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2013

A recent magazine article appearing in Fast Company magazine ("Lessons For 2013." Fast Company Dec. 2012: 88+. Print.) gathers up bits of advice from executives across many industries. I thought that much of the advice was too good not to pass it along to our readers.

supply chain metaphor.jpg

Rewrite the rules, don’t just create more exceptions to them. – Jeffrey Hollender, Cofounder, Seventh Generation

In working with our clients, one of the things we frequently observe is that, when some action intended to improve productivity or profits produces unintended consequences, they are likely to create exceptions or countermeasures to offset the unintended effects of the original action, rather than rethinking from the beginning.

 

For example, if a firm has a long-standing (but, perhaps, unwritten) rule about always buying at the lowest price “in order to maximize profit,” if quality or delivery problems arise in the supply chain, executives and managers are more likely to create more rules dealing with “quality” or “delivery” than they are to thoroughly rethink whether buying at the lowest price actually produces maximized profits.

 

This kind of reactive management adds to complexity and dysfunction. It stems from not having a firm grasp on how the firm’s “system”—the entire customer-to-cash stream—really operates or what constraints actually keep the system from producing more profit.

 


Rethink expertise: It’s very easy to think that you are the expert on your own product. But in many ways, that’s a myth. The true experts are your customers. – Jamie Wong, CEO, Vayable

Besides, when looking at products (or services) from inside—from the producer’s perspective—we are far too focused on “the product” or “the service” itself. However, our customers’ perceptions of what we produce or do for them is very frequently far broader than our narrow focus.

 

Customers tend to consider the entire experience related to the product or service: What was the experience in finding the product? Buying the product? Using the product? How did the product make life better? What were the expectations in buying the product and how well were those expectations fulfilled? What were the intangibles (e.g., pride, safety, reliability, etc.) associated with the purchase of the product? How did these intangibles augment ownership of the product?

 


Assemble a dedicated team with a shared vision. Commitment to the vision trumps funding, technology, gold-plated degrees, and press. It remains our primary qualification. Everything else can be taught. – Marci Harris, CEO, Popvox

By the way, in my view, this applies almost as much to assembling your supply chain. Taking the time and investing the effort find key players in your supply chain who share a vision of success with you can make all the difference. It makes them—and your supply chain—more resilient and more agile than any supply chain held together only by contracts and purchase orders.

 


 

Here’s to making more money in 2013 than you did in 2012! We’re in it with you.

 

Leave your comments here, or feel free to contact us.

RDCushing

Focus is everything

Posted by RDCushing Jan 28, 2013

A recent magazine article appearing in Fast Company magazine ("Lessons For 2013." Fast Company Dec. 2012: 88+. Print.) gathers up bits of advice from across many industries. Here’s one.

“You can survive any type of distraction if—and only if—you stay focused on the organization’s mission.” – Doug Ulman, Livestrong

supply chain metaphor.jpg


Focus is everything!


If a for-profit company is focused on anything other than making more money tomorrow than it is making today, whatever the company is focused upon is a distraction.


Yes! We need to have top quality products and services.


Yes! We need to have outstanding customer service.


Yes! We need to have happy and productive employees.


Yes! We need to have an agile, resilient, robust (add adjectives to your heart’s content) supply chain.


All of those may be true—and probably are true.


But, we need to spend our precious time, energy and money on the things that are keeping us from making more money tomorrow than we are making today.


If, after careful consideration, we determine that the thing that’s keeping us from making more money is poor quality products or services, then we should spend our money on improving products and services. We should continue to do so until quality is no longer the thing that is keeping us from making more money.


On the other hand, if our careful consideration tells us that the lack of agility in our supply chain is what is keeping us from making more money, then we should spend our limited resources of time, energy and money on supply chain agility. And, again, continue to do so until supply chain agility is no longer the factor keeping us from making more money.


Stated in the negative: if, by way of example, the quality of our products or services is not the thing keeping us from making more money, but supply chain agility, or market segmentation, or some other matter is the constraint, then we should not spend our precious and limited resources (time, energy and money) on improving product or service quality.


