EXCERPT from Critical Chain

Critical Chain Eliyahu GoldrattChapter 11

Rick is among the last to enter. To his surprise, the small auditorium is almost full. Probably the word went around that this colloquium was going to be different. Much different. Jim is waving at him.

“I kept a seat for you.” Now he won’t be able to sneak out after fifteen minutes.


He has just sat down when Johnny Fisher starts.

“I was sitting here watching this auditorium fill up, and I was thinking to myself, all these people came to see me. How flattering. I’m a celebrity. Then I realized, the Ph.D. students are here because they have to be. The professors are here out of courtesy. And all our important guests from industry came, not because of me, but because of the title of my presentation. Well, that’s life.”

Rick joins the polite laughter.

Johnny leaves the podium and starts to pace the stage. “I was asked to talk about the new things I learned during my one-year sabbatical at UniCo. I must warn you, one year doesn’t make one an expert. It is barely enough time to formulate some impression. And that’s all I will be able to share with you, impressions.”

“Excellent,” Rick thinks to himself, “even Johnny wouldn’t refer to mathematical models as ‘impressions.’ On second thought, with Johnny Fisher, nobody knows. Better wait and see.”

“UniCo is very famous today. This conglomerate, as you well know, is exhibiting unheard of growth and profits. It is of particular interest to our community since they are building a major high-tech operation here. Their growth is not just in their high-tech subsidiaries, but in all their businesses. Every single one of them. My grant had a hefty travel budget, so believe me I checked.”

“That’s what I call a grant.” Rick is probably not the only professor who had this thought cross his mind.

“It’s apparent that they have embarked on a different way to manage their business,” Johnny continues with his introduction. “And they don’t hide it. They call it Theory of Constraints, or for those of us who love three-letter acronyms, TOC. But what is TOC? That’s what I’ve tried to get a good grasp of. Not the details, but the concept, the framework.”

Rick, like everybody else, has heard more and more about TOC in the last ten years or so. What he has heard and read made a lot of sense, but it kept changing. At first it was related to production scheduling. Then it became a banner to attack “product cost” methods. Then marketing. Lately, it seems TOC is more connected with methods to remove friction between people. If Johnny could provide some order for this mess, it might be worthwhile sitting for a hour. Not much more than an hour.

“My impression is,” Johnny says, as he turns on one of the overhead projectors, “that TOC is a blend of three different, yet related, breakthroughs.”

He puts up his first transparency. “The first one, as we all suspected, is that TOC is actually a new management philosophy.”

“Another one of those,” Rick whispers to himself.

“In the past ten years,” Johnny echoes Rick’s discomfort as he resumes his pacing, “we came to know many new management philosophies. They came one after the other: TQM, JIT, re-engineering, the learning organization. At first it looked like we were moving from one fad to another. It was confusing. Nobody liked it. Especially not us, the professors, who all of a sudden were forced to update our course material at an unprecedented pace.

“But then we started to realize that each one had its important contribution. Moreover, not like fashions of the past, all these philosophies are not contradicting each other. On the contrary, in many ways they are complimentary. Many started to believe that they all are just pieces of the same puzzle. Now that I have been intimately exposed to TOC, I think I know. They actually are. And in a much more fascinating way than we suspected. I’m going to demonstrate it.”

He moves back to the overhead projector and points to the second line. “The second, and most important breakthrough of TOC, at least in my eyes, is the research methods it introduces. Methods that were adapted from the accurate sciences, adapted to fit systems that contain, not just atoms and electrons, but human beings.

“And the third breakthrough is, of course, the one TOC is known for the most, its broad spectrum of robust applications.”

He pauses, goes back to the podium and points to the three sentences on the screen. “New management philosophy, new research methods and robust applications. I think the best way to demonstrate them all is by raising the question, ‘What is the biggest problem managers are facing today?’ Anybody care to answer?”

A white-haired person in the front row is the first to answer, “How to win against the competition!”

