Theory of Constraints – A Scam?
Rudolf Burkhard
Focus is 2X Profit & ROI by: Apply the Theory of Constraints with me. Use 6-Sigma & Lean! Leverage capability. Gain capacity, cut lead time, get 100% reliability & control costs. Get more customers to buy more. DE/EN/FR
Steven D. Levitt and Stephen J Dubner wrote “Freakonomics” and “Think Like a Freak”. There is lots of interesting stuff in there. Reading their books, you can watch them using “cause and effect” logic. They discuss a topic they call “teaching the garden to weed itself”. My question is: Are Theory of Constraints (TOC) experts teaching their garden to weed itself?
Their first example was King Solomon and the story of the 2 women claiming one baby. Suggesting he would divide the baby into two caused the weed to reveal herself.
They go on to describe how the Nigerian[1]?scammers get their garden to weed itself. The scammers want the gullible ones and eliminate the rest quickly. Their initial email is full of unbelievable promise(s) that only gullible people will go for. The rest of us simple trash the email. In this way, the scammers take a lot of work away. They can focus on the gullible lucrative targets.
Is this what TOC experts and TOC consultants are doing? They all claim huge improvements to lead time, reliability, capacity, and the bottom line. Is this weeding out the gullible or those that are not? Many of us use the results from a study by Victoria Mabin and Steven Balderstone[2]?(both from the University of Wellington in New Zealand). The summary of the results they reported are:
·??????Lead Times: Mean reduction 70%
·??????Cycle Times: Mean reduction 65%
·??????Due Date Performance: Mean Improvement 44%
·??????Inventory levels: Mean Reduction 49%
·??????Lead Time and Inventory Reduction Correlation: .56
·??????Revenue/Throughput: Mean Increase 63% (exclusive of outliers)
·??????Combined Financial Variable: Mean Increase 76% (30 observations)
I tell stories of achieving such improvements in just a few short weeks … less than 16.
Do such results cause managers to weed themselves out? Many managers’ experiences tell them such improvements are impossible or are achieved by a fluke. They certainly believe they cannot be achieved quickly.
Most managers don’t have the time to check the claims. They are so beyond their experience that the promises TOC experts make do not get checked. The combination of lack of time and what looks like preposterous, inconceivable, implausible, and unimaginable claims weeds out many potential clients.
Is this the reason for the question, “If TOC is so good, why aren’t more companies using it?”
The markets weed out many potential customers that need TOC to improve their bottom line (a lot).
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What can the TOC World do about it?
With the Viable Vision program, TOC offered to transform companies. The top line number would become the bottom line (or near enough) within 4 years. Was this plagued with the same problem?
How can TOC experts and consultants prevent the undesirable self-weeding they seem to experience today?
If TOC cuts its promises in half, it becomes the same as many other approaches.
What if I offer to work for ‘free’ until results are achieved, and the client pays me an agreed percentage of that? Will that work? The customer must have “skin in the game”. This will be my travel and living expenses, and a penalty if he and his team do not implement an agreed action expeditiously.
The company is out of pocket for a small amount for a short period. Initial benefits to cash flow and the bottom line occur soon after the project’s start. (But I need more than travel and living expenses!)
Depending on the size of the company can I ask for between 5 and 10% of the first year’s impact on cash flow and profit? The ongoing benefits in the following years are 100% the companies.
Could such an offer prevent many more companies from self-weeding?
The first obstacle will be how can we finance ourselves until we get the benefits and payment. Can we get an investor to finance us? An investor is in the same World as our targeted customers. Most will certainly also self-weed. But we do not need many investors. We need one. That they self-weed is not a problem.
Our ambitious objective is to get an investor and our first customers. Can we do it?
An alternative is to get the investor to buy a company we identify and upgrade it with us so he can resell – it at a much higher price.
Are any investors out there?
[1]?Nigerians are not the only ones. They are the ones that have caught the moniker.
[2]?The World of the Theory of Constraints. A review of the international literature.
I ? ??Wood, ??Biomass , & ?? Energy. Reducing & ?? Recycling & Transforming Wastes are my thing. ?? Ideas Save ?? Money!
2 年The gains are there; they just have refused to look in a way that takes them towards the goal. What you are doing, utilizing logic and ToC is simply finding the thinking processes that allows them to achieve this, now as well as into the future. You are essentially working yourself out of a job, so that you can help others. This is the most noble goal IMHO.
GM/Strategic Change Consulting Practice Lead at The Advantage Group, Inc.
2 年Michael Retzlaff
CEO Manufacturing Genba Coach, Advisor in Lean Strategy Implementation | FCCA, MBA OU
2 年Wow, expert I see, and promoting TOC, er no expert here.
Productivity specialist, problem solver and business process designer.
2 年Hooray for self-weeding! Average contact time closing a prospect who proceeds to implement was about 6 hours (about 4 hours median, so there's a skew there). Prospects with over 10 hours contact time rarely buy $10k+ in services, so we let them self-weed. We never use the grand claims of results, however. That drives rational hard-working people away, leaving too many who are gullible and/or lazy, and the more gullible and the more lazy they are, the more difficult the implementation will be. I prefer they self-weed leaving the motivated, smart, action-oriented, hard workers. They make for fun fast clients. Percentages and success-only contracts are problematic. Don't like them. I offer three guarantees, and they only apply once payment is made in full. Between 60% and 80% of projects each year were paid for in full in advance, in order to get the guarantees. My experience at TOC World has been consistent: TOC Consultants who have problems selling, and those who DO NOT, seem to live in different worlds. "Any Investors Out There?" yup, purchased four business in the past 18 months, and yes I'm using experts to upgrade them for me.
Your questions… (1) Do we “scare away” many potential clients? And (2) achieve “the opposite” of what we want? Who cares what clients a marketing campaign DOES NOT attract? What matters is, does a campaign attract enough clients of the type we’re targeting? And the answer depends on specific campaigns, and specific targets, yes? Some ToC Experts are clearly doing very well, so they apparently have campaigns that work for them, and get them the clients they want. Their success shows it is quite possible to succeed with ToC. What are they doing right? What does the “ToC World” actually want? Eli Goldratt wanted ToC to become “the Main Way”… Is that really what most ToC Experts want today? Would they truly be better off, if that wish came true? Aren’t there advantages to being a successful expert, in a narrow niche, with few competitors?