I am compelled to reiterate: Focus is everything!


Every expenditure of time, energy or money on things that are not keeping us from making more money tomorrow than we are making today is a distraction.


That statement is true for any effort—even those described by executives and management teams as “improvement projects.”


That statement is true even if you are presently thinking about spending money on IT projects for your supply chain or updating your ERP system!


New technologies are not like engine additives.


Contrary to what some believe, “pouring” new technologies into a company does not necessarily assure that the company will “start easier, run faster, produce less friction or get higher mileage.”


In my view, “ERP” has had two entirely different definitions: Of course, when it was first introduced, ERP stood for “Enterprise Resource Planning,” but it wasn’t long before small-to-mid-sized business enterprises seeking to implement ERP solutions came to recognize that ERP really meant “Everything Replacement Projects.” Implementations were generally massive and disruptive and such projects, in some cases, spanned several years and could cost upwards of a million dollars.


For most firms, that era came to a close shortly after the beginning of the 21st century. (Or, at least—in my opinion, it should have.)


The new era of ERP


For most firms today, ERP should no longer be about “Everything Replacement Projects.” The new era of ERP should be about focus and “Extended Readiness for Profit”. The focusing steps in the new ERP are these and come from Eliyahu Goldratt’s Theory of Constraints:


  1. Identify the constraint: What’s keeping your firm from making more money tomorrow than you are making today?
  2. Exploit the constraint
  3. Subordinate every policy and decision to the constraint
  4. Elevate the constraint
  5. Go back to step 1 in order to keep inertia from setting in


This is the FOCUS of a process of ongoing improvement (POOGI)—your constraint—the one thing (or very small number of things) that is (or, are) keeping you from making more money.


Remember! You can survive any distraction if you keep your FOCUS on your organization’s goal.




Leave your comments here, or contact us!

RDCushing

Smart Lessons for 2013

Posted by RDCushing Jan 24, 2013


Success or Failure.jpg

A recent magazine article appearing in Fast Company magazine ("Lessons For 2013." Fast Company Dec. 2012: 88+. Print.) gathers up bits of advice from executives across many industries. I thought that much of the advice was too good not to pass it along to our readers.

Don’t be afraid to take risks that other people are going to call you out on. It’s better to elicit passion than a lukewarm response. – Randi Zuckerberg, CEO, Zuckerberg Media: Executive Producer, Start-Ups: Silicon Valley on Bravo

I’m a big believer in this. By the way, even the scriptures tell us as much (see Revelation 3:15, 16)


As we grow, our potential clients should share the same value system. If they aren’t willing to compromise and learn our company culture, then we shouldn’t do the project. – Marcus Samuellson, Chef and Founder, The Marcus Samuellson Group

By the way, I don’t entirely agree with the term “compromise” in this statement. Compromise brings out the best of the worst, the worst of the best, and almost nothing else. Better, I think, would be a meeting of the minds around what produces the best result for the entire business ecosystem—a company and its trading partners (both customers and vendors) collaborating for improved profitability.


Entrepreneurship is a new corporate function. If companies are looking to have teams build new disruptive innovations, each team should have a leader whose business card says “entrepreneur.” – Eric Ries, Author, The Lean Startup


Listen to your customer both in person and online, and make changes to fine-tune the experience. That process is ever evolving. – Kevin Desanctis, CEO, Revel Entertainment

I would extend this: Businesses don’t compete against each other much any more. The real competitors are supply chain versus supply chain. Success today means listening to and collaborating with your firm’s suppliers as much as you must listen to your customers. Supply chain resilience and agility are increasingly demanding robust and proactive supply chain collaboration and engagement.


Ideas go nowhere if they stay in your head. Everything has to be communicated to the people who execute on ideas. – Dennis Crowley, CEO, Foursquare

Executives sometime bottle-up ideas in their own heads for a variety of reasons: perhaps they don’t yet believe that some ideas are fully-formed enough to bring them out into the open. This can be a mistake.

