Dear POOGI forum members,

For the last year I am struggling to answer a question that, I believe, might bother some of you as well. What should be done to make TOC the main way of running organizations?

For a long while I told myself that the only thing that should be done is to gather plenty of patience. It will happen, I told myself, and soon, because the logic of TOC is compelling - so much so that most people refer to it as “common-sense.” In addition, the investments needed to implement it - investment in money, time or efforts - are just a fraction of any alternative. And the ensuing results surpass the highest conventional expectations and are evident within a surprisingly short time. And the various applications of TOC have been implemented in an impressive variety of environments with a very high success rate (certainly much more than any of the alternatives). So it is just a matter of time and TOC will be the main way.

It is almost 20 years since The Goal was published. TOC became much broader, much more powerful, the number of implementations is in the thousands and… And still TOC is far from being the main way, almost as far as it was in 1984.

Why?

I started to realize that patience alone is not enough; if I want to see it in my lifetime some specific actions must be taken. Which ones? What was I missing all these years?

After hearing plausible answers from numerous people and thinking about it long and hard I started to realize that the core problem hides not in the short-comings of TOC but in its strength. TOC generates the results because it argues that situations should be looked on from a different angle. It argues that any situation is not governed by numerous causes but by few constraints. Following this realization turns what seems to be a very complex environment into a simple and manageable situation. TOC is a paradigm shift so deep that it translates into several different paradigm-shifts.

So what?

So, it’s about time to recognize that:

Instituting even a single paradigm shift is very difficult.

Before we start to examine and deal with the reason for the special difficulty to institute a paradigm shift I think that we should clarify to ourselves the various aspects in which TOC is a major paradigm shift.

The first paradigm shift that TOC was recognized for is titled: “Cost world vs. throughput world.” That is the main subject of The Goal and you are all familiar with the difficulty to institute it.

A much stronger paradigm shift has nothing to do with the fixation to save local costs; it has to do with recognizing the enormous potential for improving any existing system. The realization that any system is governed by a few constraints implies that in order to improve the system we should not even consider wasting time trying to optimize things which are well within the noise (even-though this principle is well known to any scientist, nevertheless, it typifies the vast majority of “improvement” efforts and the majority of academic management science articles). It further implies that even though reducing the noise will be beneficial, the preferred way is not to concentrate on reducing the noise but rather concentrate on dealing with the constraint(s). The payback is at least an order of magnitude higher. The difference between dealing with the noise and dealing with the constraint is so big that most people (still entrenched in the old paradigm) do not even realize the magnitude of improvement possible. It is particularly important when we broaden our interest from a specific function (like production, distribution or engineering where you are aware of the particular applications that carrys out this claim) into devising the strategy and tactic of a business unit or a supply chain. 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. I also learned not to share this expectation with the top management; they will take it as a decisive indication that my suggested solution is unrealistic.

But this is still not the biggest paradigm shift TOC is bringing. In my eyes the biggest paradigm shift and the one that I almost don’t dare to talk about, is the attitude toward people. From my experience whenever I ask for undesirable effects and the plausible reasons for their existence, almost always the finger is pointing to people. Dig a little deeper and the claims about irrelevant self-interest or nasty personalities are raised. The search for the underlying constraint and the focus to elevate it invariably leads to the fact that the causes for the undesirable effects are not irrelevant self-interests but legitimate conflicts. Bad behavior of people exists, no doubt about it, but the approach of TOC leads its practitioners to realize that (except for maybe some rare psychopaths) bad behavior is a direct result of a conflict and once the conflict is removed the bad behavior is removed with it. People are not bad! One direct implication of this realization was the development of the buy-in process. I wish more people used it.

We’ve established that TOC is a collection of major paradigm shifts and that instituting even a single paradigm shift is very difficult. Where does it leave us? To progress we’ll have to dive into psychology. We’ll have to speculate what is the thing that makes instituting paradigm shifts so difficult.

The first step is to better understand what typifies a paradigm shift, what change is entitled to this bombastic name? Let’s take the “Cost world vs. throughput world” as an example. The basic premise is that cost is not the only important factor, throughput in not less important. This by itself cannot be called a paradigm shift, as a matter of fact most managers will claim that it is what they believe in right now. The next step is to realize that “the strength (throughput) of the chain is determined by the strength of the weakest link.” Have you seen anybody who objects to that? Even when we proceed and derive the five focusing steps, do people object to them? From my experience most managers feel that we are talking about the obvious, some to the extent that they think I’m wasting their time. So where is the paradigm shift? The thing that is so difficult to implement?

It is not in the essence of the suggested change, it is in the ramifications. When I realized that people treat the five focusing steps as trivial I knew that I had to find a way to demonstrate that the five focusing steps are not currently followed, to demonstrate the enormity of the ramifications. I constructed the P&Q quiz.

In the late 80’s and early 90’s I used this quiz in almost every presentation I gave. First I explained the five focusing steps. Everyone agreed and thought that it is “just common sense”. Then I introduced the quiz, making sure that everyone fully understood it, and then I forced everyone to try and solve it. One just has to follow the five steps to reach the right answer (unless one makes a careless arithmetical mistake). Nevertheless, out of over 10,000 managers that were challenged, about half reached the conventional wrong answers and only less than a hundred succeeded. Why?

Because that is what typifies a paradigm shift. It is not the different starting point, it is the ramifications; the fact that so many things we took for granted are wrong; the fact that almost everything has to be reconsidered. We are creatures of habit. We do not rethink every move from basic principles. We operate mainly upon pre-established patterns. When I take a step on a pavement I do not consider the possibility that I might sink into the pavement. When managers save set-up time, or push the high margin product they do not consider that these actions might decrease the profitability of the company. A paradigm shift obsoletes our ability to use the established patterns to predict the outcome of our actions. The ability to predict and security are closely connected. Quoting from my daughter Efrat (a Ph.D. in psychology) security is the confidence one has in his/her predictions. Now we understand why it is difficult to institute a paradigm shift:

A paradigm shift is a direct, major threat on security!

We are aware of “Efrat’s cloud,” of the need to have both security and satisfaction. The first causes us to resist change, the second causes us to induce change. All these years, maybe because of my personality, I concentrated on increasing satisfaction – on making TOC more powerful; I tried to tilt the compromise toward the change. That worked only to a limited extent because, as we now understand, TOC being a collection of paradigm shifts causes major threats to security. The deck is loaded against us.

The direction is now obvious. If we want to make TOC the main way we should concentrate on reducing the threat on security.

I think that each one of us knows proven ways to gain more security:

1. Others, whose opinions we respect, say that the change is the thing to do.
2. We examine the ramifications and establish new patterns to the extent that we feel it is sufficiently safe to move.

Following those guidelines four necessary conditions must be met to sufficiently reduce the threat to security. Let’s view each of them.

From the first guideline – “others, whose opinions we respect, say that the change is the thing to do” - the following realizations emerge:

1. No movement becomes a main movement if the professional community continues to ignore it.

Judging the frequency of interaction of management with the professional community it is clear that most frequent interactions are with the consulting community. You are talking to your boss (or to a prospect) and your arguments sound logical, but this manager will also talk with other consultants. How many of the consultants out there support TOC? Probably less than 0.1%. When all the ones your manager is talking to pooh-pooh TOC, what do you expect his decision to be?

Bringing the professional community to actively support TOC is a necessary condition to making TOC the main way. This necessary condition is not yet met. When a necessary condition is not met, by definition, the unavoidable result is that the objective is not met. I shouldn’t be surprised that TOC is not becoming the main way. We must find a way that ensures that the professional community actively supports TOC.

That is not the full story. From the first guideline another necessary condition is obvious:

2. TOC implementations must be made known.

Currently, is this necessary condition met? My impression is that TOC’s huge successes are the best-kept secret.

So far we exposed two necessary conditions and neither are met. Lets view the second guideline to reducing threat to security: “we examine the ramifications and establish new patterns to the extent that we feel it is sufficiently safe to move.”

This guideline also translates into two different necessary conditions. To examine the ramifications and establish new patterns, deep knowledge is needed:

3. TOC deep knowledge must be readily available.

I’m afraid that on this issue we have gone backwards. Today, for an individual who cannot hire a consultant, most TOC knowledge is available only on the relatively shallow level of the available books (and don’t tell me about a sporadic Jonah course here or there).

Availability of the knowledge is, by itself, not enough. Let’s not forget that most organizations will not embark on a hazardous, bumpy road. When we are dealing with a major paradigm shift, even a relatively reasonable road looks hazardous and bumpy.

4. There must be a structured, credible process for organizations to lead them from ignorance to a full switch to the TOC way.

Is such a process available today? Maybe some fragments of it.

Four necessary conditions. Not meeting one necessary condition is enough to block the attainment of the objective. In our case, none of these four are met! It is no wonder that TOC is not yet the main way of running organizations.

You can imagine that when I finally finished this analysis (in February of this year) I felt mixed emotions. On one hand I felt relieved – a mystery was solved. The reason that TOC is not yet becoming the main way is not because something is wrong with TOC, or because something is wrong with the world. It is the fact that I didn’t work smartly enough to address these obvious necessary conditions.

On the other hand, I felt overwhelmed. To satisfy each of the four necessary conditions is a very tall order. It’s beyond the capability of one person, or even a small group. But one has to start somewhere. I turned to several people whose knowledge and capabilities I respect, presented this analysis to them and asked them to volunteer half of their precious time for as long as it would take. To my relief, it turned out that the fact that TOC is not yet the main way is so frustrating to TOC practitioners that most of the ones I talked to, agreed Since then, significant progress has been made by the group, to invent and start to test the plausible ways in which the necessary conditions can be satisfactorily fulfilled.

If you are interested I can devote the next letters to the analysis and the experiments we are now doing on each of the four fronts. But I do have an obstacle. As you’ve (I hope) noticed, after I wrote POOGIforum letters about once a month (13 of them) I stopped. The reason was that in the last letter I asked from you a specific action and almost nobody came forward. I felt that I’m wasting my time since, as was laid out from the start, this POOGIforum is supposed to be a two-way street.

Let’s give it another try. I have two requests:

First, I want to check my basic assumption, the assumption that you are actually reading these letters [a friend of mine inserted toward the end of his Ph.D. dissertation a sentence stating that anyone who reached this page can claim from him a bottle of first class brandy. No one claimed it, not even his examiners]. So, please send me an e-mail saying “I read.” Email to Poogifourm@aol.com

My second request is a little more demanding. As we said, one of the necessary conditions is “TOC implementations must be made known.” As part of the efforts to rectify the situation we established a “reference bank.” If you go to www.toc-goldratt.com you’ll find that we started with 50 references. I ask you to add your implementation/s. If we all pull together we can grow this reference bank to more than 500 references. This will help everybody!

So, visit the site, examine a few of the references to see what is needed -not a long article, not all the sensitive bottom-line information, just enough to know that TOC application(s) are really working. But the name of the company and some numerical results are mandatory. To protect the credibility of the reference bank, each reference is checked before it is made public. Therefore, please include a letter from the company manager (might be you) that confirms that the information is correct. If you are a consultant, you may ask that the name of the manager who signed the letter will not be made public.

Knowing that most of you were involved in at least one implementation I expect the reference bank to grow rapidly. If you have any reason why to not add your case(s), please write to me about it.

Eli Goldratt