DECIDING ON TOC
THE HOLISTIC APPROACH TO BUSINESS.

Now, don't start by explaining what TOC is all about. True, they don't know what it is but, as you've learned from the satellite sessions, the first step of the buy-in process is not to talk about the solution but rather to get consensus about the problem.

Paraphrasing so many of your letters, I'm sure such a start causes many of you to mutter: "My top managers don't have much patience, and if there is anything that interests them, it's only the bottom line. That's where I'm suppose to start if I want any chance of success. Instead Eli wants me to start by raising problems. If there is something they are sick and tired of hearing from middle managers, it's our complaints. I'll start with UDEs, they will hear complaints and the shutters will go down. A few more minutes and I'll be out.

"Eli doesn't understand my position. I don't have the clout of a management guru. I'm just a middle manager who has stuck hes neck out to get this opportunity to present to these important top managers. I'm not going to get another chance, and if I do badly I also have a lot to lose."

So what are we going to do? In order to succeed you must feel comfortable with the presentation that you are going to give. And for many this means starting by talking about the possible (or even probable) benefits to the bottom line rather than talking about the prevailing problems. On the other hand, to succeed I'm convinced that you must follow the buy-in process, which mean starting by getting consensus on the problem.

My suggestion is to start by concentrating on the bottom part of the slide: "the holistic approach to business". Holistic approach is one of those phrases that no one really understand but no one is willing to admit it. An excellent place to start. But not by exposing your audience ignorance (a dangerous thing to do with any audience and definitely not a recommended thing to do with your bosses' bosses). Rather we'll move to a statement that explains the essence of any holistic approach and does it in such a way that every manager (especially top manager) will agree whole heartedly.

Say something like: we all know the validity of using an holistic approach to business Since we know that (Slide no. 2) THE ONLY PRUDENT WAY TO MANAGE A BUSINESS IS TO NEVER LOSE SIGHT OF THE GLOBAL PICTURE.

Easy to get agreement on such a statement. Once you see that they agree, proceed by asking: WHY? What will happen if we do lose sight of the global picture?

Answer, now, this question for yourself and realize that we are already dealing with the bottom line, as you wanted.

If you are a professor, an external consultant or if you give this presentation to your people, you should draw the answers from your audience. If you present to your bosses or even to your peers, don't think of doing such a thing. Never forget that they are your bosses not your pupils (you may forget, they won't). Proceed by giving the answers and seeking their agreement.

Now we are reaching a very sensitive point in the presentation. We have to show them that they are not doing what they think they are. We have to prove that they do not manage their company according to the global picture.

Don't throw it in their faces. Rather, hide behind the back of reputable people. Say that all inventors of any part of a holistic approach, be it TQM, JIT, LEAN or TOC, claim that when they examine the policies and measurements of almost any company they come to the conclusion that most companies are not run according to the global picture. Moreover, these people claim that this is the reason why the potential for improvement is much bigger than managers think. That lead time, quality, inventory levels, market share, and profitability can be improved not by a few percent but by orders of magnitude. [You are not taking any risk by saying it since anyone who has read any of Dr. Demming's writing, or the original book of Dr. Ohno or any of my writing will not be surprised by your statement.]

This is the key point especially for top managers, so reiterate it: We all know how important it is to always consider the global picture. No wonder that there is an opportunity for major improvements to the bottom line for a company whose policies and measurements are not in line with the global picture. But is it the case for every company? That is what Dr. Goldratt proves in this video. He carries out the analysis that logically shows why companies are not instituting holistic approach throughout the management pyramid.

Remember, top managers' major complaint is that the people below them don't see the whole picture. Therefore after pointing not to the top managers but to the entire management pyramid there is a good chance that even impatient top managers will be willing to view the tape rather than insisting on getting a quick (and totally ineffective) summary. Now show the first part of the introductory tape.

And what happens if the top manager refuses to "waste" time viewing a tape? We are in trouble. Even if you are a TOC expert with a lot of experience in presenting I would not recommend that you step directly into this mine field. It is one thing to prove that cost accounting, for example, is wrong, it is another thing to prove to your bosses that they don't know how to manage.

So my suggestion is that before giving the presentation make sure that your audience know in advance that a tape is going to be shown.

