Today is, we called VUCA, what is required of corporate management is strategic to overcome two seemingly contradictory elements, "antinomy", such as "short term and long term" and "change and stability", and to grow stably.
This is the answer that the world standard management theory has derived after a huge amount of empirical research, such as "Innovation Dilemma," "Ambidexterity," "Dynamic Capabilities," and "Knowledge Management (SECI model)." However, "management theory", is "The Theory" which is a study of many empirical cases and is made into a rule, it is not easy to put it into practice as it is, and a standard framework is required separately to practice.
"Dynamic Flow Management (DFM)" advocated by our company is a concrete methodology to utilize the rules of these management theories and lead to "management results", and at the same time, we have practiced it for 20 years. It is a practical theory that makes the best use of the "TOC (Theory of Constraint)".
I will explain the following 6 parts from now on.
Table of Contents
1. Rethinking TOC
The TOC (Theory of Constraints) developed by Dr. Eliyahu M. Goldratt (1947-2011), and described in the novel "The Goal" which became a big bestseller in Japan (2002), it was Satoru Murakami, the president of our company, who was the first person to practice and spread the idea in Japan in 1997, far before the translation was published.
To begin with, TOC is a generalized evolution of the Japanese Toyota Production System (TPS), and TOC solutions have been developed since the mid-1980s. The core of the TOC was a very "Simple" and "Natural" idea that "the capacity of the system cannot increase more than the capacity of the bottleneck process (CCR).
The TOC developed on the basis of this "Natural" principle has brought remarkable results and benefits to the production floor. The activities of Murakami (GSC) and his colleagues also made great progress in improving the production process only by suppressing the basics of the concept.
Since then, TOC has continued to expand the way of understanding and handling "constraints", and has been developing concrete methods to make various activities inside and outside the company focus on "constraints", as constraints (bottlenecks) are the key to corporate profits. However, it seems the areas directly covered by the method are scattered in the operation management areas such as production and projects or in the problem solving area because since the developer, Dr. Eliyahu Goldratt, passed away at the young age of 64,.
As a result, TOC seems to be a collection of different methods, and it lacks a "decisive factor" on how to apply it in practice, so, some instructor may recommend reading the novel "The Goal" many times. It is one of the background of the development of our Dynamic Flow Management.
2. TOC is "Dynamic" in the first place
Dynamic means that the state or configuration changes according to the situation, or that it has the flexibility to make choices according to the situation. There is a phenomenon called "moving bottleneck", where physical constraints (bottlenecks) move around in a factory, TOC was developed on the premise that constraints change one after another.
As Dr. Goldratt argues in his article, "Standing on the Shoulders of Giants," the environment that TOC assumes is one in which, depending on the environment of the market and products, is tight and supply cannot be met in time (internal constraints) or sales are poor and the purchasing power of the market becomes a constraint (external constraints). This is the environment that TOC assumes, and TOC was developed to deal with the high volatility environment that the Toyota Production System cannot handle.
As you know, constraints are only one thing if you cut out the static moment of "now," but they have a "dynamic" nature that moves around randomly with various factors in a continuous time axis. Think so, we can understand that "Constraints" are physical factors that determine the capability of a system, and that they are neither good nor bad in themselves, there are simply exist. The following are the "Five Focusing Steps", which are shown as the basic of TOC in "The Goal".
The Five Focusing Steps are often emphasized in terms of mental (philosophical) attitude, such as "Focus on Constraints" and "Continuous Improvement" (POOGI), but in fact, this cycle itself is the principle to correctly respond to the ever-changing constraints and it is truly "dynamic".
In fact, this cycle itself is a principle and principle for responding correctly to ever-changing constraints and is truly "dynamic.
IDENTIFY the system's constraint
EXPLOIT the constraint
SUBORDINATE everything else to the constraint
ELEVATE the constraint
REVENT INERTIA from becoming the constraint!
Today, the situation has become more confusing, and VUCA is attracting attention as one of the key words to describe the times beyond the TOC. VUCA is an acronym for "Volatility," "Uncertainty," "Complexity," and "Ambiguity," and refers to the fact that the environment surrounding everything is becoming increasingly complex, making it extremely difficult to predict the future. This is very different from the environment envisioned by TOC. As a result, the world of manufacturing must not only cope with "variability" but also deal with "uncertainty" that is greatly amplified by "complexity" and "ambiguity.
3. Points of agreement and differences between TOC and management theory
It has been 50 years since TOC was introduced, but there is a point that is not known to many people. It is that "constraints" are visible "physical" entities, but it is always "human behavior" that creates the constraints.
In this sense, TOC is a collection of methods that span the fields of "natural science," which deals with physical constraints and utilizes the knowledge of "scheduling theory such as MRP and OR (Operations Research)", and "social science" which deals with the behavior of humans and organizations. Some people explain TOC as reproducible science in the field of "social science," but I think this is completely different from the reality for the reasons mentioned above.
On the other hand, business administration is also a discipline that elucidates the universal nature and mechanism of thinking, decision-making, and behavior of people and organizations, and it is known to be a pure "social science" field that utilizes the knowledge of the disciplines of economics, psychology, and sociology. Although TOC and business administration are slightly different in some areas, they have something in common in that they are trying to be "science".
According to Professor Dr. Iriyama of Waseda University Business School, the purpose of Theory is not to describe the what, but to answer the "How", "When", and "Why".
(The quote is from a paper by Professor Samuel Bhachakra of Cornell University: 1989)
"How" refers to causal relationships such as "X → Y." It is a proposition that indicates the relationship between X and Y. If X is true, then Y will occur. When" refers to the scope and conditions under which the theory is applicable, and is a statement that clarifies the scope of application of the theory based on its assumptions and conditions. And the most important thing is to answer "Why". In short, even if you show causal relationships like "How", if you don't clearly explain "Why", it is not a theory.