 

But, it is probably more damaging to success that executives and managers generally fail to actively seek and invite ideas from everybody in the company—and from customer and suppliers, as well. And, I don’t mean having as “suggestion box” and forms sitting around the office somewhere. I mean employing tools that aggressively seek to unlock “tribal knowledge” in order to bring forth ideas about what works and how things work (or fail to work) throughout the firm—whether it is the products, the services, relationships, business processes, policies, procedures, or whatever. If these are not brought forward, no one can execute on a process of ongoing improvement.


There is more competition than ever before. We have to stay one step ahead by doing the opposite of what everyone else is doing. – B.J. Williams, CEO, Young Hollywood


The Internet of things is emerging. Everyday objects like streetlights, household appliances, and medical devices are becoming connected. In 2020, everything that can benefit from an Internet connection will have one. – Warren East, CEO, ARM, Microchip design company

Watch this video. In Indianapolis, Indiana, parking meters are “connected.” You can even use an application on your smartphone to find an empty parking space! You can pay with your credit or debit card, and you can add money to your meter to extend your parking time from your smartphone when the alarm (indicating expiring time) goes off.

And… the pitch!

 

There’s a crack of the bat and, instantly, the outfielder darts to the place where the ball will fall and raises his glove to precisely the right height and at the right angle to snag the fast-moving ball out of the air.

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The scene just described is so commonplace—we have known of itsince our youth—that we don’t even give it a second thought. It’s just “natural,” we say to ourselves, and shrug our shoulders.

 

But, consider what the human mind has done in the moments between the crack of the bat and the catching of the fly ball.

 

With only a couple of small clues, which occur almost simultaneously—the sound emitted from the impact of the ball with the bat, and the motion of the ball as it accelerates away from the swinging bat—the human mind calculates the trajectory of the ball and its estimated landing zone. Then sets the outfielder in motion to intercept the ball before it reaches the ground.

 

This the outfielder does this with confidence and precision without knowing any of the following “facts”—

  1. The velocity of the ball as it leaves the bat
  2. The precise weight of the ball
  3. The measurements of the atmospheric elements that will affect the ball’s trajectory, such as barometric pressure, wind speed or direction, or relative humidity
  4. The mathematical formula for calculating the trajectory of an missile

 

How does the ball player accomplish this amazing feat?

 

He does it by employing a combination of intuition and experience.


Intuition is that innate (unlearned) sense that the human mind has for absorbing—instantaneously or over time—clues from our environment and employing those clues for problem-solving and to guide actions.


Experience is the cumulative experience gained by the fielder’s own trial and error, as well as that which has been obtained by coming in contact with the experience of others.

 

TRIBAL KNOWLEDGE and INTUITION

 

Ask any all-pro, destined-for-the-Baseball-Hall-of-Fame major league outfielder to write down precisely how he does what he does and he would be unable to do so. More than likely, he would be inclined to tell anyone who asked him to do so, “You’re crazy! You can’t tell someone how to do what I do. They either can or they can’t.”

That is why we refer to this combination of intuition and experience as “tribal knowledge.”

 

Tribal knowledge is difficult to codify—to write-down, to document—in a meaningful way.

 

Nevertheless, it is very, very real and it is valuable to the success of every human endeavor—including business enterprises.

 

THINK ABOUT IT

 

The average human mind is far more capable to absorbing “clues” from our environment and computing potential outcomes based on those clues than we are generally willing to admit.

By failing to unlock the “tribal knowledge” in your business enterprise and beyond—into the extended supply chain—your firm is failing to access the best, most powerful computer of all: the human mind!

 

Examples:

  • Your people know far more about your customers (individually, in some cases; but certainly in the aggregate and by segment) and your marketplace than your ERPsystem with all its “big data” will ever know. Chances are they know…
    • The subtleties about your customers—what excites them and what turns them off
    • How much various customers rely upon your firm for certain products
    • The scuttlebutt in your industry about your firm’s performance, and even why certain big players in the market do business with you (or why they do not do business with you)
  • Your people know more about your vendors, too, than the “big data” in your ERP database—in fact, they know more about your entire supply chain from end-to-end than either “big data” or “fast data” will ever be able to provide to management
  • Your people know more about how things actually work in your organization, too
    • Not what management believes about how things work
    • Not what the policy and procedures manual says about how things work
    • Not what the workers tell management about how things are working
  • Your people know more about your products and services than “big data”, as well

 

All of this “tribal knowledge” may be unlocked and leveraged for a process of ongoing improvement (POOGI)—like a pennant-winning baseball team—using the right tools.