The next few slides that you'll find in the attached power-point file are there because when I give this presentation I cannot say "and now let's see me on tape". Let's use them now as a reminder for what is on the tape; it has been quite a long time since you've seen the satellite program. Besides, if you already showed the "introductory tape" to your bosses you cannot force them to sit again through it, so you must give them now a reminder.

The satellite program starts with seeking agreement that we all want to manage our company according to a system approach (if you notice, I now prefer the phrase holistic approach - simply because too many people think about a computer when the word system is mentioned). Then I explain that a "system approach" is based on the realization that when we deal with a problem, we shouldn't just look on that problem in isolation, or even look on one function in isolation; we must look much broader.

How do we do it in practice? To demonstrate it I take, as an example, the entire steel industry (in that industry, it is easy to spot the biggest problem in each issue). That is what is summarized in slide no. 3. After explaining that we don't confine ourselves to just looking at a problem in logistics alone but consider also problems from marketing, finance, etc. (slide no. 3) I ask the "innocent" question, "And now what do we do?"

The answer: we don't know what to do so we do what the steel industry has been doing for the last hundred years; dealing with each problem in isolation.

I continue with the encouragement not to give up on our healthy intuition. Why do we all believe that we must manage according to the global picture? Because we know that a decision made in one function may have a big effect on another function. In other words, we are all aware that a cause in one section might have effects in another section. So why won't we base our approach on tying up the cause effect relationships? Can it be done? And I present the Current Reality Tree of the steel industry (slide no. 4) as an answer.

Is there any point in doing such a cause-effect analysis? I point to the obvious conclusion of the tree (slide number 5); as long as the prime measurement will continue to be tons/hour the unavoidable results are all the problems the steel industry is complaining about. But that was overlooked for at least the last one hundred years.

Are we, in our company, doing cause effect trees or are we also dealing with undesirable effect on their own merit? In other words, do we manage according to an holistic approach? Since I've used one industry as an example, many managers will try to avoid the conclusion by stating that their company is different. Therefore I have to continue at least to the point when the analysis and the conclusions are clearly generic.

I continue by pointing out that the cause-effect tree that we have seen is not enough. It explains why the steel industry should not use tons/hour as a prime measurement. But it must be that managers in that industry recognized, at least intuitively, that tons/hour leads to distortions. So there must be a reason that caused them to continue to use it in spite of their intuition. That line of thinking gives me the opportunity to unveil the generic cloud of any manager in operations (slide no. 6).

Using the simplest (and most generic) diagram of flow of work (slide no. 7) enables the exposure of erroneous assumption (slide no. 8). That is what drives home the fact that we are dealing with any type of operation, yours included. Now it is a small step and the generic cloud of all conventional companies (companies that haven't yet adopted the holistic approach) can be presented.

Now it is your turn to continue the presentation. Remember, the natural tendency is to elaborate on the power and breadth of the applications of TOC. As much as you like to do it you should not forget the purpose of this presentation. It is not to get the permission or even the support of top management. It is something much more ambitious. You are actually trying to persuade them to take charge of the entire process and the first step is that all top managers together will devote 8 days of their time. So now move from operations to the realm of top managers. And then swiftly move on to persuade them that the only way to achieve what they so much desire is that they will carry the baton.

Present the generic cloud (slide no. 9). Encourage your audience to figure out what they think is the erroneous assumption, the one on the top or the one on the bottom. The fact that they point to the erroneous assumption is important! People (especially top management) have to save face. Use the next slide (slide no. 10) in order to confirm that they were right.

Now use the next slide (slide no. 11) in order to summarize what I said only verbally in the tape; when managing holistically, every issue should be approached by answering, in sequence, these specific three questions. We have asked and answered the first question regarding our company. If we want to improve the bottom line performance of the company, the biggest potential is in rooting out the erroneous assumption that the local impact is equal to the impact on the organization.

What should we do instead? In other words, what is the answer to the second question: to what to change?

Say that the 24 hours of the Goldratt Satellite Program Videos answer this question. We have seen the first hour of the first session "operation" (slide No. 12). Since the tapes are available, you prefer to quickly review the subjects so that you'll be able to devote the majority of the time of this meeting to answer the third, and most difficult question: how to cause the change.

Stress that the TQM, JIT and Lean are all parts of the holistic approach and that the session about operation also shows how they all integrate. Then, quickly go over the next seven sessions (slides 13-19). Give the information of who in the company have seen the program, and that they think that the information is very relevant to the company. (I assume that it is the case otherwise how come that you are giving this presentation to your top managers?)

