A while back, an acquaintance asked me to summarize the main aspects of the Theory of Constraints for him. The resulting email provides a nice, concise overview which I would like to share with readers of this blog. I have added a few links allowing you to explore further if you wish.
1 Main Assumptions
The Theory of Constraints is based on a few basic assumptions which help in problem-solving by expanding the scope of potential solutions and thus increasing the likelihood of finding a WinWinWin solution (for employees, customers, suppliers, shareholders, the public, the environment…).
- Reality is exceedingly simple and harmonious with itself.1
- If something seems complex, find the necessary lever… or build one yourself, and it will become simple.
- Where a conflict exists (in the sense of a contradiction or a dilemma), you will find one or several assumptions that do not correspond with reality. Find these assumptions and the conflict will disappear.2
- People are good.
- Humans follow positive impulses (by doing/not doing something, they want to achieve something for themselves).
- Never say „I know“.
- We must always be ready to discard our assumptions about what is possible, to avoid getting stuck in the status quo.
- No matter how much we have achieved, there is always an opportunity for a further “leap”.
The way Eli Goldratt generally presented these paradigms led to the interpretation that he thought of himself as “smart” enough to always identify the lever, the erroneous assumptions, the positive impulses or the opportunity for a great leap. I approach this with a little more humility.
Starting from „reality is exceedingly simple and harmonious with itself,” some 25 years ago a team around Goldratt developed the “TOC Thinking Processes”, which can be used to represent and analyse interdependencies.3
2 Local vs Global Optimization
- The assumption „the optimization of parts (of a system) automatically leads to the optimization of the whole (system)” produces (in its extreme form commonly used today) silo mentality, conflicts and dilemmas, poor business results… and generally makes life difficult for everyone. Still, for centuries it made sense to run businesses on the basis of this assumption (it was preferable to letting chaos reign).
- Goldratt has shown (and many others have since proven) that it is entirely possible to manage a system such that all decisions/actions are in line with the greater goals of the entire system, and that (even if it may seem impossible at first glance) this enables WinWinWin-situations.
- Goldratt was less concerned with balancing the requirements of the different interest groups, but rather aiming for solutions that would “increase the cake” (and thus everyone’s share).
3 Forecast vs. Uncertainty
- Business management as it is used today continually tries to predict the future and is largely based on forecast mechanisms… making it necessary down the line to justify why the forecast was “wrong”.
- The solutions developed by the TOC (e.g. for managing production, multi-project, distribution environments, generating strategies for businesses or even entire supply chains) all start from the assumption that our world is characterized by uncertainty and variability.
- This means it’s impossible to predict the future. Instead, the system’s reactivity and adaptability need to be strengthened (i.e. antifragility, as described for instance by Taleb)4.
- The TOC thinks of a change initiative as a “scientific experiment”.
- For this experiment, it defines:
- What should be achieved (goal / strategy)
- Why it is necessary / worthwhile to achieve this goal (necessary assumptions, generally starting from a higher-ranking goal)
- Why it is difficult, but possible, but difficult, but possible… to achieve the goal (parallel assumptions)
- How to achieve the goal (tactic, path)5
- The experiment is run primarily to verify or falsify the assumptions (and to learn from it all for the future6). Achieving the previously defined goal is only of secondary importance.
A much more extensive description of these concepts and their application in the business environment can be found in my book Goldratt und die Theory of Constraints.
1: Based on Isaac Newton: „Nature is simple and harmonious with itself”.
2: The Evaporating Cloud is a very useful tool for this: https://en.wikipedia.org/wiki/Evaporating_Cloud
3: You can find a full list here: https://en.wikipedia.org/wiki/Thinking_processes_(theory_of_constraints)
4: More details can be found in this article https://en.uwetecht.de/antifragility-ready-anything/
5: Strategies and tactics are described in detail in this article: https://en.uwetecht.de/strategy-and-tactic-2-a-superior-tool/
6: The idea of „Learning from Experience“ is discussed in detail in the following article: