are gifted visionaries. To see the potential of a company, we need to realize that the thing that makes our system difficult to manage is that what is done in one place has complications in other places; the cause-and-effect relationships turn our system into a maze. Strategically central issues and opportunities can occur at any time, and they cannot always wait for the next planning cycle or off-site to roll around. However, that fact also provides the key to the solution. This model had served them well. However, they began conjecturing about their organization in the future. They began to wonder if the model would work when the commodity that was being passed around was information, not metal.

Examine a system and ask, what is the minimum number of points we must impact to impact the whole system? If the answer is “10 points,” this is a challenging system to manage because it has too many degrees of freedom. However, if the answer is “one point,” this system is easy to manage.

Theory of Strategic Constraints - Strategic Wisdom

Now, the more interdependence between the components of the system, the fewer degrees of freedom the system has. However, the realities and the consequences of how they actually use their time are often quite different. Bearing in mind the complexity of your system, only a few elements govern the entire system. The more composite the system, the more profound is its essential simplicity.

To capitalize on the inherent simplicity, we must identify those few elements that govern the system. In addition, if we clarify the cause-and-effect relationships among all elements of the system, we can manage the system to achieve higher performance.

Companies turn out to be too focused on executing today’s business model and stop thinking about the fact that business models are perishable. Because companies’ decision-making systems are designed to push investments to initiatives that offer the most perceptible and immediate returns, companies shortchange investments in initiatives that are imperative to their long-term strategies.

Theory of Strategic Constraints

The few elements dictating the performance of the system are the constraints or advantage points-the Theory of Constraints (TOC).

In this school of management, we are qualified never to bring forward problems without a recommended solution. The marketing and strategy of companies is in it’s not luck. They have to be streetwise but not necessarily wise in other ways. They need to be fledgling and without much need for sleep. If you read these books, you will agree that the conclusions are horse sense, even though they fly in the face of common practice. Moreover, if you put it into practice, you experience remarkable improvements in a short time.

Is a viable vision possible for your company? Is it feasible to have, within four years, yearly net profit equal to its current yearly sales? The complications are discouraging. For example, such profitability is impossible without a huge increase in sales, and this is doable only if you have a remarkable new offer accepted by your markets. Can such an offer exist? Can you produce on such an offer? What investments will be needed? In addition, is your team capable of implementing such a change?

You do not have to coin your own phrase, but if you can find a simple, clear concept at the core of your policy, and if you can get others to appreciate it, then you are on your way to forming nuggets of you of strategic wisdom. A winning, stupendous concept will keep a team positively focused and sustain it during the inescapable disappointments and trying times.

Tagged
Posted in Management and Leadership

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>