No one likes spending money on maintenance. Take your car in for a service and you’re not only left with no transport, you have to pay for the privilege to boot. In fact, there’s only one thing worse than planned maintenance. An unplanned breakdown.
I recently had the chance to talk at one of the premier asset management conferences in Australia. It felt like being in a guild—in my case, of engineers and asset managers. People like us are charged with ensuring that billions of dollars of assets—whether aircraft, manufacturing plants or mines and refineries—can deliver safe, reliable, cost-effective outcomes.
[Listen to audio version, read by David Hodes]
Conferences such as these are excellent places to share knowledge. But there’s one drawback. Asset managers aim to get better and better at the theories, methods and tools of asset management. Likewise, project managers focus on improving their mastery of the theories, methods and tools of project management. But too often, in this laudable desire to learn and grow in a given domain, something goes missing: the systems view. The risk is that you get ever better at chopping down trees before ascertaining whether or not you’re in the right forest.
The first question any business needs to ask is what is its goal? In the industrial settings where I work, the ultimate goal is to consistently increase the return on shareholders’ funds. This is not to be confused with having a grander purpose, with which you will inspire greatness in the hearts and minds of your team. And, of course, you must also delight your customers and collaborate tirelessly across the value chain.
For a commercial enterprise, making more money now and in the future isn’t a crass goal—it’s oxygen. It’s the ticket to doing all the great works the leaders within the organisation can imagine. Good competitive returns encourage the shareholders to keep investing—in people, in ideas, and in systems. Bringing clarity to the goal brings alignment to the team; you all know what you are aiming for. Just as a sports team plays to win the league or the tournament, so too does the business play to win in its chosen markets.
My own contribution to helping my clients make more money is to systemically improve production. By finding the place of greatest leverage, we can increase the system’s effectiveness as a whole. Given this goal, we can then turn to the Theory of Constraints and, especially, what TOC’s inventor, Eli Goldratt, called the Five Focusing Steps. His original formulation called these steps ‘identify’, ‘exploit’, ‘subordinate’, ‘elevate’ and ‘repeat’. In my early consulting days, I found these words sent the wrong message. People don’t want to subordinate themselves, or be exploited. Language matters. I therefore developed a different, and more memorable, acrostic: the 5-Step FOCUS.
This is not as simple as it sounds. It all depends on the horizon you’re looking at. With a strategic lens, it means properly understanding all elements of your value chain and choosing where you want to place the control point. It’s usually the most expensive piece of equipment, requiring the most investment to upgrade, such as a mill at a mine, or the aircraft of an airline.
In the case of a project, it will be the critical path—that is, the longest sequence of tasks from the beginning to the end of the project. A gain of 10% at the constraint is a gain of 10% for the system as a whole, whereas a gain of 10% anywhere else gets you nowhere closer to our goal. So it’s worth spending the time to properly find your constraint, or design it deliberately into your system.
Once you’ve determined your constraint, you need to get the most out of it. This step usually involves some kind of schedule optimisation. Before you go off and invest more money in plant and equipment, you should make sure you’re getting the most out of what you already have. Any unplanned breakdowns not only incur unnecessary costs, they have the potential to create serious disruption to throughput. Thus, managing your assets in a disciplined systematic fashion is critical to optimising flow through the bottleneck.
Once you’ve squeezed all the capacity you have to the limit—for example, hot handovers at lunch or shift breaks, quick changeovers and an attitude of not having a moment to lose—there is still another step you can take. You can decide which products you will make, and which will be cut. It’s fairly simple to calculate the throughput delivered per minute or hour of the constraint’s capacity, called the product octane. Consider the consequence of dropping ‘viscous’ products in favour of those that flow through the constraint more readily.
In the project environment you would be looking for cases where work can be done in parallel rather than sequentially. You would look to see if the effort estimates and task durations are fair dinkum and whether or not you are prepared for action with the five rules of high-performance execution.
