13. GoldrattEliyahu - Viable Vision 2005

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Viable Vision By Eliyahu M. Goldratt © Eliyahu M. Goldratt, 2005 Maybe the best way to describe what I mean by a “Viable Vision” is by a quote taken from a letter I wrote to my friends in November 2002: “When I do an analysis of a company I am somewhat satisfied only when I clearly see how it is possible to bring the company to have, in less than four years, net profit equal to its current total sales.” Knowing the response of most people to such a claim, my next sentence was: “I am also carefu
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    www.goldrattconsulting.com Viable Vision By Eliyahu M. Goldratt© Eliyahu M. Goldratt, 2005Maybe the best way to describe what I mean by a “Viable Vision” is by a quote takenfrom a letter I wrote to my friends in November 2002: “When I do an analysis of acompany I am somewhat satisfied only when I clearly see how it is possible to bringthe company to have, in less than four years, net profit equal to its current total sales.”Knowing the response of most people to such a claim, my next sentence was: “I amalso careful not to share this expectation with the top management; they will take it asa decisive indication that my suggested solution is unrealistic.”During 2003 I put to the test the reaction of top managers to Viable Vision. But I wascareful to expose the reasons for my conviction that this apparently incredible visionis viable. I started by sharing my diagnosis of what is currently blocking theperformance of the company. Based on that, using solid cause and effect logic, Ideduced the tangible steps that are bound to remove that block. Then I detailed thesteps that must be taken in order to capitalize on that breakthrough; the steps that willpropel the company to have, in less than four years, annual net profit equal to itscurrent annual sales. Done in this way, the first reaction of top managers was: “Thisis just common sense, why aren’t we doing it?”Why haven’t they done it? How come the prevailing notion is that, unless thecompany has a unique product or unless the company is very small, it is unrealistic toexpect a company to increase its net profit by so much? How come, even though it ispossible to construct a Viable Vision for more than half the companies, the prevailingnotion is that it is impossible?The answer is that most people are unaware of the fact that any complex system isbased on inherent simplicity. Capitalizing on the inherent simplicity is what enablesincredible improvements within a short time.What is “inherent simplicity?”To explain this concept we first have to clarify what we refer to as a complex system:“the more data one has to provide in order to fully describe the system, the morecomplex the system is.” If one can fully describe a system in four sentences, it is asimple system. But if one needs a thousand pages to describe it, the system iscomplex.How complex is the system you manage? How many pages are needed to describeevery process on every part, the relationships with each client, etc? It is no revelationthat companies, even small ones, are extremely complex. It is also no revelation thatit is difficult to manage a complex system.    www.goldrattconsulting.com So how do we go about managing a complex system? We dissect it into subsystems.Each subsystem is, by definition, less complex than the whole. If you have anyhesitation accepting that this is precisely what we do, just look at your organizationalchart.Dissecting a system into subsystems has its price. It leads to miss-synchronization; itleads to harmful local optima and, in some cases, even to the devastating silomentality. Since our systems are incredibly complex it seems that all that can be doneis just to minimize the price; to do the best we can to improve synchronization, and tofoster better collaboration between the subsystems.As long as this is the only option we consider, we’ll be under the impression thatachieving a significant jump in profit within a relatively short time is a rarity. Wewill be under the impression that bringing the company to have, in less than fouryears, net profit equal to its current total sales is unrealistic.To see the true potential of a company one has to delve deeper into the issue of complexity. What bothers most of us is the fact that part of the data that typifies oursystem does not relate to just one component of the system, but to the relationshipsbetween two or more components. In other words, the thing that makes our systemdifficult to manage is that what is done in one place has ramifications in other places;the cause and effect relationships turn our system into almost a maze. But that fact iswhat provides the key for the solution.Think about it in the following way. Examine a given system and ask yourself, whatis the minimum number of points one has to impact in order to impact the wholesystem? If the answer is “ten points” then this is a difficult system to manage, it hastoo many degrees of freedom. It is like attempting to manage a bunch of wild cats.But, if the answer is “just one point” then this system has only one degree of freedom,it is an easy system to manage.Now, do you agree that the more interdependencies existing between the variouscomponents of the system the less degrees of freedom the system has? Consideringthe enormous complexity of your system it follows that there must be only very fewelements that govern the entire system. In other words, the more complex the systemis, the more profound is its inherent simplicity.To capitalize on the inherent simplicity we must be able to identify those fewelements that govern the system. Additionally, if we clarify to ourselves the causeand effect relationships between these elements and all other elements of the system,then we can manage the system to achieve a much higher level of performance.These few elements, the ones dictating the level of performance of the system, are theconstraints of the system. This implies that the constraints are also the leverage pointsof the system. Hence the name I chose for this approach – the Theory Of Constraints- TOC.    www.goldrattconsulting.com Twenty years ago I demonstrated the TOC approach on production systems(manufacturing plants) in my book The Goal. Then I demonstrated it on project-based systems in Critical Chain. The marketing/strategy of companies is in Its NotLuck. If you read any of these books you, most probably, agree that the conclusionsare pure common sense, even though they fly in the face of common practice.Moreover, if you are one of the many managers who actually put it into practice youhave firsthand experience with the impressive improvements and the surprisinglyshort time in which you achieved them.Still, is a Viable Vision possible for your company? Is it feasible to bring yourcompany to have, in less than four years, yearly net profit equal to its current yearlysales?The obstacles look insurmountable. For example: it is obvious that such a quantum jump in profitability is impossible without a huge increase in sales. A huge increasein sales can be achieved only if the company will have a new offer that is unrefusableby its markets. Can such a remarkable offer exist? Can the company deliver on suchan offer? What investments will be needed? And even if it can be done, is themanagment team capable of implementing and sustaining such a change?In these three pages (few minutes) I am unable to answer these questions (and manymore). But if you join me for a day I think that you will get enough convincinganswers to follow my business proposal.
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