Therefore, Management Theory aims to present the laws of truth in business that apply universally to many companies and organizations. It is, of course, not enough to simply say "the bottleneck determines the output of the system (how)," but the "why" and "when" must be clarified as "concretely" as possible.
4. What happens when Dynamic Flow Management takes root in an organization.
It is human behavior that creates many problems, but we are not completely rational beings, and there are many reasons behind our behavior, such as "assumptions (cognitive bias)," "evaluation," and "ties (profit-and-loss account).
The diagram above shows ”Basic Structure of Constraints” as we see it, and we can see that the existence of a set of "visible superficial problems" and "invisible core problems" causes many problems and reduced throughput in the "system".
The point of our "Dynamic Flow Management" is that by using this "basic structure of constraints" as a frame for the approach to change, it is possible to clearly answer the organization's specific (How, Why, When) questions. It is making possible to carry out reform in an extremely logical way.
As mentioned above, it is "human behavior" that causes various problems, but by analyzing the various reasons behind the behavior and reforming them as a set, it is possible to reform "complicated people" and various "organizational ties". At the same time, it will be possible to create a "system" that can respond quickly to change.
5. What GSC has been practicing for 20 years
For the past 20 years, GSC has been providing consulting services for reforming the three domains of "People", "Organizations", and "Operation System".
One of the typical out-come of our 20-year history is that our client companies always develop core human resources who will lead the next generation. This is not only because people are nurtured through performance success, but also because it clearly shows the "flow" that improving the "business structure" dynamically changes the organization, products, and business, and as a result, human resources are nurtured.
It is said that most of the "problems" that arise in today's VUCA environment are "vague" and "uncertain," and that Japanese companies and organizations often prioritize to make decision, such as "atmosphere" or "place," over solving problems. Based on such characteristics of Japanese companies, we have continued to take the approach of "BA(place)" creation centered on "co-creation workshops" since our founding.
In our workshops, we first build "human relationships" that connect people to people and organizations to organizations, and then proceed with reforms and improvements based on trust. Then, based on this, we use the TOC flow application (e.g. S-DBR and DBM or CCPM) to change the "Business System" and improve the flow of goods and information.
Through these activities, "The Team" will bridge the "knowledge gap" to realize knowledge management that turns "Tacit knowledge" into "Explicit knowledge".
The logical background for this is the "SECI model (knowledge management)" proposed by Dr. Ikujiro Nonaka, Professor Emeritus at Hitotsubashi University, and the "A core theory of success" put forward by Professor Daniel Kim and others at MIT.
The SECI model is a framework for systematically managing the tacit knowledge (knowledge and skills) possessed by each member of an organization, making it the organization's property as "Explicit knowledge," and nurturing new knowledge from it.
The "A core theory of success" clarifies the process and mechanism by which organizations continue to achieve results and move toward success. It is a way of thinking that in order to improve the "quality of results" of an organization, the "quality of relationships" among the members of the organization should be improved first, even if it seems to be a roundabout way. Therefore, in order to achieve organizational results, the first step is to improve the "quality of relationships" among the members of the organization, and then sequentially improve the "quality of thinking," "quality of action," and "quality of results.
The key to success in future-oriented activities is to first break the "vicious circle of the past" by actively creating a "BA (place)". In other words, the functioning of the "A core theory of success" is a prerequisite for the functioning of the SECI model, and at the same time, if the SECI model starts to work well, the relationships in the organization will improve and results will be achieved.
6. Three points of Dynamic Flow Management
"Dynamic Flow Management" achieves a dramatic increase in the speed of change and value creation by dynamically recombining and continuously improving the following three flows according to the environment.
1) Business Flow
Business flow innovation means to increase the actual speed of business, or in other words, to maximize throughput, and to realize two things at the same time: to width of the river by promoting orders and to increase sales and to speed up the business flow in shorter lead time.
The activities to increase the width of flow are TOC marketing, and the activities to speed up the flow (operations management) are a combination of "TOC flow application methods" such as S-DBR, DBM, Lean CCPM, etc., which can significantly improve the actual performance and ROI.
2) Knowledge Flow
In order to achieve efficient manufacturing in a short lead time, various information must be shared among related parties without delay, and quick problem solving is required. The "co-creation workshop" is a concrete place that embodies our domain. The most important point of this activity is that the participants themselves play the leading role and carry out the activities while thinking about the themes and ideal forms of the problems and issues. The experts (Consultant) play the role of imparting knowledge and supporting the participants' proactive implementation together with the management, aiming for both "management results and growth of people and the organization through the accumulation of practical knowledge. Under such environment , it is a difficult to see the ”reality" correctly.
However, in the workshop activities, the members can naturally implement the Three realism (Sangen-Shugi Principle) ”GENBA (Actual place)” ”GENBUTSU (Actual part)” ”GENZITU (Actual situation)” by looking together.
Then "recognition alignment" and accumulating their perceptions, thereby turning tacit knowledge into formal knowledge and further increasing the knowledge flow.
3) Activation (Organizational) Flow
Many companies today, operate "organization by function", in which divided into different elements and subdivided into different specialties. However, this organizational structure does not work effectively in today's rapidly changing world. What is required is the flexibility to dynamically reconfigure teams in response to changes.
The aim of the activation (organizational) flow is to unleash the full potential of the organization, and the key to this is to create a state in which each member takes ownership for the goal and the work can proceed based on the trust between members. This will create harmony within the organization, and through the implementation of reforms, the flow will improve, people will grow, and organizational knowledge will be accumulated.
#Theory of constraint #Reform #Innovation #Improvement #Flow #Toyota production system #TOC thinking process #Goldratt
