TOC for Companies (and for Life)

TOC (Theory of Constraints) helps us to answers the question of What to Change?

The theory of constraints (TOC) is a management paradigm that views any manageable system as being limited by a very small number of constraints.

There is always at least one constraint. TOC focuses on identifying the constraints and builds the rest of the organization around them.

TOC adopts the common idiom: "a chain is no stronger than its weakest link"

According to the theory, the performance of any company is dependent on its leverage points – The Constraints.

The constraints dictate the performance of the company.

If we identify the constraints we can judge their impact on the system as a whole. This gives us the ability to understand which of them is more important, in terms of its priority to be fixed. We call this the Focus Mechanism.

In order to be able to measure the impact of implementing the Focus Mechanism, we need a way to measure POOGI – a Process Of Ongoing Improvements.

POOGI can be measured in a number of ways and helps us to identify the root cause of our main problem (like in the Pareto Principle) so we can handle it, in a manner that produces the greatest positive impact. In this way, we maximize improvement and progress to a holistic future.

TOC - Provides us a simple and straight forward Focus and Priority mechanism that directs us to where attention is needed, when it is needed. 

TOC 5 focusing steps

1. Identify the system constraint - usually the weakest link in the chain that generates the greatest value.
2. Decide how to Exploit the constraint - analyze if that link has been exploited as best as possible, before investing any further capital, taking into account the environment it operates in.
3. Subordinate everything else to the above decisions - make the rest of the links work for the link that you identified as the constraint, encouraging global optima instead of local optima. This automatically will reveal hidden capacity that is free of charge!
4. Elevate the system constraint - after doing all of the above, you can start thinking about investing capital to increase your performance. Spending money and purchasing resources are not always the right first action to take.
5. Do not allow inertia to become the system constraint - inertia is the biggest enemy of a system. Always challenge others, including yourself, as the world is a super fast moving environment that keeps changing and improving. Today's decision might be tomorrow's obstacle.

When a constraint is removed (you broke that link), return to step 1 as there will be always a constraint hidden somewhere.

If you understand how the above can improve the company you work for, think how much improvement you can bring to your personal life applying the same...