Don’t fail to leverage the most powerful computing system you have available to you for helping make your business more successful. After all, you're already paying for access to it.

 

Unlock “tribal knowledge” starting tomorrow!

 


 

Contact us.

Recently I read an editorial by Robert Safian, editor of Fast Company magazine, entitled “What I’ve Learned.” A key statement caught my eye:

“In an age of flux, it’s worth reminding ourselves that every day should be an education.”


Both individuals and business enterprises that stop learning are nearing the end of their useful lives. This is particularly true of business enterprises as participating members of their supply chain communities.


FAST DATA BEATS BIG DATA

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As I’ve said before, in today’s fast-changing world of economics and business, fast data is even more important than big data.


Fast data is the flow of near real-time data across the supply chain in a way that keeps sources (like raw materials providers and manufacturers) aware of demand and changes in demand by end-users of products almost instantaneously. When a product moves off a shelf at the retailer, the entire supply chain is “educated” regarding this demand in near real-time.


In the article referenced above, Safian also said that “[t]here are no rules” in the face of constant change.


Statistical forecasting models are nothing more than “rules” and—no matter how sophisticated—they simply cannot keep pace with change in today’s world. Reliance upon forecasts rather than fast data will inevitably lead to out-of-stocks and overstocks (simultaneously), thus needlessly tying up resources in the production and transportation of the wrong goods at the wrong time while, at the same time, preventing the production of the right goods at the right time.


The bottom-line is that all this leads to a smaller bottom-line for your firm and, probably, for all the participants in your supply chain.


FAST DATA AND AGILITY GO HAND-IN-HAND


Fast data is not enough all by itself. Fast data must go hand-in-hand with supply chain agility if making the change is going to contribute to significantly better profits for you and your trading partners.


It makes little sense to have fast data informing your entire supply chain of changes in consumer demand while half the supply chain participants are still determining production and transfer batch sizes by “rules” that have been in place for 30 or 40 years. The world was a different place when your daddy made those rules about production batch sizing and “efficiencies.”


THE HIGH COST OF NO DATA


And, what about the dangerously high cost to your business that comes from executives and managers reliance upon no data?


“What do you mean?” I hear you say.


Here is precisely what I mean:


Much of the data that is most critical to the profitability of your business enterprise is unknown and unknowable. For example, you cannot know with any sense of precision, the size of your market, or how much money you lose due to lost sales, or how many customers you lose as a result of one (or too many) out-of-stock occurrences, or how many potential customers never will buy from you at all because of a poor order fulfillment reputation.


All of these numbers are unknowable, in the final analysis.


But that does not mean that the numbers are equal to zero.


Yet, a great many executives and managers ignore the impact of such numbers on their business enterprises simply because the KPI (key performance indicator) values cannot be calculated. They fail to take actions to improve in areas where the numbers are unavailable to them.


They treat no data as though the KPI value—if it could be calculated—is zero.


In essence, some of the most critical options available for moving a business forward toward success are ignored by too many executives and managers simply because they have no data upon which to hang their decisions.


As a result, they continue to cling to old and outdated “rules” of operation at a time when constant change is relentlessly calling for agility and innovation.


This they do to their own peril.


END THE STIFLING AFFECTS OF BUREAUCRACY


Fast data and agility will never evolve in an organization mired in bureaucracy and entrenched in “rules” for which the die was cast ten, 20, 30 or more years in the firm’s past. There are ways to break the mold, but it means opening up to new ideas and new ways of looking at what may seem to be old problems.


Remember! “Every day should be an education.”




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NOTE: In order to understand this series completely, we strongly advise that you go back to start reading with Part 1. Thank you.