Rick doesn’t recognize him. He must be some hotshot from industry. But his answer, as trivial as it might sound, makes sense.

“Any other answers?”

“My opinion is different,” says another top manager. “I think that the real problem is how, exactly, we should go about inducing our people to improve. We hear so much about the importance of empowerment, communication, teamwork. At the same time we hear so little about how to actually achieve it.”

“He has a point,” Jim whispers in Rick’s ear. Rick is not so sure.

“In my company, we know exactly how to handle the competitors, and we don’t have any problem inducing our people to improve. Our problem is how to shrink the development time of new products. Does TOC have an answer to this problem? If so, I’m very interested.”

“So am I,” Rick thinks, and whispers to Jim, “Who is that guy?”

“That’s Pullman, the chairman of Genemodem,” Jim tells him. “Some of their people are in our program.”

“My problem is different,” says the person sitting next to Pullman. “My biggest problem is my clients. They drive us crazy.”

More answers are coming from all directions. Johnny raises his hands.

“Please, that’s enough. I’m sure that all your answers have merit, but let’s not forget the subject of this presentation.”

When it becomes quiet, he continues. “TOC regards what was said here as just symptoms. It claims that they all stem from one, single core problem. If true, this is a very profound statement. How am I going to prove it?”

He starts to pace again. “Let me start with the observation that most managers want to manage well; I don’t know many who come to work each morning saying “How can I mess things up today.’ But what does it mean, to manage well? Many things. For our discussion, we don’t have to list them all. It’s enough to agree that two things are absolutely necessary conditions. In order to manage well, managers must control cost, and at the same time, managers must protect throughput they must ensure that the right products will reach the right clients in a way that they will pay for them.”

He stops, faces the audience, and using his hands extensively, he elaborates.

“Suppose that one of your managers tells you that he has done an excellent job of controlling cost, that he cut expenses by twenty percent. By the way, he also enraged half your clients. Would you call him a good manager? Or, another one protected throughput, shipped everything on time, but for that he hired more people and put everybody on endless overtime. Good manager?”

“I didn’t know Johnny was such a good speaker,” Rick comments to Jim, who gives him a look that says, I told you so.

“Controlling cost and protecting throughput. Two absolutely necessary conditions. We cannot be satisfied with one without the other.

“What I would like to show you now is that each implies a different mode of management. So different that there is no acceptable compromise between the two. To demonstrate it let me use an analogy. Let’s view your company as a chain. A physical chain. It’s not difficult to see why such an analogy makes sense.”

He goes to the overhead and puts up a blank transparency. “One link, the purchasing department, is in charge of bringing the materials. Another department, another link, is in charge of starting production. Another department, another link, is in charge of finishing production.” As he speaks he draws ovals representing the links. A chain starts to form on the screen.

“Yet other links are in charge of shipping, getting the clients, invoicing and collecting.” The chain becomes longer.

He puts the marker down and asks, “What is analogous to ‘cost’ in our physical chain?” Without waiting, he asks another question.

“What typifies cost? Cost is drained by each and every department. We pay money to and through our purchasing department, our production departments, and so forth. No department is free. And if we want to know the total cost of the organization, one way to find it is to sum up the cost drained by each department.”

He pauses to check if the audience is with him. Satisfied, he continues, “In our chain, the closest thing to cost will be weight, each link has its weight. And if we want to know what the total weight of the organization is, one way to find out is to sum up the weight of all the links. What are we going to do with this analogy?”

“That’s what I want to know,” Rick whispers impatiently.

“We are going to use it,” Johnny answers, “to demonstrate that controlling cost implies a certain way of managing.” And without delay he continues.

“Suppose that you are the president in charge of the entire chain. I’m working for you. I’m in charge of a specific department, a specific link. Now you instruct me to ‘improve!’ And I am obedient. After some time I come back to you and tell you that with ingenuity, of course with ingenuity, and also time and money, I improved my link. I made it one hundred grams lighter. You are not interested in my link, you are interested in the whole chain. But when I tell you that I reduced the weight of my link by one hundred grams you know that the entire chain becomes lighter by that amount. Do you know what that implies?”