Continue by asking: How to cause the change; if we want to implement a holistic approach, where should we start? Use the next slide (slide No. 20) to give the most common answers. Than say that starting with any of them does present a problem. To highlight the problem turn to the next slide (slide no. 21) and ask the question: WHAT, do you think, HAPPENS TO ASECTION WHICH IS MANAGED ACCORDING TO A HOLISTIC APPROACH WHILE THE REST OF THE COMPANY IS MANAGED CONVENTIONALLY?

Repeat the question using different words, like: one section is doing what is right. It takes actions not according to how its local performance looks but all its actions are aimed at improving the performance of the company as a whole. And its doing an excellent job. But every other section continues to do the usual. What will happen to our "altruistic" section?

Enough people in your audience will have the experience to suspect that somehow our "altruistic" section will get nailed. Acknowledge that it is really the case and use the next slide (slide no. 22) to explain the mechanism that causes it.

Suppose that the section we call X was the constraint of the company. X embarked on an holistic approach and improved drastically. So much so that it is not the constraint anymore. Now the performance of the entire company is constrainted by another section, let's call it Y. Do you think that Y is pleased with such a development?

Of course not. From the perspective of Y, before X started to move every thing was fine. Now, all of a sudden, all fingers are pointing to Y; it is the constraint of the company.

Y is bitter, convinced that "they" don't want to understand that we in Y are already doing our best! And who is raising the loudest "noise"? None other than the section that caused it all, X. Why? Because X, being on the holistic approach, realizes that any further improvement to the company depends on Y improving its performance. X is telling Y to use TOC in order to improve. Y tries to explain that "it won't work here, we are different."

War starts between X and Y. WHO WILL WIN? To drive home the absurdity of the situation immediately elaborate on the question. Ask: Who will win, the section that has demonstrated startling improvement or the one that claims that it cannot improve (unless… and here comes a long list of unrealistic demands).

Well?

You'll find your audience quite indecisive. Being top management, they want to say that the department that demonstrated startling improvements will win since it is the thing that they promote - improvements. At the same time their intuition (and experience) tells them that probably the opposite is true. So, don't let them hang there for too long. Rather unfold the answer by another question. Just ask: Who is in the consensus, X or Y?

Of course, Y will first try to discredit X. It is very easy. All the solutions of TOC are very simple. So simple that after they are recognized they are best described by the term "common sense". Y will claim that X has improved so much only because they were doing such stupid things before. But we ….

Besides, X right now is busy digging their own grave. X is not just attacking Y, at the same time they attack many of the company's measurements and even policies.

Who will win?

And when Y wins what happens to the company's Process Of OnGoing Improvement?*

_______________
If you noticed, a lot stems from the behavior of X. We understand exactly why X behaves this way, still, is there another set of actions that X can take and that will lead to the spread of the holistic approach throughout the company? In other words, is there a way to implement TOC from bottom up? This is the subject I would like to discuss in the next letters.

Don't worry they get it. But as we all learned it is one thing to learn about earthquakes and another to hear a moving testimony about a specific earthquake. Move to the next slide (slide no. 23) and read the testimonial that was included in letter 6 (just the testimonial and not my answer).

Now you have achieved something. At this stage top managers are convinced that the ball is in their hands, and that they cannot delegate it.

But they are stuck. Remember, you have posed a question that is still not answered: where should we start the implementation?

Turn to the next slide (slide 24) to explain the dilemma your audience are now facing. Pay attention to the connection between B and D. To justify this connection you have to remind your audience the natural tendency (summarized in slide 20) that guides people to start with a confined application.

As for justifying the connection between C and D' you'll have to remind them of the conclusion we just derived; starting with a local implementation (X) is likely to lead to the annihilation of the process.

To guide them to solve the conflict bring up the next slide (slide No. 25). Read it aloud; we do want to move the whole company on an HOLISTIC approach. So where is the proper place to start?

They will give you good answers. Summarize their answers by bringing up the next slide (slide no. 26) - the proper place to start is by devising the company's strategy. And now there is no conflict.

Before I tested this presentation I was under the impression that at this stage top management's concerns would revolve around what is the actual meaning of constructing a strategy according to an holistic approach. That is the reason I included in the introductory tape the first half of the last session - strategy.

After checking the presentation several times I realized that top management are, at this stage, concerned with something else. From past experience they know how difficult (often painful) it is to get consensus on a strategy.

