TOC has been criticized as being focused solely on the short-term. Exploiting a capacity constraint, while subordinating everything else to the exploitation scheme, is a typical effective and fast way to get more from the goal in the short-term.
In the long-term, provided the constraint is already exploited and subordinated to, we are guided to elevate of the constraint. The constraint would then move to the market. Further market expansion, using mafia-offers, will cause the emergence of a constraint back into the organization and so on. This is the classical description of how the five focusing steps work in the long-term.
When the constraint is in the market – how should management decide where to focus their efforts to expand the demand?
Theoretically, every expansion of the market, when no internal constraint is active, should be encouraged. But, arbitrary market efforts might eventually cause the emergence of the “wrong” capacity constraint, not the one that yields the best bottom-line.
The notion of the “strategic constraint” could guide us to expand the market so that the emerging constraint would be that particular resource. With this target in mind what market should be the focus of the marketing and sales efforts? Would you base your plan on products with high throughput per strategic-constraint-unit (T/sCU)? Actually if you do so you definitely going to end up with another constraint – not the strategic one which would not have enough load to even come close to be a constraint.
Is it good to have an internal strategic constraint?
Not to my mind! There is an effective rationale to maintain spare capacity to ensure flexibility in answering market opportunities, while offering excellent reliability to the existing clients. I’m aware that not always reliability is a decisive-competitive-edge, but when it is not then it is still a necessary condition. An internal constraint is always a threat to the reliability and fast response.
TOC never ignored the impact on the long-term, but let’s admit that the major focus, exploiting the constraint, was on the short term. There is a simple explanation why:
The further we look into the future the higher is the impact of uncertainty
And thus any approach to the long-term is subject to possible failure. However, we cannot and should not ignore what we can do NOW to reach the ever-flourishing state we like to have in the future.
The focus on the short-term considers resources, capabilities and opportunities we already have. It does not consider creating new value for potential clients. Coming up with a decisive-competitive-edge takes time to synchronize, integrate the various parts into an effective launch that expands the market demand. We also need to build the appropriate infra-structure, resources, capabilities and robust processes, to handle this growth.
Thus, we can easily identify two critical flows within any organization:
- The current value-flow – the short-term generation of T.
- The flow of initiatives to increase the value to potential clients, enter new markets and possibly limit the growth of OE and I relative to the growth of T. These initiatives together construct the actual Strategy of the organization.
The two flows use mostly different resources. The current-value-flow is all about getting orders, responding fast and ensuring good quality. The main efforts come from Sales and Operations.
The flow-of-initiatives is quite different. It includes Marketing, as the function that looks to new opportunities and R&D that come with new answers to the various markets. The key gross initiatives try to expand the market demand, or elevate the value perception of the market. Those key initiatives derive initiatives to prepare the appropriate infrastructure, like bringing in new capabilities, resources and new processes. Other initiatives build control mechanisms to warn from developing threats.
The resources for the flow-of-initiatives are mainly managers and high-level professionals. High enough budget is another needed resource.
Both flows are critical to the success of any organization. Of course, there are many other flows in an organization like the flow of incoming payments, the flow of information and the flow of human resources. The above two flows seem to me as the key ones for achieving the goal.
Both flows are constrained, but not by the same constraint!
It has been my own view since the mid-90s that the current-flow is almost always constrained by the market and sometimes also by lack of capacity of an internal resource. Forcing the clients to subordinate to the internal constraint of their supplier is a very damaging to the future of the organization.
However, the flow-of-initiatives is always constrained by an internal resource. There should be always more ideas that might improve the future performance than the capacity of either the budget or the human resources.
This is how I interpret Eli Goldratt saying that the ultimate constraint is management attention!
I doubt whether there are many cases where management attention truly limits the current-value-flow. Once the basic TOC methodology is implemented and the level of WIP is about right we should not expect to have operation managers loaded up to the level where damage is unavoidable.
But, when it comes to striving to ensure future growth and stability – management attention is the strategic constraint. The most obvious exploitation scheme is focusing on the most beneficial ideas. Planning carefully the Strategy based on TOC, preferably using the S&T format, is the best way to achieve not just the exploitation, but also the proper subordination processes, giving the right priorities to the rest of the organization.
This is, to my mind, what the long-term TOC should be.