Rick doesn’t.

“It implies a management philosophy. It implies that any local improvement automatically translates into an improvement of the organization. Which means that to achieve the global improvement, the improvement of the organization, we know that we have to induce many local improvements. I call it the “cost world.”‘ He pauses.

“What is he talking about?” Rick is irritated. “Why so much fuss about something first-year students know?”

“Wait,” Jim whispers back. “Johnny must have some point here, even though I don’t see it yet.”

“You’re probably wondering,” Johnny is smiling, “why I am hammering on the obvious. But it is so trivial to all of us not because it’s the only management philosophy, but because it’s the management philosophy we all used for so long. We have managed according to the “cost world’ probably since the beginning of the industrial revolution.”

He raises his voice. “What is not common knowledge is that ‘protecting throughput’ implies a contradictory philosophy. It implies the ‘throughput world.’ What is that?”

Everybody is now quiet. Even Rick.

“First, let’s clarify to ourselves the essence of throughput.” Pointing to the chain on the screen, Johnny explains: “One link is purchasing, another starts production, another finishes production, another assembles, still another ships to clients, et cetera. If one link, just one link, drops the ball, what happens to the throughput of the company?”

“Drops,” many answer.

“When we deal with throughput, it is not just the links that are important; the linkages are just as important.”

Rick finds himself nodding in agreement.

“What is the equivalent of throughput in our physical chain? What is determined not just by the links, but by the fact that they interact with each other? It’s not weight. If we remove all interaction, all linkages, and we are left with just a pile of links, the weight is still the same. So what property typifies a chain? It is the strength of the chain. If one link breaks, just one link, the chain is broken; the strength of the chain drops to zero.

“Now, I have some seemingly trivial, but very important questions for you. What determines the strength of a chain?”

“The weakest link,” somebody in the front answers loudly.

“And how many weakest links do we have in a chain?” Johnny stresses the word ‘weakest.'”


Rick doesn’t like Johnny’s style. He would never stress such trivialities. But he must admit that it’s effective. Johnny now has everybody’s attention.

“Now,” Johnny says, in an invigorating voice, “now, let’s see what that implies. You are still the president in charge of the entire chain. I’m still in charge of just one department. Since there is only one weakest link, let’s take the more general case, the case where I’m in charge of a department that is not the weakest link. And, and once again you tell me to improve. To improve the strength this time. And once again I come back and report to you that with ingenuity and time and money I improved. I strengthened my link. I made it three times stronger. Give me a medal.”

He pauses and smiles. “Remember, you are not really interested in my link. You are interested in the chain. My link wasn’t the weakest. If I made my link stronger, how much did I improve the strength of your chain? Nothing. Absolutely nothing.”

Jim looks at Rick. “I told you.” Rick doesn’t respond. His mind is racing.

“Don’t you see what we are facing now?” Johnny starts to pace again. His strides are full of energy. “Most of the local improvements do not contribute to the global!” he almost shouts. “And we do want the global, we do want the organization as a whole to improve. Now we know that since any improvement requires attention and time and money, the way to improve the total organization is definitely not through inducing many local improvements, the more the better. That’s not the way.”

“Interesting,” Jim says to himself.

“So where do we stand? In order to control cost, managers must manage according to the ‘cost world,’ while in order to protect throughput they must manage according to the ‘throughput world.’ Can they manage according to both at the same time?”

Nobody volunteers even a speculation.

“We try,” Johnny sighs. “We definitely try. For example, are you familiar with the term, ‘the end of the month syndrome?'” Many laugh. Especially the guests from industry.