If you want to get buy-in you must address your audience's concerns; you must address the major obstacle that they are concerned will block them. That is the reason why the next slide (slide no. 27) stresses the aspect of consensus.

But that is not enough. Mentioning their concern is not yet addressing it. What I found is that in order to convince my audience that I am going to overcome the obstacle, I have to demonstrate that in my eyes it is even more important than what people are used to thinking. That is the reason for the next two slides (slides no. 28 and 29). There is no problem to get agreement on the content of slide 29.

Now they are eagerly waiting to see how you propose achieving such an ambitious target.

What you do is to present one obstacle at a time, and then the means to overcome this obstacle. You are familiar with the obstacles, they were detailed in letter 5. Maybe it is a good idea to reread this letter.

Slide no. 30 presents the first obstacle, the one which will be there due to the top managers who are pushing for rapid improvements. As much as this characteristic is desirable, it does carry with it a problem. Most managers are new to the holistic approach and therefore they might be blind to the fact that the performance of the company is held back due to some specific conflict. As a result, THE STRATEGIC DIRECTION that some top managers might suggest CONCENTRATES ONLY ON ONE SIDE OF THE EXISTING CONFLICT. Explain (according to letter 5) why is it such a big obstacle.

How do you think it can be overcome?

Concentrating on only one side of a conflict is one of the diseases of the local management style. To overcome it the participants (all top management) will have to revisit all aspects of the company and reevaluate everything through the perspective of the holistic approach in order to realize how the performance of each sub-system and the performance of the whole system are held back by one underlying conflict. That takes time. The fastest and most effective way is to see all the GSP Videotapes.

Slide no. 31 presents the second obstacle, which is there due to the top managers who are more cautious. First rule of good managers is to be paranoid. Never the less, this good characteristic may lead to a big obstacle. THE STRATEGIC DIRECTION that some top managers might suggest IS NOTHING BUT PUSHING AN EXISTING COMPROMISE. Explain (according to letter 5) why is it such a big obstacle.

How do you think this obstacle can be overcome?

Experience has taught us that reality is full of conflicts. Our education has taught us that the best way to deal with a conflict is to compromise. This is not correct if we want to strive for significant improvements. We must learn how to do something which is much better than compromising. We must learn how to identify the erroneous assumption that leads to the conflict and based on that construct a win-win solution. The best way to change our approach is to learn how to deal with the fundamental conflicts that exist in our reality; the one currently hampering each subsystem we are managing. In other words, again the eight sessions of the videotapes (if to remove the previous obstacle the first hour of each tape is vital, to remove this one the discussion in each tape on how to break the cloud is vital).

The third obstacle stems from Inertia, from everybody's tendency to extrapolate from the past. (Slide no. 32) THE SUGGESTED TACTICS ARE BASED ON PREVAILING ERRONEOUS ASSUMPTIONS.

The way to overcome it is to see many examples how to devise new tactics when an assumption has been replaced. And to get acquainted to new generic tactics (like Drum-Buffer-Rope or Critical-Chain). Again, the same tapes.

Since all the above obstacles are overcome by the same means, it should be summarized (slide no. 33).

Removing these obstacles does not yet generate the consensus on what to do. It just paves the way. There are three more obstacles (slide no.34). Explain each of them according to letter 5. And unveil the consensus process (slides 35-39) that overcomes them all. In letter 5 I've describe that process in detail so study it (don't just read it) again.

And now we've reached the time to give conclusions. We agreed that the single most important obstacle standing in the way of ANY system-wide approach is consensus among the top managers on the resulting strategy and tactics. We have reviewed the obstacles and suggested how to overcome them. The specific proposal now is to take the following steps… (slide no. 40).

If you present to all top managers (and opinion leaders from all functions have already seen the videotapes or the live broadcast) go directly for the gold - recommend the 4x4 as the next step. Of course, stress that after the four days they as a group will see the entire set of solutions and at that time they will have to decide whether on not to proceed to the next stage and rebuild the strategy.

If only a handful of you have seen the tapes, or if you present to only one top manager (even if it is the president) give the recommendation as written on the slide. First, a few people whose opinion is trusted check the solutions by watching the tapes, and then the 4x4.

Some wise person said that good luck is nothing but preparation meets opportunity. I agree. I also think that bad luck is nothing but lack of preparation meeting reality.

Prepare and succeed.

Eli