I Focus Right

Not everything that can be

improved should be, says Rami
Coldratt By Priyanka Sangani
is father, thelateEliyahu Coldratt shot into theglobal

H spotlight with Goal, a hix)k that launched the theory of

constraints (TOC) into the world.Rami Coldratt contin¬
ues his father’s work by helping companies improve their re¬
sponse time to the market using TOC asa systems management
tool. India is thesecond biggest centre for Goldratt Consulting
andhemakes sure he keeps his finger on thepulse of the coun¬
try. comingdown once every few months. Goldratt was in Pune I
recently toconducta session on breakthrough innovation using I
TOCat the Tata Management and TrainingCentre. In a conver- I
sation with CD, he spoke of the new challenges companies are
.
facingand using TOCin a VUCA (volatile uncertain, complex

ft
andambiguous) world. Edited excerpts:

How would you explain TOC to someone who

is new to the concept?
Ifl need to summarise TOC inone word it would
be focus. There are always many areas that can
be improved, however not everything that can be 1
improved shouldbe improved. Focus starts with '
what not todo. Usually when wethinkabout focus
it*s about what to do but TOC is about what to stop do¬
ing. Many of our improvement efforts aren’t aimed f
at theconstraints of thebusiness what limits
-

thebusinessfromdoingmore. Ifyouarenot
improving something that's limiting the A
businessfiramdoingmore,thebusiness
will not do more. TOC is about how¬
to identity’ the right constraint
and then giving you the
right set of tools to open it. A

Fast Responses
7
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Fast Responses
> Focus Right Continued
from pg 1
How is TOC relevant in a VUC A
world?
lÿet ’s take the consumer goods in¬
dustry and uncertainty. Weneed to
forecast the sales ofa certain product
in a certain place ina certain time.
Based on this we would knowhow
much to produce. One wouId expect
that over time ourability to make
an accurate forecast would improve
with more informalion on recorded
consumption and more sophisti¬
catedIT tools but reality shows us
it’sexactlytheopposite it’sget-
t ing worse. Wehave more and more
surpluses and shortages. This is
because there are three dynamics
in consumer behaviour that makes
it almost impossible to predict ac¬
curately. The first is t hat consumers
are becoming more sensitive to get
the products they want and this puts
pressure on retailers to work with
wider assort ments else they will lose
sales. The wider the assortment, the
harder it is to have a good forecast
of what you will sell because you’ll
stock more unitsand managing the
depth of this inventory becomes
difficult. Thesecond is consumer
tolerance. Consumersare willing
to wait lessand less for t he product
to becomeavailable which means
that retailersneed to have it in the
storesnot in the warehouse. Finally.
product 1ife isbecoming shorter
i CJfv'PA’ .¡f S THAT
CAN'T
DRAMATICALLY
Mí R O'. í W S : OVA
LIMES WILL NOT
IN THE FUTI
Ak RAMI COLOR
CEO.
COLSRATT
CONSULTING
wit h new products constantly being
introducedandretailers needing
to offer discounts to sel11heolder
version. This puts a lot of pressure
on brands. Unless the new launch is
a star product 1ike t heiPhone, there
will bea clash between your old and
new offerings. All thismakes our
ability to forecast andhavethe right
inventory impossible.
So t he only way for compan ies to
survive is to reduce the react ion
time to market since it's impos¬
sible to have an accurate forecast.
Youneed to capture signals from
reality of what issellingand react
to it as fast as possible. Companies
that can’t dramatically impreve
response times will not exist in
thefuture.Earlicrhavingafast re¬
sponsetime wasa luxury: now it’s
a necessity. In TOC we remove op¬
erational constraints that block the
flow and improve response times.
whether in marketing, operations
or product ion.
What are the typical constraints
you come across?
The main constraint isoften policy
driven. What typically increases
response timesis working with big¬
ger batches. In procurement if you
wait longer before placing an order.
response time would naturally in¬
crease. However, companies want to
accumulateal1orders to get a good
deal. What t hey don’t not iceis t hat
every suchincident increases their
response t ime. This is one major con-
straint that ishurtingtheflow.
How do youmanage the constraints
once you identify them?
One mtqor obstacle to flow causing
project delays happens not in the
execution, but the planning stage.
When setting t iinelines.people will
giro an extended buffer - typically
—
50% to bereliable.The problem is
t hat people end up using this buffer
period whether they need it or not.
andaré likely toovershoot it as is¬
sues cropup towards the end. A pro¬
ject isa chain of tasks and to ensure
t hat it finishes on t ime. t he project
manager needs to make sure each
task finishes on time. As the man¬
ager. you have to take theindividual
’safety' out of the equation and use it
as partofthe overall project buffer.
Inengineeringconipanies. the im¬
portant thing is how you provide bet¬
ter valuc t o your clients by delivering
the project ontime.Due date perfor-
manee inengineeringeompanies is
very p<x>randclientstolerate it be¬
cause everybody isthe same. Socan
we manage projects ina different
way that can give valueandon-time
delivery? One of the fundamental
mistakes we makeinproject man¬
agement that causes major obstacles
to flow isbadmulti-tasking. Thisis
when you are forced to switch from
one task toanother without complet¬
ingany of it. You have to realisethat
by doing this you are losing capacity
and quality willbe impacted. You
have to prioritise and queue them up.
moving to the next one only after the
first isdone.
How can TOC aid innovation?
Many companies have good ideas
for business innovation but they
will work only if you havethe right
structured process to decipher what
value tobring to whatclients.In
TOC. value is defined asremoving
a significant limitation toan extent
that no otheraltemativecan. So if
you understand the limitation you
are removing and thenbuilding
thebusinessmodelaroundthat it
would translate into more business.
You thenunderstand development
and execut ion in the right way. May
times we fail in executionbecause
we invest toomuch in the wrong
directionand thencontinue to invest
because are already invested in it.
You need to clearly understand the
coreassumptionsundcrlyingthe
businessand you need to validate
these as soon as possible. Thisis
TOC for businessinnovation.
Have the external constraints that
business has to deal with changed?
Timeisbecomingofesscnccand
business innovationis becoming
more crucial. Companies typically
tend to compromise on thevalue
they provide their clients during a
downturn. The key is even during
a downturn,or rather, precisely
duringdownturns tocrystallisethe
value you are providing themarket
and remove any constraintsthat
prevents you from deliveringmore of
this value.
What advice do you give leaders on
how todo it?
Start with analysing thevalueand
competitive edge you are aiming to
give and what you want to deliver to
which segments. Then analyse the
major constraints that prevent you
from deliveringmore value and then
work to remove them.
priyanka.sartgani a
timesgroup.com