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Previously in this series we have covered:

  1. The critical problem with the use of “brainstorming” as a business improvement tool is the context in which it is generally applied
  2. Most applications of “brainstorming” are in seeking local optima or solutions to a single issue within the business environment
  3. A truly reliable and consistently effective process of ongoing improvement (POOGI) requires that those involved consider the entire “system”—the entire business or enterprise—not just individual departments or functions
  4. In order to understand whether a “system” is functioning properly, we must understand its purpose and, in for-profit organizations, that purpose should be “to make more money tomorrow than we are making today”

 

THE SYSTEM’S GOAL AND GLOBAL PERFORMANCE METRIC

 

If, as we have suggested, the goal or purpose of a for-profit enterprise is to make money, and a POOGI would suggest that the goal is “to make more money tomorrow than we are making today,” then we have a very simply global metric by which to measure the performance of the “system”—the enterprise. That global metric is “profit.”

 

In the terms we stated in earlier portions of this series, profit can be calculated as follows:

 

P = T – OE
where P = Profit, T = Throughput and OE = Operating Expenses

 

By now, we should understand what our “system” is (our enterprise, taken as a whole) and what the goal or purpose of our system is. We also know how to measure the system’s effectiveness in achieving our goal.

 

AGREEING ON OUR SYSTEM’S CURRENT REALITY

 

Before we can build a better roadmap to success for our system, we really need to understand where we are. We need to comprehend our present situation.

 

At this point, the numbers are far less important than understanding how our system really operates and to get a clear grasp of just how it operates, we need to begin unlocking the “tribal knowledge” in our organization. We need to find out what our people can tell us about cause-and-effect relationships as goods and services flow through our supply chain (our extended system) and our system—our organization—on the way to producing Throughput.

 

But we need a tool—a method—by which to document these cause-and-effect relationships so that we can read them, reread them, discuss them and agree upon them.

 

Eliyahu Goldratt’s Thinking Processes provide just such a method, and it’s simple to understand.

 

TP Example - Simple.jpg

 

The example in the figure above is pretty intuitive to read. The arrows between the entities are read as “if-then” statements. The ellipse that encircles two or more arrows is read as an “and” join. So, we can read the example (adapted from Thinking for a Change by Lisa J. Scheinkopf) as follows: “If I have the key and I turn the key with sufficient force and it is 20-degrees below zero where my car is parked and my car’s battery does not hold sufficient charge, then the starter does not turn the engine over.” The next segment, reading from bottom to top, reads, “If the starter does not turn the engine over, then my car will not start.”

 

By the way, where did we get this information about the cause-and-effect relationships in this “system”? We didn’t need to read technical manuals or consult specialists. We were able to gain all this information from “tribal knowledge.” Our friends and family—with experience in this realm—were able to tell us all we needed to know.

 

Here we have a Current Reality Tree (CRT) for an automobile ignition system where the goal or purpose of the system is to start the car. It’s failure to perform to the goal is stated at the top of the CRT as a NEGATIVE. We call this negative result an Un-Desirable Effect (or UDE, for short).

 

At the base of the CRT we have four “roots”—those elements with no preceding cause.

 

This very simple example shows us the focusing power of the CRT approach.

 

A POTENTIALLY RATIONAL APPLICATION OF BRAINSTORMING

 

Now that we have identified the potential “root” causes of our system’s failure to achieve its goal—starting the car—we could use brainstorming to attack the root causes.

  • If I don’t have the key (or the correct key), where might I go to get it or find it (if it has been lost)?
  • If I am not turning the key with sufficient force to engage the starter, what must I do to apply more force?
  • If it is 20-degrees below zero where the car is parked, is there any economically sensible action that can be taken to change that circumstance?
  • If the car’s battery is failing to hold sufficient charge (at this moment), what economically sensible options are available to me to address that root cause?

 

Now, with this tool in place, we are very focused. While brainstorming might aid us in addressing the “root causes,” the entire CRT keeps us focused on the goal (at the top of the tree) and our need to turn that UDE into a DE (Desired Effect)—starting the car. We aren’t seeking to optimize the “key finding process” or the “parking location process.” We are interested in optimizing the system in reaching the goal—starting the car on demand.

