SMU MBA ASSIGNMENTS

Answer: The theory of constraints (TOC) is a management paradigm that views any manageable system as being limited in achieving more of its goals by a very small number of constraints. There is always at least one constraint, and TOC uses a focusing process to identify the constraint and restructure the rest of the organization around it.

TOC adopts the common idiom “a chain is no stronger than its weakest link”. This means that processes, organizations, etc., are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the outcome.

A constraint is anything that prevents the system from achieving more of its goal. There are many ways that constraints can show up, but a core principle within TOC is that there are not tens or hundreds of constraints. There is at least one but at most only a few in any given system. Constraints can be internal or external to the system. An internal constraint is in evidence when the market demands more from the system than it can deliver.

The model can be expressed as a simple 7 step process.

 

 

 

The seven steps determine the strategy and supporting tactics in an iterative or cyclic manner.  The first 5 steps each use a thinking process tool, step 6 uses buffer management.  Steps 1 & 7 essentially set the direction of the company, and steps 2-6 set the direction of the solution and supporting tactics.

 

If you click back to our discussion on the cloud page in Tool Box you will find a paragraph called “The Cloud and the OODA Loop” have a quick look at that and then page back here.  It might help crystallize a better understanding of the structure of the diagram above.

Let’s, then, have a look at each of the steps in the model in turn.

 

Determine the Paradigm

The key to this methodology is the use of an intermediate objectives map.  An intermediate objectives map is a pre-requisite tree without the obstacles.  It uses necessity-based logic to map cause and effect, in this case the goal, necessary conditions and critical success factors of the organization at some period into the future.  As such it establishes the question “why change.”  Step 2 addresses “what to change,” steps 3 & 4 address “what to change to,” and steps 5 & 6 address “how to cause the change.”Let’s draw a generic intermediate objectives map to show the relationships for the first step.

We read this as follows; in order to reach the goal we must have the underlying necessary conditions.  In order to have the necessary conditions we must have the underlying critical success factors.  We Must!  It needs to pass the “we must” test to be a necessary condition.  This produces a strong vision of the future requirements.  And yes, organizational values can be incorporated into necessary conditions or critical success factors.

It has been said that if you don’t know the goal of your organization, then that is the constraint of the organization.  The strategic intermediate objectives map — step 1 of the constraint management model for strategy — allows you to develop and define the goal and the necessary conditions of the organization.

 

 

Analyze the Mismatches

The intermediate objectives map doesn’t, however, survive in this form in the final product.  It is just the starting point.  From this starting point it becomes easy to produce a current reality tree that lists the symptoms of the gap between where we are now, and where we should be now or in the future if we want to support the vision in the intermediate objectives map.  Senge called this gap creative tension (5).  For Boyd the mismatches and discontinuities that the gap represents are to be celebrated; Hammond summed this up as follows.  “It is the mismatch, the lack of fit, the incongruity, that is the spur to creativity.  It is our recognition of it and ability to contend with it and make something of the opportunity that determines our success or failure, our prosperity, the quantity and quality of life itself (6).”  Recognizing the mismatch is the heart of the OODA loop and the heart of the Constraint Management Model for Strategy too. Of course the current reality tree is the tool that allows us to examine mismatches with unparalleled ease, and moreover drill down to the underlying cause.  Let’s draw a simple example of a current reality tree.

 

The symptoms are expressed as undesirable effects, building back to an underlying core problem.  This is a sufficiency-based logic diagram.  We read this from top to bottom as; if we have an undesirable effect it is because of the underlying undesirable effect.  Reading from bottom to top would be; if the underlying undesirable effect, then the overlying undesirable effect.

 

 

Create A Transformation

Reducing our symptoms or undesirable effects to one core problem, or one core conflict, or even a few select critical problems allows us to deal with these using clouds.  We set out to remove the core problem or break the core conflict with a new assumption about reality — an injection, or if you like, a countermeasure.  We create a transformation.

 

 

Design The Future

We can take the injection or injections that we developed above and use them to build back to a future reality tree, making sure that we negate or overcome all the undesirable effects that we presented in the current reality tree (and that we don’t create any more).  We also need to include and incorporate the critical success factors, necessary conditions, and the goal that we produced in the first step, the intermediate objectives map — but here it is now converted from necessity-based logic to sufficiency-based logic.We can show this using our rather Spartan example from above.You can see the basic shape of the current reality tree with its previously undesirable effects now converted to desirable effects (and one entity removed completely).  Of course reality isn’t so symmetrical when it comes to drawing current reality trees and future reality trees.  Nor need there be a clear demarcation between the desirable effects and the critical success factors.  They may well be intermixed.  In fact it is the whole composite that is our future reality tree.

 

However what hasn’t been shown here is that in essence the bare branches of our previous necessity-based logic intermediate objective map (step 1) can, indeed should, be fleshed out in-full with additional “leaves” of sufficiency-based entities.  It has been left in its original “bare necessity” for clarity here.  The injections are our tactics — they were developed using the cloud method. The future reality tree is our map or our design of the future.  Now, all we need is a plan to enable us to execute our tactics in order to allow them to unfold as we require.

 

 

Plan the Future

The basic planning tool of Theory of Constraints is the pre-requisite tree — sequence of intermediate objectives that must be implemented to ensure that the injection can be actioned.  These intermediate objectives are the detail of our tactics that support the strategy as per our design of the future.

 

Let’s redraw our simple example, keeping our color coding from above, and adding several intermediate objectives prior to each injection. So, in order to implement our example strategy to support our goal, we must implement two injections — they could be new ideas, new policies, whatever.  Injection 1 requires that 3 intermediate objectives be met first.  Injection 2 requires just 1 intermediate objective.  All the intermediate objectives must be met in order for the strategy to proceed. A sequence isn’t a plan by itself.  For a complete plan we must also add timing to the sequence.  The pre-requisite tree sequence is however a perfect pro forma framework for a Critical Chain project management plan.  Critical Chain is to project management what drum-buffer-rope is to manufacturing — check it out.  There are references to this method listed in the bibliography.

 

 

Deploy the Strategy

We have mentioned planning and control several times in these pages.  Critical Chain is the planning stage of project management.  Buffer management is the control function.  If you recall from our discussion of supply chain and manufacturing buffers, they really are an exception reporting device.  Buffers and their critical placement are the mechanism that makes Theory of Constraints logistical applications so damn robust.  Again check the Critical Chain references if you are unfamiliar with this application in order to see how buffer management is applied in this situation.

 

 

Review the Strategy

The last step serves two purposes.  One is the evaluation of the current plan.  The other is a less frequent and more “big picture stuff” — a periodical review to make sure the direction that the company is taking is indeed the one that the company wants to take.

 

 

 

Q2. Explain the balanced scorecard approach which provides important information to allow the overall strategy of an organization to be reflected in specific performance measures? 10 marks (300-400) words