Overview of the Theory of Constraints
The Goal
The Theory of Constraints (TOC) is an overall management philosophy originally developed by Eliyahu M. Goldratt and first popularized in his bestselling business novel The Goal. He started with the idea that all real-world systems; whether personal, interpersonal, or organizational have a primary purpose, or goal. The rate at which the system accomplishes its goal is called throughput.
The Constraint
From the idea of throughput, it is easy to see that systems must also have at least one constraint: something that limits the system’s throughput, which can be likened to a chain’s weakest link. If a system had absolutely no constraints, it would be capable of infinite throughput. But though infinite throughput is impossible, amazing throughput gains are possible through the careful identification and management of a system’s key constraints. The purpose of the TOC then, is to give individuals and organizations the tools they need to manage their constraints in the most effective manner possible.
Originally applied to industrial manufacturing lines, TOC principles have been successfully adapted for areas as diverse as supply chain, finance, project management, health care, military planning, software engineering, and strategy.
TOC claims that a real-world system with more than three constraints is extremely unlikely, and in fact usually only one constraint is key. Counterintuitively, this is because the more complex a system becomes, the more interrelationships are necessary among its parts, which results in fewer overall degrees of freedom.
A major implication of this is that managing a complex system or organization can be made both simpler and more effective by providing managers with few, specific, yet highly influential areas on which to focus: maximizing performance in the areas of key constraints, or elevating the constraint (making it less constraining.)
The TOC was originally applied to manufacturing operations, where the constraint was usually a physical constraint: some sort of machine or process that formed a bottleneck in the production line. These sort of constraints are fairly easy to locate. But in the real-world situations where these constraints were broken (i.e. elevated to the point where they were no longer the constraint) it was discovered that the constraints could take on another character: the policy constraint. These are the “ways things have always been done” that ultimately serve to restrict the system’s throughput, and they are usually due to some form of suboptimization: tuning part of a system without regard to the benefit of the whole. Policy constraints are often more difficult to identify and more difficult to manage than a simple machine or physical process, and more powerful tools were invented to do just that.
The Five Focusing Steps
To identify and manage constraints of all kinds, the developers of TOC defined the Five Focusing Steps, which describe a process of ongoing improvement. (Step Zero was later added for additional clarity.)
0. Articulate the goal of the system. How do we measure the system’s success?
1. Identify the constraint. What is the resource limiting the system from attaining more of its goal?
2. Exploit the constraint to its fullest. How can we keep the constraining resource as busy as possible, exclusively on what it can do that adds the most value to the entire system?
3. Subordinate all other processes to the decisions made in Step 2. How can we align all processes so they give the constraining resource everything it needs?
4. Elevate the constraint. If managing the constraining resource more efficiently does not give us all the improvement we need, then how can we acquire more of the resource?
5. Avoid inertia. Has the constraint moved to some other resource as a result of the previous steps? If so, don’t allow inertia itself to become the constraint: go back to step 1.
It is possible that, after iterating through the Five Focusing Steps a few times, that the constraint on the system’s throughput moves entirely out of the system itself, and into the system’s environment. An example of this would be when a manufacturer has more capacity than demand for its products. In this case, further improvement may still be possible, but doing so requires expanding the concept of the “system” to include its customers, the economy, and other factors that were originally just givens of the system’s environment.
The Thinking Processes
The Thinking Processes emerged as TOC practitioners worked with organizations that needed to identify their core constraints and how to manage or elevate them. They needed the answers to three deceptively simple questions:
What to change?
To what to change?
How to cause the change?
The Thinking Processes are based on the scientific method, to which is added a simple visual language, the Thinking Process Diagrams, that are used for describing and reasoning about situations, arguments, and plans using the language of Cause and Effect. There are two basic kinds of reasoning: Sufficient Cause and Necessary Condition.
Sufficient Cause Thinking
Necessary Condition Thinking
The Thinking Process Tools
From the basic Thinking Processes developed several techniques called the Thinking Process Tools designed to answer the three questions. The tools provide the ability to develop a complete picture of a system’s core constraints and how to manage them.
The last of these tools, the Strategy & Tactics Tree, is used in large organizations where it is necessary to create major changes in a short period of time. However, the other five tools are applicable to systems of any size from individuals, to families, to businesses small and large. Like a physical tool kit, you can choose to use individual tools: just the right tool for the job at hand. Or, you can do a larger project where most or all of the tools may be required. When all of the tools are used, the “finished result” of one tool can easily be used as part of the “raw materials” for the next tool. Since improvement is a continuous process, you can use each tool over and over again on every pass through the Five Focusing Steps.
Tool | Thinking Process | Starting Point | End Result |
Current Reality Tree (CRT) | Sufficient Cause | A set of undesirable symptoms | The core cause of the symptoms (constraint) |
Evaporating Cloud | Necessary Condition | A perceived conflict underlying a constraint | Possible win-win solutions |
Future Reality Tree (FRT) | Sufficient Cause | A proposed solution | Necessary changes that implement the solution and avoid new problems |
Prerequisite Tree (PTR) | Necessary Condition | Major objectives and the obstacles to overcoming them | Milestones that overcome all obstacles |
Transition Tree (TRT) | Sufficient Cause | A set of goals | Detailed actions to achieve the goals |
Strategy & Tactics Tree (S&T) | Necessary Condition | The highest-level goals of a system | A multi-tiered set of implementation steps |
The Measurement of Success
The last piece of the improvement puzzle is feedback. There needs to be an unambiguous way to measure improvements brought about through the implemented changes. For traditional business, Dr. Goldratt developed three non-traditional measurements that began with the overriding concept of the system’s goal: Throughput (T), Inventory (I), and Operating Expense (OE). It is outside the scope of this book to discuss these in detail, but readers are directed to the TOC body of knowledge for discussions of these measures and how they have been adapted for many different endeavors.
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