 

This is just a very, very simple example. Other Thinking Process tools can help us in complex situations. These include:

  • Future Reality Tree – a logical tree depicting how we want our system to function after we’ve understood our current reality
  • Transition Tree – a logical tree depicting the “injections” we will make all along the tree (from bottom to top) to help our system turn UDEs into DEs in order to reach our goal
  • Others – Prerequisite Tree, Negative Branches, a Conflict Cloud to aid in resolving troublesome conflicts, and more

 

We hope this discussion has been helpful. Get in touch with us if you would like to see more real-life examples of CRTs in order to understand their impact and application more fully.

 


 

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NOTE: If you want to reap the most from this series, we strong recommend that you go back to start with Part 1.

http://www.brainwads.net/drewhawkins/wp-content/uploads/2011/07/brainstorming.jpg


In Part 1 of this series, we said that the biggest problem with “brainstorming” as it is frequently practiced is the context in which it is applied. Next, we introduced the concept of “system thinking”—stepping away from the traditional “functional view,” where management sees only a collection of departments and operations, to look at your enterprise from 40,000 feet in order to grasp the “flow” that leads to the production of Throughput.


Here are two illustrations covering the “functional” (i.e., department or silo) view versus the process “flow” view of an enterprise:


HOW MANAGEMENT VIEWS THE ORGANIZATION

 

OrgChart_humorous_typical.jpg

 

HOW THE ENTERPRISE ACTUALLY WORKS [Note: The same applies to supply chains, by the way. They don't necessarily work like their drawn.]

 

Organizational Working.jpg

 

Traditional management methods and “brainstorming” attempts are generally aimed at local improvement—improvement in one function or silo—falsely believing that improvement in one part of the organization will improve the organization as a whole. This approach only haphazardly produces desired results—only when management (usually somewhat by accident) stumbles upon the system’s constraint.

 

THEORY OF CONSTRAINTS’ FIVE FOCUSING STEPS


The difference between traditional management’s attempts at improvement and implementations of “brainstorming” for solutions and the Thinking Processes that emerged from Eliyahu Goldratt’s Theory of Constraints is around the fundament concept of focus.


Goldratt contends that any process of ongoing improvement (POOGI) must consider the entire system (not individual portions or functions within the system), the system’s goal, and the reality that every system must have at least one constraint or bottleneck. (Of course, we know this last point must be true. Otherwise, in a system where the goal is profit, in the absence of at least one constraint, the system would become infinitely profitable.)


By taking these assumptions as its base, Goldratt’s Theory of Constraints next lays out what are called The Five Focusing Steps:

  1. Identify the system’s constraint(s)
  2. Decide how to exploit the system’s constraint(s)
  3. Subordinate everything else to the constraint(s) and decisions made in steps 1 and 2 above
  4. Elevate the system’s constraint(s)
  5. Return to step 1 and do not allow inertia to become the system’s constraint


IDENTIFYING THE SYSTEM’S CONSTRAINT(S)


Goldratt recognized that management, in many cases, was entirely unfamiliar with their own organization’s as “systems.” They only saw their enterprise as a group of connected departments, divisions and functions. They did not grasp the reality of interplay and dependencies between decisions and actions taken in one department and the affects of those decisions and actions as they played out in some other functions or departments. They had no grasp of the true cause-and-effect relationships at work across their enterprise.


Of course, these cause-and-effect relationships are not easily decipherable from ERP data. In fact, some cause-and-effect relationships don’t even leave an imprint on the ERP data (other than lower profits, for example).


What is needed to identify these hidden cause-and-effect relationships in the enterprise process flows is the ability to unlock “tribal knowledge.”

As Toyota’s management discovered long ago, “No one know more about the machine than the man who runs it.”


In other words, executives and managers have lots of knowledge about how things should work and, perhaps, about how the processes and procedures are designed to work. But only the people who work in and with those processes and procedure day-in and day-out know how they actually work. This information is not encoded in writing or electronically anywhere. This is all “tribal knowledge”—knowledge in the heads and hearts of the workers within the “system.” This knowledge must be unlocked and Goldratt’s Thinking Processes provide a way to both unlock and document this “tribal knowledge.”