“At the beginning of the month,” Johnny explains, “we control cost. Tight fist on overtime. Batch sizes must be optimal. But at the end of the month, forget it. Do everything to ship the damn goods out the door. Expedite these three pieces, go on overtime for the entire weekend. Ship!”

Johnny lowers his voice. “What happens? At the beginning of the month these companies are managed according to the cost world, at the end of the month according to the throughput world.”

“Fewer and fewer of these companies survive today. Why? Because compromises that were acceptable yesterday are intolerable today. And not because we have become more fussy, but because our clients have. Ten years ago we shipped eighty percent on time and everything was okay. Today we ship ninety-five percent on time and they still dare to bitch and moan. Ten years ago we shipped the best quality we could produce. Today if we ship that same quality our clients will ship it back. Protecting throughput has become much harder. The margins that enabled us to live with compromises are no longer there.”

“But let me prove to you that there is no compromise between the cost world and the throughput world. Not even theoretically. Do you want to see the proof?”

“Yes,” the auditorium echoes.

Johnny takes a handkerchief out of his pocket and wipes his forehead.

“For that, I first have to direct your attention to another topic. That of focusing.”

Rick straightens in his chair. Maybe he can pick up a clue that will help in his subject.

“We all know that focusing is important.” Johnny speaks softly. “A manager who does not know how to focus will not succeed in controlling cost and will not protect throughput. But what is focusing for us? We have come to know it as the Pareto principle. Focus on solving twenty percent of the important problems, and you’ll reap eighty percent of the benefits. This is a statistical rule. But those who teach statistics know that the twenty-eighty rule applies only to systems composed of independent variables; it applies only to the cost world where each link is managed individually.”

“What about the throughput world? Since in our organizations we do have many more than five links, it’s obvious that improving twenty percent means that many of these improvements will not contribute to improving the performance of the organization as a whole. Linkages are important, the variables are dependent. The Pareto principle is not applicable.”

“So how can we find out on what to focus? What process can we use?”

“Interesting,” Jim says again. This time Rick is in total agreement.

“Well, it’s simpler than expected,” Johnny comforts them. “Just think about the chain and the fact that its strength is determined by its weakest link. If you want to strengthen the chain, what must your first step be? No ‘ifs,’ no ‘buts,’ no ‘we are different.’ What must be the first step?”

At this stage everybody has probably figured it out. Johnny gestures to a volunteer in the first row to say it out loud, “First thing is to find the weakest link.”

“Correct,” says Johnny. And grasping a marker, he comments, “In academia we must use more respectable words. So let me write the first step as: IDENTIFY the system’s constraint(s). Don’t you agree that ‘identify’ sounds much more impressive than a simple ‘find’?”

“Of course these two words mean exactly the same thing. Fine, we identified the constraint. Now what?”

“Strengthen it,” the same, first-row person says.

“Correct again,” Johnny smiles at him. “But wait. We have to be careful with analogies. When we move back to organizations we can easily see that there are two different cases. The first one is the case where we identify the constraint as physical, like a bottleneck, a type of resource that does not have enough capacity to meet the demand. In that case, strengthening the weakest link will mean to help the bottleneck to do more.”

“But we shouldn’t overlook the other case. The case where it turned out that the constraint we identified is an erroneous policy. In that case, strengthening the weakest link cannot be interpreted as helping the erroneous policy to do more. We have to replace the policy. By the way, this fork of physical constraints and policy constraints caused a lot of confusion about TOC. All the early publications concentrated on physical constraints. It’s no wonder that when articles and books first appeared about the applications to policy constraints, it took some time until we, at least in academia, understood the connection.”

“I didn’t, until now,” Rick admits.

“Interesting,” is the only word Jim is willing to say.

Johnny waits for the murmur to quiet down. “At this point I’ll stick to physical constraints. They are less important but easier to understand.”

“Strengthen the weakest link,” we said. Before I write the second step, I would like to highlight that there are two different ways to strengthen a bottleneck. One is to simply add more capacity, by hiring more people or buying more machines. But there is another way. To squeeze the maximum from the capacity we already have. Make sense?”

