As we have seen in the introduction, the holistic implementation of a Theory of Constraints change initiative requires a fundamental paradigm shift from everyone involved.
The success story of First Solar Inc.
First Solar Incorporated, a renewable energy company, provides a shining example of a holistic implementation of the throughput model which led to great success. It was founded by Harold McMaster in the mid ‘80s and acted at the cutting edge of the very new and exciting solar energy industry for decades, pouring millions into research but not making any profit. By the turn of the millennium, it looked to be on its last breath; unlikely to recover. But in 2003 it was bought by a private equity firm and made it into the S&P 500 within a few years. How was this achieved?
A young and innovative management team under Michael Ahearn turned to the throughput model of the Theory of Constraints, among other things. This extraordinary success story is documented by Dr. Alan Barnard and Ray Immelmann in their case study1, giving us a great example of how a holistic TOC implementation can be done. The most important lessons to be learned from this are summarized below:
Support from top management is vital
From the very start, top executives at First Solar were convinced of the superiority of the TOC throughput model. This is a basic prerequisite for any organization wishing to successfully apply the TOC model. In this process, management has two roles above all: for one, it must ensure the implementation is consistently enforced and followed through. Additionally, it must lead by example
– following Ghandi’s advice of “be the change you want to see” and thus encourage the rest of the company to follow.
The Theory of Constraints is not just a tool, it is a way of thinking
The path from a cost-world-influenced corporate culture to a throughput world one can be quite daunting, as it requires people to fundamentally change their thinking. But it is very important for this to happen. Rather than just half-heartedly (or even reluctantly) following the new rules and procedures, everyone in the organization needs to be truly convinced of the validity of the thought processes underlying them. This way they will understand the reasons behind the changes and be quite happy to cooperate.
Workshops, simulations and analogies
In order to gain this support from everyone, it is helpful to use the various tools and simulations offered by the Theory of Constraints, especially during the initial phase. These play an important role in uncovering old, erroneous paradigms and illustrating why the new thought processes are valid and useful.
Fast and meaningful success
In order to be successful long term (by gaining buy-in from everyone involved), a fundamental change initiative must show obvious and tangible improvements right away. This was true in the case of First Solar as well, where one of the first initiatives after the takeover was to build a new plant. Despite adverse circumstances, this was completed before deadline and thus provided irrefutable proof of the potential the Theory of Constraints could unlock for the business.
Consistent communication at all levels
Obviously, it is equally important to communicate successes and general progress to all concerned. Not only does this allow staff to regularly keep informed of the changes and their benefits to the organization but open and inclusive communication also promotes community spirit: everyone feels involved and will thus be much more ready to play their part in the changes.
Leverage and build on pockets of excellence
Every organization has areas or departments that work more efficiently than others, even amidst difficult circumstances or challenges. These “pockets of excellence” can be analyzed and used as catalysts or to propagate best practices. What are they doing differently? What can be transferred to other areas?
But also: understand differences
Not every department works in the same way and it is important to understand and respect these differences in culture: it is not always possible to use one template in every area of the business. It is therefore important to bear the specific context in mind and get stakeholders involved in finding a solution that fits them. Hearing and discussing their objections rather than simply dismissing them will also foster greater acceptance and cooperation.
Not without an internal TOC champion
For an initiative to really be successful and keep its momentum, it should ideally have an internal TOC champion who can assist the process and keep an eye on its long-term implementation. This person should be experienced and respected, persuasive and willing to take risks. He or she needs full management support and constant access to external TOC experts.
Lastly, it is important to remember that the improvement process is never complete. Business performance and progress should be continually monitored and re-evaluated. The environment changes all the time and even the most successful business needs to adapt and change in order to maintain its competitive advantage. Besides, even with the most careful planning, there may be mistakes or wrong assumptions sometimes. But with robust, ongoing processes of analysis and evaluation, it is relatively easy to change course if necessary.
Private businesses aren’t the only place where the Theory of Constraints finds its uses. The final article in this blog series analyses how a holistic implementation can lead to remarkable results even in the highly complex public sector.
1 Dr. Alan Barnard and Raimond E. Immelman: “Holistic TOC Implementation Case Studies, Lessons Learned from the Public and Private Sector” in Cox III, James F., and Schleier Jr., John G., ed. Theory of Constraints Handbook. New York: The McGraw-Hill Companies Inc., 2010. p. 455-498