It May Not Be What You Think...
Kevin Kohls
I help logical leaders improve profitability and create long term change. Ask me how :) Want to talk? Schedule a time at calendly.com/kevinkohls or go to linktr.ee/kevinkohls
Setting a company goal is one of the most important things that a leader must do for success. It provides the common purpose that almost all experts agree is vital to an organization's success. Poorly defined goals create indecision among your team, and setting a poor goal – like those focused solely on cost reduction – can lead to failure and bankruptcy.
You’ll get plenty of viewpoints from the consulting work on what it should be, but they often add more confusion than clarity, generating a plethora of KPIs that spread resources and dilute efforts. Want one that makes sense today? It just combines two elements:
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Make money by creating five-star products and services.
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It’s based on the Theory of Constraints but updated with a modern Amazon theme. Let’s examine the basics.
The five-star aspect is basic. If a product is rated highly on this scale, it probably means several things are true. ?
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From a Theory of Constraints (TOC) perspective, we know that the company or organization needs to make money. It’s more than just reducing costs. But it's not just about making money producing anything. Its five-star products. For TOC, we must ensure the necessary conditions are understood – safety comes first, legal obligations must be met, etc.
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Decision-making and priority-setting become easier based on this goal. For example:
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What becomes a low priority is also clear by asking three basic questions.
If not, it's probably not worth doing – at least not today.
This goal forms the basis of the Theory of Constraints Production System (TOCPS). Haven't heard of it? That's because it only exists in segments now. Don’t compare TOCPS to TPS, Lean, Six Sigma, etc., because it has been implemented on a fractional basis to solve isolated problems as an actual overall methodology – a symptom of how TOC was developed and used in the first place. Logical solutions aimed at constraints that, once removed, failed to spread into the thinking of the rest of the organization. Ironically, this is a constraint within the Theory of Constraints.
This forms an interesting journey for the next set of articles. What if we did not take a focused approach to TOC in production to solve a particular problem but instead created a Production System?
Freed of the actual restrictions of only a focused solution, what would the TOCPS look like?
Well, of course, we would first have to start with the goal. For our journey, let's go with:
Make money by creating five-star ?????products and services.
Investor. Advisor. Innovator.
10 个月Kevin Kohls your article implied to me that a focused approach is at odds with a systems approach. IMHO, focus isn’t about fixing an individual process and then moving on to something completely different. Focus is about identifying the biggest lever for positive change that improves the system regardless of the impact on the individual process. Focus should always come first.
Author: The Machine: A radical approach to the design of the sales function. Founder: Ballistix.
10 个月This is unnecessarily complex. As Eli said, the goal of a business is to make money (now and in the future). If you don't believe me, try raising capital for a business with some other goal!
Principal Advisor underground mining productivity at Rio Tinto
10 个月I agree on the importance of a defining a system ( organisational) goal not only in order to establish units of measure and then, that which constrains that system from achieving more.of that system goal However isnt it also critical in representing and distinguishing the view and rights of the system owner from other stakeholders? This doesn’t diminish as you have correctly stated, that other stakeholders needs must be defined , but also satisfied; either as pre or co- requisites to that owners goal. Ie. What MUST be done in order to achieve the system goal also implies that a standard needs to be established for each necessary condition. The significant departure that toc makes from other approaches to necessary conditions is that maximise is replaced with satisfy for each nc based on the system goal. If the system goal is vague or nebulous, it is no wonder that both the necessary conditions as well as the standard by which they are assessed as satisfied will be difficult to define. So when it comes to Product ratings on Amazon, is a 5 star rating the required standard because it compromises system goal attainment? . A test would be to prove that this is so using cause and effect logic with evidence .. ditto for other Nc’s ?
But Kevin, Amazon didn’t make money for YEARS. Instead, they GREW. Selling other peoples’ products… SCALE was the goal, and their market capitalization reflected their success at doing that. And when you get big enough… there are plenty of ways to make lots of money. Making money was not even a necessary condition for Amazon. Bezos is famous for saying, “your operating margin is my opportunity”. With their scale, they can offer similar products, at lower prices — because they can go for a long time making little or no profit in a market. And what they sell, they deliver in two days (with “free” shipping for Prime customers). If a firm with less scale, attempts to compete with Amazon — using their strategy — what will happen?
Dad. Change Agent. Facilitator. Strategist. Linkybrain PM @ Scottish Enterprise & Hon. Executive Fellow Uni@Aberdeen
10 个月This looks like an excellent and useful series... Love the idea of showing a blueprint for a TOCPS venture through design not correction...