The Theory of Constraints Maturity Model (2004)

TOC Update

The Theory of Constraints Maturity Model

By Rick Denison

Originally Published in Purple Curve Elevate Your results Volume 1 - Issue 4 January 2013

Elbert Einstein once said that you cannot solve a problem with the level of thinking used to create the problem.

This is a pretty interesting statement. Is this why we often find new solutions coming from outside the problem area? Use of the same level of thinking used to create a problem is what I find when people such as those who have a “cost world” mentality try to understand something that isn’t based upon that thinking.

Of course, that does make it more difficult to discover the differences in the Theory of Constraints, but not impossible, if you are willing to work for the understanding.

Having been into the TOC way of thinking since my late 20’s, I have had a lot of time to think about how people come to learn about TOC. I often quiz them on why did TOC appeal to them? How did you first hear about it? Now in my late 40’s (Now early 60's) and looking at the scientific approach to management that TOC provides, I began to classify the tools of TOC when I discovered that not all people come to TOC the same way. Not all people have the same experiences, and I think the most frustrating of my findings is how people bend the TOC Body of Knowledge to fit their own paradigm of understanding.

If you read the early TOC journals, Eli Goldratt talks about the stages during which a science, such as physics, become a hard science. Since TOC is patterned after a physicist’s view of people in organizations, it is good to see where our knowledge stacks up compared to the Body of Knowledge available.

Much of the interpretation of TOC is through the view of the cost world, and as such, it is confusing and misunderstood by a large number of people. Any attempt to fit TOC into this view will lead to further frustration for all concerned. When I read articles and posts on LinkedIn and the CMSIG CMSIG is no longer supported by the ASCM), I look at the questions and comments and can quickly discern the author’s level of understanding of TOC. I haven’t yet seen a definition of TOC as a total process, so I thought I would present this finding to the greater interested TOC Community, and see if it brings some clarity to the discussions concerning the TOC Body of Knowledge. For some, it will help them understand that there is no one definition of TOC, but instead, a layered approach and levels of understanding. I know many people will have many exceptions to what I write here, but since I see no one else stepping up to the podium, I figured this would be a good of place to lay out what my thoughts on the subject have been for some time. At least doing so will create a context within which to discuss the pros and cons, and we can also use the Thinking Process Tools to help seek the validity of the proposed outline using a Current Reality Tree as we were taught to do in the Thinking Process Jonah training.

Please note: TOC isn’t the only way to achieve results, and Toyota is a good example. However, duplicating Toyota’s success using a cost world approach is a very difficult road to take. For those who have the strictures of the western culture bias toward Allocation Accounting (Cost Accounting) well developed in their modern organization, achieving similar results will be harder by far than it was for the western-bias-free Toyota.

It is my belief that Toyota operates at Level 2 without the benefit of TOC. Of course, there are many more examples out there, however, most organizations can no longer squander their efforts, yet they still do. The results are measurable.

So with that, I would like to lay out how I see the TOC world as to where all the various tools and methods fit and where the expected characteristics and benefits for an organization using TOC “as the way” for decision making are found. It will also serve as a measurement for your own journey through TOC.

In the last several years, I have observed a person schooled in TOC represents someone who, in the early days of TOC Organizational Behavior, would have been termed a Directly Responsible Person (DRP). The learning process (using Effect-Cause-Effect) internalizes the learner’s ownership in the process of discovery, and in the implementation of the solutions. Depending upon when the person learned the process be it DBR, or CCPM, they may have found all the answers they were looking for in those solutions. They may have even built a consulting practice around this knowledge. However, this is because they were fond of “the answer” they had been looking for throughout their careers. When this happens, it is a very powerful inhibitor for gaining further knowledge in the Levels of Maturity in TOC. More than likely, those entrenched in this predicament will not even recognize that they have become limited. As far as they know, they can explain the world based on their understanding of the solution(s). Be cautious not to fall into this deception as you progress through your journey.

Since the TOC Body of Knowledge continues to grow, I have thus far only developed three levels. As we learn more as the process expands, I would expect that this model will also expand to fit the new knowledge and discoveries.

LEVEL 1: BASIC TOC

Tools: DBR, CCPM (Single Project), Conflict Resolution, Distribution, Replenishment

Characteristics:

1. Constraints are local.

2. Constraints are perceived to be internal to the organization (sometimes the organization perceives wandering bottlenecks when the problem is really an inadequate understanding of subordination).

3. The basic role of constraints in an organization (Archimedean, Capacity Constraining Resource {CCR} and Bottlenecks), however, does not understand Strategic Constraints.

4. Use of Tools is based upon a local problem/crisis

5. TOC message is found to be common sense, not common practice.

Results:

1. Typically does not change or cannot change the existing organizational measurements.

2. Local improvement (department/section).

3. Quick short term gain.

4. Ultimately stagnation. However, there can be rapid regression and it is made worse if the “protective capacity” was exposed and trimmed. If trimmed, the company will be worse off than before.

5. TOC Practitioners will leave due to frustration and become consultants, or leave TOC altogether.

LEVEL 2: INTERMEDIATE TOC

Tools: Simplified DBR, Multi-Project CCPM, Supply Chain (Integrated S-DBR, Replenishment and Distribution), TOC Marketing (Unrefuseable Offers/Mafia Offers) with any other tool.

Advanced Tools: Constraints Accounting, Thinking Process (CRT, CRD, FRT, PRT, TT) CCRT, TCCRT

Characteristics:

1. Applied to plant/division.

2. Strategically controls constraints (in this world there are no wandering bottlenecks).

3. Higher level goal is sustainable.

4. Continual competitive advantage within the markets the organization chooses to operate.

Results:

1. Continual competitive advantage in markets

2. Long term success (Financial, Market, Employment, Reputation)

3. Culture shift from “Cost World” to “Throughput World”.

LEVEL 3: ADVANCED TOC

Tools: Global Supply Chain with URO, Project Companies: CCMPM with integrated S-DBR in plants, Thinking Process used to plan corporate strategy.

