The concept of the constraint, or bottleneck, in a business plays a pivotal role in the Theory of Constraints (TOC) developed by Eli Goldratt – it is, after all, right there in the name. Goldratt developed his management philosophy around the basic idea that any system can have only one constraint, on which all efforts must be focused, in order to improve the system’s throughput.
Starting from this simple, but groundbreaking idea, the TOC and related research has evolved and expanded considerably in the decades since. Concepts such as Critical Chain Project Management, Viable Vision and POOGI (Process of Ongoing Improvement); tools such as throughput accounting, the current and future reality trees or strategy and tactics – they have all become valuable tools for businesses to reach greater success. The constraint remains of fundamental importance within all of them.
Wouldn’t it be a good idea, therefore, to spend some time picking it apart? What exactly is a constraint – and what isn’t one? Even within the TOC universe, not everyone is in agreement about this. A June 2015 webinar by Eli Schragenheim1 offered an interesting (not uncontroversial) introduction into some of the historic and more recent thoughts on the topic.
The Five Focusing Steps – discussed previously on this blog – aim to improve an organization’s throughput by utilizing the system’s constraint:
1. Identify the constraint
2. Exploit the constraint
3. Subordinate everything to the constraint
4. Elevate the constraint
5. If the constraint has moved, return to step 1. Prevent inertia from becoming the constraint!
The very first step raises the question: how will you recognize what the constraint is? What defines it? Eli Schragenheim offers a number of considerations to bear in mind.
What is a constraint – and what isn’t?
When you set out to identify the constraint in your business, your questions will likely be a variant of “what are we short of?”, such as:
- Not enough man hours within a team;
- Not enough employees with the necessary expert knowledge or skills;
- Not enough management time to answer all urgent questions quickly;
- Not enough demand for a product;
- And so on.
All these are constraints which can be incrementally increased (in other words, improved). There are also constraints where the only options are “on” or “off”: Schragenheim calls these total (as opposed to continuous) constraints. A total constraint can only be broken with a fundamental paradigm shift or a significant investment – which is often much harder to do. An example would be a necessary certification in order to become an authorized supplier to a highly regulated industry.
It is important also to distinguish between a constraint and a “core problem”. To tackle the constraint, the TOC uses the Five Focusing Steps, as we’ve seen above: the constraint is optimally exploited. A core problem, on the other hand, is an unresolved conflict leading to multiple undesired effects and generally based on an erroneous assumption. A core problem is identified with the help of a Current Reality Tree and broken with an Evaporating Cloud.
Now you can easily see the difference between the two: you would not “exploit” a core problem and subordinate the rest of the business to it. Rather, you need to eliminate it to allow the business to develop. This is also the reason why a business policy cannot be a constraint: while it may prevent your business from improving, it needs to be removed rather than exploited. The TOC often uses the Lieutenant’s Cloud to resolve these conflicts: an Evaporating Cloud specifically for rules.
Capabilities vs capacities
Another issue worth raising is the difference – and the dependency – between capabilities (what I can achieve) and capacities (how much of it I can achieve). It goes without saying that capacity can be a constraint – and in practice often is. A team of engineers with highly specialized skills is chronically overworked. You can exploit this constraint by allocating simpler tasks to other resources, standardizing processes, reducing multitasking and so on.
But what about the skills themselves? They are an advantage, are they not? They can even become your Decisive Competitive Edge if they enable the business to offer something no one else can do. It’s safe to say then that the skills are not a constraint – they can however easily lead to the creation of one! Highly specialized experts will be less skilled in everything else, meaning that the business will want to focus on their specialization to optimally use its capabilities. This almost inevitably turns the engineers’ capacity into the constraint – and this will only get worse once demand from the market increases (as desired).
Internal or external constraint?
Here we encounter a further interesting idea: the choice between an internal and an external constraint. Once a business has successfully implemented a number of improvement initiatives and “worked through” its constraints with the help of the Five Focusing Steps, the constraint will at some point move into the market: the internal processes have been optimized and can always satisfy demand.
Then again, the business naturally wishes to grow – but once it has developed its decisive competitive edge and increased its market share, there is always a risk that it cannot sustain this growth (i.e. meet demand) and the constraint moves back into production. The whole process is a balancing act, which also raises the question: where would we rather have the constraint?
- An internal constraint is generally easier to keep “under control”: the market is unpredictable; a constraint in the market makes planning that much harder.
- However, this affects an internal constraint, too! Even a constraint which is optimally exploited under normal conditions can be overloaded by unexpected fluctuations in the market.
- If demand exceeds the business’s production capacities, this puts it in the “fortunate” position of being able to cherry pick contracts, or even increase its prices.
- This can quickly backfire, however: if customers can’t be sure that they will always be able to receive their product in time, they will start looking elsewhere – until one day no customers remain.
Bear in mind, too, that even if the actual constraint is in the market, there will still be an internal “weakest link” (a secondary constraint) which may quickly become relevant again if the market changes.
“Choosing” the constraint can be an important strategic step, since the Five Focusing Steps allow you to move the constraint. The only thing you cannot do is resolve it – even the most perfectly functioning system will still have something that limits its output, somewhere. You can, however, decide which constraint is easiest to manage and deliberately leave it there. As mentioned above, this is often the market, but it doesn’t have to be.
The next article in this series will go a step further and ask the shocking question: what if there were more than one constraint in a system after all?
1: Eli Schragenheim, Re-evaluating the Five Focusing Steps, TOCICO 2015