We will talk about how that gets done in our next segment. Stay tuned!


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What’s wrong with “brainstorming”?'

 

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Well, nothing, in one sense.

 

The wonderfully egalitarian concept that “no idea is a bad idea” suggests that every idea is equally valuable.

 

Of course, when the rubber meets the road—as the discussion inevitably evolves during the “brainstorming session”—it becomes quite obvious that every idea was not equal, and that some ideas definitely had more bearing on the question, problem or issue at hand than did other ideas.

 

Nevertheless, in a business environment, probably the biggest problem with brainstorming isn’t even with its sort of haphazard approach to the discovery of business solutions. The biggest problem with brainstorming lies in the context in which it is far too frequently applied.

 

For-profit organizations are intended to be money-making machines.

 

TOC MoneyMakingMachine.jpg

 

The function of a for-profit organization’s money-making process may be defined by three critical factors:

  1. Throughput – all of the money the machine takes in, less all of the Truly Variable Costs (TVC) it took to produce the goods or services leading to the revenues
  2. Investment all of the money the business (the system) has tied up in the process of producing Throughput
  3. Operating Expenses – all of the money the business pays out (day after day, month after month) to support the production of Throughput

As Peter Drucker so wisely pointed out: All of the profit lies outside the organization and outside its direct control. Inside the organization, all you have is costs.

 

Clearly, if the for-profit organization’s goal is to make more money tomorrow than it is making today—which is what it should be—then two things must happen with certainty:

 

  1. Every other goal must be recognized as subsidiary to that singular overarching goal. You may want to offer the best customer service, or the highest quality products, or set another other lofty-sounding goal, but your continuing to offer the best customer service, the highest quality products or attaining any other objective is dependent upon your firm’s ability to make profits. That’s not greed at work. That’s simply a fact of life. (Note: In not-for-profit firms, the goals may be otherwise, but we are dealing with for-profit organizations presently.)

  2. Organizational leadership must recognize that is the system’s (the business’s) ability to increase Throughput that is key to ongoing improvement. One-time or short-term improvements may be achieved through cost-cutting, but the key to any process of ongoing improvement (POOGI) is in increasing the “flow” of goods and services that result in Throughput.

So, let’s turn back to brainstorming: I said that the biggest problem with the application of brainstorming is, generally, the context in which it is applied.

 

Executives and managers hold brainstorming sessions over “problems” they are struggling with in sales or marketing or customer service or human resources or purchasing or production or their supply chain. They do this without realizing that optimizing subsystems does not lead to the optimization of the whole system.

I recall back in the 1980s, when U.S. automobile manufacturers were struggling and failing to meet the challenges being posed to them by the onslaught of Japanese auto-makers like Toyota and Honda. A story appeared in a prominent business magazine about how one of the Big Three U.S. automakers had undertaken modernization of its accounts payable department and how the investment would save the firm several millions of dollars every year.

Of course, while they were doing this, the whole firm—their “system”—was still losing many billions of dollars every year. Optimizing—if, in fact, they actually did “optimize”—accounts payable should not have been their first priority unless that department happened to be the company’s bottleneck to increasing Throughput and profits. Clearly, it was not the bottleneck, as the following year’s losses where not significantly better than the preceding year’s billions.


Brainstorming, as a standalone tool, offers no way to help management see their whole “system” and how its inter-related departments and functions work. It is very difficult for a single department (a limb of one tree) to comprehend what is really happening system-wide (in the whole forest).

As Lisa J. Scheinkopf says in Thinking for a Change, “When we want to understand what is constraining an organization from achieving its purpose [or, goal], we should enlarge our perspective… from the Function Box to the Value Chain Box.” We need to have a view as though “our perspective of the organization” as though we were hovering “over [the enterprise] at an altitude of 40,000 feet” and witnessing the “flow,” not just individual functions.


This is the beginning of “system thinking,” and we may yet find a place for “brainstorming.”




Stay tuned for Part 2—coming soon.


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