The object of any component part of a system is not to maximise its own production, but rather to support the optimisation of the system as a whole. You cannot accomplish this feat if everyone is pulling in different directions. Priorities need to be coordinated and everyone must be willing to subordinate their own activity to do what’s best for the agreed-upon constraint. It matters little if a mine’s drilling and blasting is 100% efficient when the mill can only handle 70% of the ore presented to it. And it’s no use to the airline that an overnight check takes four hours instead of six if it all happens in a single shift whilst curfew is on.
All other things being equal, deploying resources onto a non-critical path activity will do nothing to get the project finished sooner. In fact, it is more likely to slow the whole project down as more work-in-process is introduced to the mix, creating clutter, confusion and unproductive multitasking.
In an orchestra, we don’t expect every musician will play as fast and loud as they can to offset the cost of their time and expensive instruments. Of far more consequence, if they are to get the audience to keep coming back for more, is that they play as an integrated unit, collaborating on creating a soundscape to delight and move the audience.
“At the heart of collaboration is effective leadership”
At the heart of collaboration is effective leadership. At the conference, one of the presenters told us the story of how they went about creating a set of competencies for every level of the business—from the shop floor to the boardroom. Included in those competencies were of course the technical skills each person had to have to effectively perform their role. But most impressive to me was how they made the competency include an understanding of the broader context of the business. Everyone would understand how what they were doing contributed to the overall purpose, including a means by which they could see how their specific contribution could be measured, recognised and rewarded.
The specific intent of the design of this competency system was that, as you made your way from the shop floor to the C-suite, you kept building and building on your knowledge of how all those functions adjacent to your own fit together. By his account, this deepening of knowledge created much greater empathy between the functional disciplines and a far more coherent and systemic approach to identifying and solving problems. It called to mind my own Just Work manifesto and I was reassured to recognise these universally applicable tenets playing out so positively in the account given by the presenter.
These first three steps from the 5-Step FOCUS usually produce a productivity improvement of 25% or more. There is no magic in this fact other than the fundamental proposition that constraints govern the rate at which value is created—and there is usually an awful lot of capacity wasted at the constraint. To get an idea of what high-performance optimisation feels like, picture the frenetic activity that goes on in during a pitstop in the Formula 1 grand prix. It is extraordinarily tightly choreographed, with someone stationed at every part of the car, each doing a specific job. They typically perform the whole routine in under seven seconds and know that a second saved in the pits is a second saved in the race. In a sport where races can be won or lost by seconds, this is a crucial consideration.
When you have squeezed all the blood you can from the stone, it’s time to get more stones. But what kind of resource do you need? Of what type, for what time and in which place? And what is the business case that supports the investment?
Once you elevate your capacity, where will the constraint move? Will it be in the supply of critical materials or labour to your link in the value chain? Will it become your ability to produce what the market is calling for? Or, will it be the market itself? Of what use is it to release an additional hull to an airline through a productivity improvement in maintenance if they haven’t thought through what additional routes it will fly? What’s the point of investing in another mill if the mine cannot feed it with the ore it can now crush? And what use is it to invest in reducing the duration of the construction of the Olympic Stadium if its new completion date leaves it lying idle for a year?
Uplifting the constraint is a strategic decision and should be considered carefully. It is a deliberate act which demands careful consideration. Different scenarios may call for different selections and the merits of each should be considered before pressing ahead. After all, to reap the full benefit of a constraints-based approach, everyone within the organisation should be invested in the reasoning of the decision.
Once the investment has been made, the constraint will have moved. If you have done your homework and the market has not moved against you, it will end up where you have designed it to be. This will not be the same place as it was before and thus needs the application of the 5-Step FOCUS to take into account the new circumstance. By starting again, we have locked in a process of continuous improvement.
The change from standard thinking to Theory of Constraints (TOC) is both profound and exhilarating. To make it both fun and memorable, we use a business simulation we call The Right Stuff Workshop.
We’d love to run it with you. To learn more:
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