Characteristics:

1. Altruistic goal.

2. Competition views organization as not competing fairly, but respects results achieved.

3. Jonah’s and the TOC Thinking Process provide the “strategic planning engine” of the company.

4. Advanced concepts in employee fulfillment and development create a very motivated workforce.

Results:

1. Strategic growth

2. Market dominance (but does not command more than 50% of a market).

3. Diversified, vertically integrated.

4. Great corporate citizens.

EXAMPLES OF LEVELS

? Wandering bottlenecks this is a Level 1 question.

? The blending of methods involves various levels. Blending TOC in a Lean or Six Sigma implementation is Level 1.

? Viable Vision was Level 2.

? A question about “unrefuseable offers” with S-DBR is a Level 2 question.

? I doubt that we’ll ever see Level 3 questions on this list, because it is difficult enough just addressing Level 1 questions, however, the essence of Level 3 is touched when it is asked whether or not there is more to a company goal than just to make money now and in the future.

Q&A: These are actual questions I received when I first proposed this idea on the CM-SIG APICS TOC list in 2004.

Q: Why do you label S-BDR as Level 2 and DBR as Level 1? S-BBR is simpler to implement than DBR, isn’t it?

A: Although S-DBR is relatively easier to implement, there is great value (institutional learning) in going through the 5 Focusing steps a couple times. It serves to teach the concepts to those who are not very familiar with DBR. I say this purely in light of learning the mechanics of Steps 2 through 5. Most people can identify physical constraints; however, it is not so easy to get more out of them, and even harder to subordinate everything else to the constraint. The elevating of constraints is much more familiar and that is why people always jump to it first. (As a note, I do sometimes use Lean Tools on this step and in some cases Six Sigma also works very well at this stage).

Someone implementing S-DBR should understand the “strategic” role of a constraint and subordination to a high degree. If one does not have the understanding of Steps 2 through 4, S-DBR could be very frustrating.

Q: What do you mean by going to an “altruistic goal”? Is not more money (today and tomorrow) any longer the first goal for profit organizations? Then, you can have all the altruism you want (and that’s good if altruism exists of course)

A: I believe that if you create a company that has a dominate market role it can keep, money then becomes a necessary condition and not the goal. The goal shifts to benefiting society. That is what I mean by an altruistic goal.

There are many examples out there: The Bill and Melinda Gates Foundation, Andrew Carnegie, Noble Prize, McKnight Foundation, etc. The goal of “making money now and in the future” is great to start companies down the right path and also to instill the measurement system that removes the devastating behavior we see in organizations today. It is akin to Maslow’s Hierarchy based on needs. If you take care of food, shelter, love, etc., then you can move up the hierarchy and address the next level of requirements until you have “self actualization.” In my view, altruistic goals are at the self actualization level of an organization.

It will take some time to see if this is true or not. I am just speculating through a thought experiment. The “necessary conditions” that Eli Goldratt talked about must be met as well. When making money is no longer a problem, what will the organization choose to do?

Q: We have organizations with the characteristics (market dominance, strategic growth...) you mention in Level 3 that were born “in the cost world.” Does this mean this is a much quicker way to go (in the TOC way to reach the 3 Level stair) to reach a similar position that these organizations have?

A: Yes that is what I believe.

Q: Finally Rick, you launched a bomb when you said that the mix that a lot of us have been preaching in order to get along with other ways like Six Sigma / Lean IS BAD because TOC can’t work well with those. I think personally that it works well “above” these others ways, meaning TOC should lead the way. Am I interpreting your thoughts correctly?

A: Here is a reiteration of what I wrote: Blending methods involves various Levels. Blending TOC in a Lean or Six Sigma implementation is Level 1 (RE: Cost World). I use many Lean Tools, and I have been trained as a Black Belt. Both Lean and Six Sigma methods have very powerful tools. I don’t say they are BAD, I just meant that there will be limited success from the blending depending upon how they are blended. If the driver is Lean or Six Sigma, then the success will be limited by the overall emphasis of the movement. Lean and Six Sigma are about reducing waste and variation.

These are negative drivers, and the results are measured by $ saved.

In the three companies at which I’ve witnessed Six Sigma as the driver (Ford, Motorola, and GE), all three have a cost benefit analysis as part of the Definition Phase. The emphasis is on saving money, which is interpreted as an improvement. This I call the Myth of Improvement. It is the decision criterion that separates TOC from these other methods. Like you, I use TOC to determine what to change, what to change to, and how to cause the change. If this is done filtered through a cost world view, then you will have slow improvement, and at worst, you’ll have steps backwards if it is applied in the wrong area.

For more info on this phenomenon, see John and Pamela Caspari’s book Management Dynamics and the Thinking Bridge comparison between Cost World Decisions and Throughput World Decisions. This is a great explanation of the real differences between TOC and other improvement methods. These Thinking Bridges are much more robust than the old TOC P&Q Example.

What ahs changed since 2004 when I first proposed this model?

Like all improvement methodologies the body of knowledge continues to expand. The passing of Eli Goldratt was quite the loss to TOC. There are still advancements by various practitioners and academics. The Theory of Constraints International Certification Organization still operates as a source of knowledge and training.

I however see no reason to update the model yet. We are still seeing most companies and practitioners in Basic TOC and Intermediate TOC. I'm sure there are some advanced organizations, but they generally keep this to themselves.

Rick Denison

Jonah