THE GOAL is a business novel written by Eliyahu M. Goldratt, a business consultant who brought to attention the THEORY OF CONSTRAINTS- a system of focusing on bottlenecks, which is the most important factor limiting the outcome, and Jeff Cox, the co-author, who has written numerous other business novels. Be it business or any goal that we are running towards, we often forget to crystallise the outcome.
And like so many of us Alex Rogo, the plant manager in this novella has forgotten what his intention is for that particular plant, and the losses continue to go deeper after his supervision there for over six months. Bill Peach, the division vice president gives Al (Alex Rogo) three more months to turn things around or the plant would be shut down and the workers will be laid off.
In attempts of trying to save this plant from its dire situation, Al keeps boiling things down as to what the root causes might be, how to fix them, and identifies the real goal of any business. He uses a combination of analytical, critical, and creative thinking to zero in on the errors they have made and comes up with solutions to turn things around for his plant.
This book will hint to you where you are going wrong, show you the blind spots that you fail to see, which on correction can help you move faster towards your goals, help you build successful systems for maximum productivity, and will direct you to focus on high-priority tasks first by zeroing in on the bottleneck areas. So what is the THEORY OF CONSTRAINTS? How can we apply this principle to our lives to achieve our goals? Read on, to know more.
LIFE AS A PLANT MANAGER:
Alex Rogo, a 38year old plant manager at UniCo, married to Julie, and a father to Dave and Sharon is under constant stress to change the dire situation of his plant. He is given three months to turn things around for his plant by the division vice president Bill Peach, or the plant is going to be shut down. With his focus and attention on his work 24*7, the relationship with his wife, Julie is strained and his marriage is on the rocks.
One day, Al bumps into Jonah, his physics professor in the airport. There, Al tells Jonah that he's going to Houston to talk about robotics, as his plant has the most experience with robots. Jonah asks if the robots have increased the productivity of the factory, to which Al replies "sure they have." "I think it was a 36% improvement in one area" he says. Jonah continues asking "so your company's making 36% more money?"
To which Al says "well...no". "It was just in one department that we had a 36% improvement." Then Jonah says "Then you didn't really increase productivity." He begins to use his hunch to ask Al if the robots have decreased inventory cost and if they are shipping products before the deadline. To which Al replies that the inventory cost has not been reduced and that there are overdue shipments, but installing the robots have improved the efficiency of the plant.
To which Jonah replies that if the company is not making more money by reducing the inventory cost and shipping more products, the plant is not efficient. Al tries to defend saying that the measurements show otherwise. But Jonah continues to tell that the measurements are inaccurate, and he asks Al "what is productivity?"
Al says "there's a formula you use, something about the value added per employee equals..." Jonah shakes his head and asks "from your own experience, what does it mean to be productive?" To which Al says that it means to accomplish something. Jonah asks "but you are accomplishing something in terms of what?" "in terms of goals", says Al.
Jonah says that productivity is the act of bringing a company closer to its goal. To which Al replies "one of my company's goals is to increase efficiencies. Therefore, whenever I increase efficiencies, I'm being productive." Then Jonah says "your problem is you don't know what the goal is." Al is stunned for a second after which he says again that the goal of a factory is to produce products efficiently. Jonah says "wrong". But now he has to leave for his flight, so the conversation ends. But he encourages Al to keep thinking about it.
KNOWING WHAT THE GOAL IS:
Al continues to ponder about what the goal might be. He was sure that the goal of a manufacturing plant is to produce products efficiently. What else could it be right? So he keeps thinking about efficiency, and quality, R&D, technology, and sales. Then it dawns on him "MONEY." "Peach is going to shut us down because the plant is costing the company too much MONEY." Now that he figured out the goal of any business, he needs to come up with ideas on how to increase income by selling more quality products efficiently.
One morning Alex wakes up to find his son Dave dressed up to go for a Boy Scouts hike, for which he had volunteered to lead. While leading the boys in a line, he understood the true meaning of DEPENDENT EVENTS and STATISTICAL FLUCTUATIONS, which Jonah was conversing about in New York. He also remembered Jonah saying that a BALANCED PLANT is what every manager strives for, but it will be at a loss as the INVENTORY and OPERATIONAL EXPENSE GOES UP, while THROUGHPUT GOES DOWN.
But first Al needs to ship the products that are long overdue. He informs the team to use a system in which high-priority tasks and shipments are focused on first. He discusses with his team the THEORY OF CONSTRAINTS- which is to focus on the bottlenecks and lets everyone working in the plant know about this priority system.
To make it easier, he introduced a colour coding system, in which the items that are tagged red should be prioritised first. And only after finishing the red colour coded items, the workers can move on to the green colour coded items. He informs that the NCX-10 and the HEAT-TREAT are the two important areas to focus on.
By making all the staff work on high-priority shipments- from most overdue to less overdue, he was able to clear the backlog of 12 shipments. After this success he was able to understand that the way to increase inventory is to target the most important tasks first by zeroing in on the bottlenecks-which are the areas that limit the outcome the most.
And instead of performing the easier tasks/the ones that can be produced efficiently in large quantities but do not improve the outcome of the plant much, Al instructs the staff to work on the most difficult tasks/chronic pain points which brings huge results. So Bob Donovan, the production manager finds and gets an old machine called the "ZMEGMA", which if activated even one shift a day could increase the output of the parts required for the NCX-10 by 18%.
As larger orders start coming in, Al finds it difficult to cope with the product demand whilst having low inventory. While pondering, he is interrupted by a call from Jonah, who informs Al that he will not be available for advice over the next few weeks. Al informs Jonah about the problem he's facing and Jonah advises to reduce the batch size which in turn would reduce the inventory in half.
So Al asks John, the division sales manager to create a new marketing strategy, which lands him a customer who wants to buy 1000 products in two weeks' time. But given the existing commitments, the demand placed is more, so Al and his team come up with the strategy to deliver 250 products per week and the customer was all in for the contract. Soon Mr. Burnside, the owner increases the contract from a 1000 to 10,000. and their sales increases.
Long story short the plant does not shut down as it improves by 20% that particular month, and Bill Peach, the division vice president is now promoted and Alex takes his old position as division vice president. Once promoted Al promotes his team to higher positions and is being invited to other divisions to teach their plant managers on the strategies to implement. Meanwhile, Al reconciles with his wife Julie, by asking her on a date and winning her all over again.
Al and his team review the process they have been implementing to create a formula so that it can be used as an approach to the problems they have been facing. Soon they come up with a FIVE STEP FORMULA FOR P-O-O-G-I: Process Of Ongoing Improvement
Identify the system's bottlenecks.
Decide how to exploit those bottlenecks.
Subordinate every other decision to STEP 2 .
Elevate the system's bottlenecks.
Repeat.
To translate the THEORY OF CONSTRAINTS to our lives, most of the time we spend our time and energy on tasks that don't take us far. Instead, we need to PRIORITISE on the tasks that moves the needle for us; tasks that can take us places. Instead of focusing on the low-priority tasks, we need to zero in on the 1 or 2 BOTTLENECKS that if dealt with can skyrocket our success.
This book is a bit deep, but nothing tedious or difficult to understand. Anyone can understand the book though it's a business-related topic. Not only that, it gives you profound information about the things we are doing wrong unknowingly in an interesting, storytelling kind of way, with the introduction of various characters and relatable life circumstances.
I recommend you to read the book as I got many "AHA MOMENTS" while reading the book. It's not only helpful for your business but literally any area of your life that you are striving to improve.
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