| Focus Right Not everything that can be improved should be, says Rami Goldratt Sy Priyanka Sangani H is father, the late Elivahu Goidrattshot into theglobal spotlight with Goal, a book that launched the theory of constraints (TOC) into the world. Rami Goldratt contin: ues his father’s work by helping companies improve their re- sponse: ing TOCasasystems management tool. India is the second biggest centre for Goldratt Consulting and hemakes sure he keeps his finger on the pulse ofthe coun- try, coming down once every few months. Goldratt was in Pune recently toconduct a session on breakthrough innovation using TOCat the Tata Management and Training Centre. Inaconver- sation with CD, he spoke of the new challenges companiesare facing and using TOC ina VUCA (volatile, uncertain, complex andambiguous) world. Edited excerpts: ime to themarket us How would you explain TOC to someone who is new to the concept? If need tosummarise' TOC inone word it would befocus. There are always many areasthatcan be improved, however not everything that can be improved should be improved, Focusstarts with what nottodo, Usually when we think about focus it’s about what todo but TOC is about what to stop do- ing. Many ofourimprovementeffortsaren'taimed _¢ attheconstraints of the business what limits the business from doing more. If youarenot improvingsomething that’s limiting the business from doingmore, the business willnot domore. TOC isabout how toidentify therighteonstraint andthengivingyouthe rightsetoftools toopen it. Fast Responses Continued on pg 3>Fast Responses > FocusRight Continued frompg 1 How is ToCreievant ina VUCA world? Let’s take the consumer goods in- dustry and uncertainty, Weneed to forecast thesalesofa certain product inacertainplaceinaceriain time. Basedonthis we would know how much to produce. One wouldexpect thatovertimeourabilitytomake anaccurateforecast would improve ‘with more information on recorded consumption and more sophisti- cated IT tools butreality showsus it'sexactly theopposite—it'sget- ting worse. Wehavemoreand more surplus s.Thisis because thereare three dynamics inconsumer behaviour thatmakes italmostimpossible topredict ac- curately. The first sthat consumers arebecomingmoresensitiveto get theproducts they want and this puts pressureon retailers to work with widerassortmentselse theywill lose sales. Tho wider theassortment, the harder itis tohavea goodforecast ‘of what youwill sellbecause you'll stock more unitsand managing the dopthof this inventory becomes diffieultThesecond is consumer tolerance, Consumersare willing towaitlessand lessforthe product tobecome available which means thatretailersneed tohaveitinthe storesnot in the warehouse. Finally, product life is becoming shorter COMPANIES THAT CAN'T DRAMATICALLY. IMPROVE RESPONSE. TIMES WILL NOT EXISTIN THE FUTURE RAMIGOLDRATT CeO, OLDRATT ‘CONSULTING with new products constantly being introducedand retailers needing, tooffer discounts tosell the older version. This putsalotof pressure “onbrands. Unless the new launchis star productlike the iPhone, there will beaclashbetween yourold and new offerings. Allthismakesour ability toforecastand have theright inventory impossible. Sotheonly way forcompaniesto survive is time to market since it's sible tohavean accurateforecast. Youneed tocapture signals from reality of what issellingand react toitas ast as possible. Companies that can't dramatically improve response times will not exist in thefuture. Earlier havinga fast re- sponse time wasa luxury: now it’s anecessity.InTOCwe remove op- erational constraintsthat block the flow and improve responsetimes, whotherinmarketing, operations orproduction, What are the typical constraints youcome across? ‘Themain constraint isoften policy driven, What typically increases response times is working with big sgerbatches. Inprocurement ifyou wait longerbefore placinganorder, response time would naturally in: ‘crease, However, companies want to accumulateall orderstogeta good deal. What they don’tnoticeis that every such incidentincreases their response time. Thisis one major con- straint thatis hurtingthe flow. How do you manage the constraints, ‘once you identify them? One major obstacle to flow causing project delays happens not in the execution, butthe planning stage, Whensetting timelines, people will sgiveanextended butfer—typically 50% —tobereliable. The problem is that people end up using this butte period whether they need itor not, andare likely to overshoot itasis: ‘sues crop up towards the end. A pro- jectisa chainoftasksandtoensure thatitfinisheson time, the project manager needs tomake sure each task finishes on time. As theman: ager, youhavetotake theindividual ‘safety’ outof theequation and.use it aspartof the overall project buffer. Inengineering companies, theim: portant thing ishow you provide bet. fervahueto your clients by delivering theprojecton time. Duedateperfor- ‘mance inengineeringcompanies 1s very poor andclients tolerate itbe causeeverybody isthesame. Socan wemanageprojects ina different \way thatcan give valueandon-time delivery? Oneof thefundamental mistakes wemake in project man- agement hat causes major obstacles toflow isbed multitasking. Thisis whenyouare forced toswitch from onetasktoanother without complet ingany ofit. Youhavetorealise that bydoingthis youare losing capacity and quality will be impacted. You haveto prioritiseand queuethemup, movingtothenext oneonly after the first isdone. How canTOCaidinnovation? Manycompanieshavegoodideas forbusiness innovation butthey will work only ifvouhave theright structured processto decipher what gtowhatelients.In sdefined as removing significant limitation toanextent thatnoother alternativecan.Soif’ youunderstand thelimitationyou areremovingand then building. thebusiness model around that it ‘would translate into more business. You then understand development andexecutionintheright way. May timeswofail in execution because ‘we invest too much in the wrong directionand then continuetoinvest becausearealready invested in it You need toclearly understand the core assumptions underlying the businessandyouneedtovalidate theseassoonas possible. Thisis TOC for business innovation, TOC. valu Have the external constraintsthat business has to deal with changed? Timeisbecomingofessenceand business innovation Is becoming ‘more crucial. Companies typically ‘end tocompromise on the value they provide their cientsduringa downturn. The key iseven during adownturn, or rather, precisely during downturns tocrystallisethe value youare providing themarket andremoveany constraints that prevents you from delivering more of thisvalue. What advice do you giveleaderson how to doit? Start with analysing the valueand competitiveedge you areaimingto giveandwhatyou want todeliverto which segments. Thenanalysethe majorconstraints that preventyou from delivering more valueand then ‘work toremove them. priyanka.sangania timesgroup.com