Why you cannot ignore Theory of Constraints

There are three primary reasons why I believe that businesses that are not considering the Theory of Constraints as core to their management approach, cannot afford to ignore this much longer. These are:

          Results

          Competitive Advantage

          Speed of achieving both results and competitive advantage

Results

The results that are being achieved by organisations implementing Theory of Constraints in their operations, are phenomenal. In many cases these results are beyond what is expected.  Unlike many management improvement interventions, TOC focuses from day one on delivering measurable bottom line results. In TOC, the key question to whether an improvement is delivering results, is whether the business is making more money. In a non-commercial environment it’s about the organization delivering more goal units, e.g. for a hospital, it’s about whether more people are being treated faster and better.

I have read more than a 100 case studies, journal articles and books on TOC. Several of the journal articles were from peer-reviewed academic journals – so they have no inherent interest in over-stating the effect of what they find. In all of this material I have not yet seen a single case where there were not positive results. This is in quite sharp contrast with most other methodologies, where academic reviews normally show a mixture of positive and negative results.

Competitive Advantage

At the core of a successful Theory of Constraints implementation lays the concept of creating the so-called Mafia Offer – thus named because it is literally unrefusable, and because in order to deliver to the promise of this offer an organizational capability is required that is not easily copied by competitors. This capability is built on the item mentioned above – the ability to deliver results.

This literally means that the companies who are first to effectively implement theory of constraints in a certain market, elevate themselves to a position where it is close to impossible for competitors to continue competing against them.

Speed of achieving improved results and competitive advantage

It is not uncommon for companies to spend months, and even years on large improvement projects before beginning to see results. Often those “results” are just internal improvements e.g. a specific department is delivering more on time, or information is more visible throughout the organization, or some efficiency is gained, which doesn’t really result in actual bottom line savings.

With TOC implementations, very often the first internal results are seen within weeks, and business results – real improvement to the bottom line – are realized within months.

Similarly, in many companies the concept of building a real competitive advantage is based on large investments in R&D projects for “the next big innovation.”  Sometimes it succeeds sometimes it doesn’t. The TOC approach of building a competitive advantage is done within months, and typically does not require significant high-risk innovation. It just requires building an operational capability that is not easy to copy – at least not for competitors who are not also implementing TOC.

Are you doing something about TOC, or will you wait for your competition to try it first?

You may, or may not believe that it is possible for any management approach to be this powerful. You may question whether the above statements are based on facts or whether they are merely meant to capture attention. But to simply brush this off without at least taking the time to investigate whether or not theory of constraints is posing a threat, or offering an opportunity to your business, is a decision you take at your own peril. TOC awareness and support is rapidly growing through the world. If you are not the first in your market to adopt it, someone else may very well soon overtake you at a speed that you simply had thought was impossible.

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