When he gets agreement, he continues, “Since TOC accepts ‘controlling cost’ as an absolute necessary condition, no wonder that it elects the second step to be: Decide how to EXPLOIT the system’s constraint(s).

“What next? Let’s not forget that in the throughput world the linkages are as important as the links. Which means that if we decided to do something in one link, we have to examine the ramifications on the other links. Once again, it’s quite easy. Our intuition is in the throughput world. Always was. Let me demonstrate it to you.”

He points to his “volunteer” and tells him, “You’ll be the bottleneck. Do you mind? It means that you are most important, the throughput of the entire company depends on you. It also means that you are in the hot seat.”

“I’m used to the hot seat.”

“Fine. Now let’s suppose that when you try, really try, you can produce ten units an hour. No more. Okay?”

Johnny picks another victim. He picks Pullman. “And suppose that you are a non-bottleneck. You can easily do twenty units an hour. But whatever you do, before we can sell it, it must be further processed by our bottleneck. On an ongoing basis, how many units per hour should you produce?”

“Ten units,” Pullman says without hesitation.

Johnny repeats the description of the scenario and asks again, “Everybody tell me. How many units an hour should this gentleman produce? Everybody!”

“Ten,” comes the roaring answer.

“What you said is the third step.” And while talking, he writes it down.

“Step three: SUBORDINATE everything else to the above decision. If we can squeeze only ten units from the bottleneck there is no point in doing more on the non-bottlenecks. Now, if this first gentleman is still a bottleneck and we do want more throughput, we must lift some of the load from his shoulders. Even if it means buying more machines or hiring more people.”

When everybody agrees, he writes the fourth step: ELEVATE the systems’ constraint(s).

Rick carefully copies the steps. The logic is impeccable. It must be applicable for project management as well. Exactly how? It’s not clear. He will have to think about it later.

Johnny puts down the marker and moves to the front of the stage. “This is not the last step. And you all, intuitively, know it. Here is our chain.” In the air Johnny stretches an imaginary chain between his hands. “Here is the weakest link. I strengthen this link. The whole chain becomes stronger. I strengthen it again, the chain becomes even stronger. I strengthen it again, Nothing happens. Why?”

Many people answer.

Johnny summarizes, “It’s not the constraint anymore. So, I have to avoid inertia and go back to step one. Have you noticed something fascinating?”

He pauses, but nobody volunteers to read his mind.

“We have found the process to focus. This is the focusing process of the throughput world. But at the same time, do you agree with me that these steps are also the ‘process of on-going improvement?’ Fascinating, isn’t it? In the throughput world, focusing and process of on-going improvement are not two different things, they are one and the same.”

“Interesting,” Rick whispers to Jim.

“No, Rick, Johnny is right. It’s fascinating.”

“Let me remind you,” Johnny returns to the podium, “that I still owe you something. I owe you the proof that there is no acceptable compromise between the cost world and the throughput world. Remember? Now it’s easy. Really easy.”

He turns back to his volunteers. “You are still the bottleneck. You can produce maximum ten units an hour. And you are still the non-bottleneck, you can easily do twenty an hour, but whatever you do must pass through him. Everybody, again, how much should he produce per hour?”

By now everybody likes his dynamic style. “Ten,” they all roar.

“Really?” He cocks his head slightly, still looking at them. “Do you really mean it?”

“Yes.” Everybody is confident.

“And I thought that you liked this gentleman.” He turns directly to Pullman.

“Imagine that you are a worker in your own company. And you produce only ten units per hour when you can easily produce twenty. What will be your recorded efficiencies?”

Understanding starts to spread on Pullman’s face. “Low,” he says. Then, clearing his throat, “My efficiency will be fifty percent.”

“And if your efficiencies are only fifty percent, what will happen to your head?” And smiling, he moves his hand across his neck.
When the laughter quiets somewhat, Johnny continues, “And everybody here told you to produce only ten. Your friends probably want to turn you into a kamikaze. Some friends.”

Johnny is smiling. The laughter reaches new heights.

He waits patiently. “Do you understand what we have seen here? Your intuition is in the throughput world and in this world the answer is ‘don’t dare to produce more than ten.’ But your systems are in the cost world. Your systems want him to reach maximum local efficiency; they want him to produce twenty.” He pauses.

“And there is no compromise. If this gentleman produces fifteen, both worlds will kill him.”

The message is serious, but everybody laughs.

“So what will he do? He will slow down. He will claim that he cannot produce more than, let’s say, twelve, which he will. We forced him to lie, because if he doesn’t, his job security is threatened.”

Slowly Johnny goes back to the podium. He stands there awhile before resuming his lecture. “Everybody knows that the first step in solving a problem is to define it precisely. The strange thing is that in spite of this realization, we didn’t bother defining what we mean by ‘defining a problem precisely.'”

He notices that not everybody understands, so he clarifies. “When do we know that we have defined a problem precisely? When we have already solved it, and looking back we agree that the stage when we defined the problem precisely was a major step forward. But how do we know that we defined the problem precisely before we solved it?”

“He has a point,” Rick says to Jim.

“TOC adopts the definition accepted in the accurate sciences. A problem is not precisely defined until it can be presented as a conflict between two necessary conditions.”

He pauses to let his peers digest.

“That’s what we have done for the last half an hour.” He goes back to the overhead projector and inserts a transparency.

“The objective of managers is to manage well. In order to manage well, one of the necessary conditions is to control cost and the other is to protect throughput. But in order to control cost, managers must manage according to the cost world, while in order to protect throughput they must manage according to the throughput world, and as we saw, these two are in conflict.

“What do we do? We try to find a compromise. And if there isn’t one? Life is a bitch.”

“Is there any other way? Do they do anything differently in the accurate sciences?”

Everybody waits for Johnny to supply the answer.

“For example,” Johnny tries to clarify his point, “suppose that they try to measure the height of a building. Using one method they find that the height is ten yards, and using another the answer comes out to be twenty yards. A conflict. Do you think that they will try to compromise? That they will say that the height of that building is fifteen yards?”

Everybody is grinning.

“In the accurate sciences, what do they do when they face a conflict? Their reaction is very different than ours. We try to find an acceptable compromise. This thought never crosses their minds. Their starting point will never allow it; they don’t accept that conflicts exist in reality.

“No matter how well the two methods are accepted, a scientist’s instinctive conclusion will be that there is a faulty assumption underlying one of the methods used to measure the height of the building. All their energy will be focused on finding that faulty assumption and correcting it.

“Should we do the same?”

He pauses, and then asks, “Can we do the same?”

As he returns to the podium he keeps on asking, “Can we, who deal with human-based systems, believe that conflicts cannot exist?”

“How can we? Conflicts are all around us.” In a conversational tone he continues, “This is probably the most daring assumption of TOC. One of its foundations is that whenever we witness a conflict, it is a clear indication that someone has made a faulty assumption, a faulty assumption that can be corrected, and by doing so the conflict removed. What do you think about it?”

“I don’t buy it,” Rick whispers to himself.

“Do you believe in win-win solutions?” Jim asks him.

“I guess so.”

“So you do accept what Johnny just said.”

Rick doesn’t see the connection clearly, but now Johnny continues.

“Let’s use our conflict to demonstrate how powerful this approach, called ‘evaporating cloud,’ is.” And he moves back to the overhead projector.

“Let’s expose some hidden assumptions,” he says. “We claim that in order to control cost, managers must try to manage according to the cost world. Why? Because we assume that the only way to achieve good cost performance is through good local performance everywhere.” As he speaks he adds the assumption to his diagram.

“And why do we claim that in order to protect throughput managers must try to manage according to the throughput world? Because we assume that there is no way to achieve good throughput performance through good local performance everywhere.” When he finishes adding it to the diagram, he pauses to give everyone time to digest.

“Where do we stand? We now have three alternatives. We can challenge the upper assumption, we can challenge the lower one, or we can continue to look for a compromise. What do you think we should do?”

Probably Johnny regards his question as rhetorical, because he continues to ask, “Who thinks that the upper assumption is wrong? That the assumption that the only way to achieve good cost performance is through good local performance everywhere, is wrong? Please raise your hands.”

About five people raise their hands. After a moment, a dozen or so join them.

“Don’t be too hasty,” Johnny warns them. “Those who think this assumption is wrong, do you know what you’re claiming? You are actually claiming that most organizations, since the industrial revolution, were wrong. Do you still want to raise your hand?”

Almost everyone who raised their hand before defiantly raises it again.

“Your prerogative,” Johnny smiles. And then he continues, “Who thinks that the lower assumption is wrong? That the assumption that there is no way to achieve good throughput performance through good local performance everywhere, is wrong? Please raise your hands.”

To Rick’s astonishment, nobody does.

“The vote is clear,” Johnny announces. “Unfortunately, such questions are not resolved by a democratic vote. We have to prove what we claim. How can we prove that the upper assumption is wrong?”

“And now we are going to see some fancy mathematical model,” Rick sighs. “Wake me when it’s over.”

But Johnny doesn’t use any mathematics. “You are still the bottleneck and you are the non-bottleneck.” He points to his two volunteers. “The same scenario as before. We all agreed that the non-bottleneck should produce only ten units an hour. Why? Is it because we want to protect the throughput? Think about it.”

“If the non-bottleneck will produce fifteen or even twenty, will it prevent the bottleneck from producing his ten?”

“So why are we so adamant about restricting the non-bottleneck to only ten units an hour? Maybe the non-bottleneck is willing to answer?”

“Because if I produce more,” Pullman confidently says, “the only result will be the accumulation of unneeded inventory.”

“And if inventory goes up, what happens to cost?”

“Goes up.”

“You see,” Johnny addresses the audience, “we all asked the non-bottleneck to produce much less than he can, not in order to protect throughput, but in order to control cost. We instructed the non-bottleneck to restrict its local efficiency to only fifty percent, when it could achieve one hundred, for only one reason. To control cost. What does that tell us about our upper assumption?”

“The only way to achieve good cost performance is through good local performance everywhere. Baloney!”

Speaking slowly, stressing each word, he concludes, “We are chasing compromises, degrading our performance, making our life miserable, because of an assumption that is apparently wrong.”

After a short while he repeats, “The only way to achieve good cost performance is through good local performance everywhere. The fact that so many managers and almost all our systems are based on this assumption is regarded by TOC as the current core problem of our organizations.”

“I have to think about it,” Rick promises himself.

“All the new management philosophies,” Johnny is now on a roll, “implicitly recognized it. They all try to stress the importance of protecting throughput, they all try to shy away from local optimums.”

“TQM and JIT are adamant about throughput even though they haven’t realized that it mandates a much sharper focusing. Reengineering puts the emphasis on reexamining basic assumptions. A cornerstone of the learning organization is to replace unsatisfactory compromises with win-win solutions. Using the clarity provided by TOC and systematically using its analytical methods, all these philosophies, at last, merged into a coherent whole.”

“But you didn’t come here for a theoretical lecture. You want to see what can be done with it. In reality. What results can be achieved? In what time frame? And above all, how?”

“What I’m going to do now is to share with you one of the most fascinating experiences I had last year. How, in UniCo, they turned around a losing company they bought. Turned it into a gold mine in just a little over three months. But my first hour is over and I was told to break for coffee. If you are still interested, be back in twenty minutes.”

This is an excerpt from Critical Chain by Eliyahu M. Goldratt. All rights reserved