tocico 2014 conference introduction to strategy & tactic

Microsoft PowerPoint - Barnard, Alan_Introduction to S&T by DrAlanBarnard_TOCICO2014_V2-FINALTOCICO 2014 Conference
Developed by: Dr. Alan Barnard CEO, Goldratt Research Labs
© Goldratt Research Labs, LLC, 2008 - 2012
2 © 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Workshop Outline
1. Why Change? 2. What to Change? 3. To what to change? 4. How to Cause the Change? 5. How to achieve ongoing improvement? 6. New Applications for Strategy & Tactic Trees 7. Simpler ways to create your own S&T
STRATEGY & TACTIC TREES Background on why & how Dr. Goldratt created S&Ts
• Dr. Eli Goldratt said he created the S&T when he realized that his own company (Creative Output), that were specialist in helping companies overcome resistance to change, became THE company that was the most resistant to change (at least that is how it felt to him at the time )
• It was a real mystery. How could it have happened? • Dr. Goldratt’s hypothesis was that the root cause was mainly (his) poor
communication. • He realized two common mistakes:
− Communicating the WHAT FOR without the HOW and vice versa − Not giving other stakeholders opportunity to understand and help validate
/ challenge hidden assumptions. • How to make a breakthrough in an area, especially those, like STRATEGY, that
most consider an ART…rather than a Science… • …using Classification Correlation Cause-Effect Application
• See: Strategy and Tactics, 2002, By: Eli Goldratt, Rami Goldratt, Eli Abramov
1. WHY CHANGE? What is GAP Gap between the current reality and the expectations when it comes to the planning, execution and auditing of Strategies and Tactics needed to achieve their Goal?
Our Expectations…HARMONY - Clear Vision and linked operational goals - Everyone clear on their and other stakeholders’
contribution to achieving the goal and vision - Responsibility and authority continuously re-aligned
to reduce fire fighting and synchronize execution - No critical policy, measurement, priority or resource
conflicts & no damaging local optima/bad multitasking - No fear of challenging Status Quo when necessary. - Harmony between functions and levels
CEO
COO
FINANCE IT HR
So, what is the “Constraint” that limits organizations to achieve the desired GROWTH, STABILITY and HARMONY?
CEO
COO
Typical Organization…DISHARMONY • No clear vision and/or linked operational goals • Many not clear on their & other stakeholders’ required
contribution to achieve operation goals & vision. • Large Gaps between authority and responsibility causing
frequent firefighting and unsynchronized execution • Policy, measurement, resource and priority conflicts
resulting in local Optimization & Bad Multitasking • Inertia – Fear of challenging the Status Quo • Distrust between functions & levels - scars from the past
faster decisions
Available Information
Available Information
Available Attention Available Attention
Demand vs. Supply
Step 1: Identify the System Constraint …to Achieving GROWTH, STABILITY AND HARMONY (within our Organizations)
WHY IT IS IMPORTANT FROM TOC PERSPECTIVE?
There is a COST and a BENEFIT of PAYING Attention 1. COST – we GIVE UP the benefit of focusing our attention on something or
someone else… 2. BENEFIT – we GAIN the benefit of focusing our attention on this thing or this
person…
What is a common strategy to maximize BENEFIT and minimize COST… We Multitask…we try to give equal attention to the MANY things that demand or can benefit from our attention…but don’t realize the high COST we pay for it.…
WARNING
So how to prevent 3 types of mistakes that waste ATTENTION?
FOCUS on FEW Things that
could really benefit from our limited Attention…and
DON’T MULTITASK
could really benefit from our limited Attention…and
DON’T MULTITASK
Better Exploiting Management Attention Demand vs. Supply
Step 2: Decide how to EXPLOIT the System Constraint … Identify the things that WASTE our Management Attention…
1. DOING things we should NOT do
1. DOING things we should NOT do
Productive use of our Attention
Productive use of our Attention
2. NOT DOING things we should do
2. NOT DOING things we should do
3. Repeating Mistakes by Learning from Experience
3. Repeating Mistakes by Learning from Experience
REDUCEREDUCE HOW? … STOP …
Error of Detection & Correction
2. WHAT TO CHANGE? What constraint and related problems contribute most the large GAP?
Many consider Strategy and Tactic formulation, communication and execution an “art” but Dr Eli Goldratt decided to apply a
Scientific approach to find a simple solution to address the root cause(s).
As with many scientific breakthroughs before, Dr. Goldratt started with simple questions to try and resolve major inconsistencies
related to:
1. What is “Strategy” & “Tactic” and 2. How do they relate to each other? 3. If any Strategy and/or Tactic is “only as valid as its underlying
assumptions”, why are these assumptions never explicitly defined and validated in conventional strategy and tactic formulation and execution methods? Is there a simple solution that can overcome the limitations
of the current approach to Strategy and Tactic?
3. TO WHAT TO CHANGE? What solution could help to significantly close the performance expectation gap within Strategy and Tactic formulation and implementation …to ensure we don’t waste our scarcest resource – management attention?
Tactics
But… 1. Where does “Strategy” end? 2. Where do “Tactics” begin? 3. Is there really a “1:Many” relationship between
Strategy &Tactic(s)?
Conventional View • Strategy is the highest level of an initiative
and defines the overall direction for the organization to achieve a goal.
• Tactics are (lower) details in an initiative and define all the decisions/actions to deploy resources to implement the strategy
Theory of Constraints View • Strategy is simply the answer to the
question: “What for?” - i.e. the objective of a proposed change to achieve a higher goal
• Tactic is simply the answer to the question:“ How to?” – i.e. the specific decisions/actions needed to achieve the objective of this change
Therefore… 1. Strategy&Tactic entities always exist together 2. Strategy&Tactic entities exist at each level 3. Each Strategy&Tactic entity represents a
necessary “change” to achieve the higher level
3. TO WHAT TO CHANGE? The Conventional vs. Theory of Constraints View of Strategy & Tactic(s)
Tactic Strategy
Tactic Strategy
2.2 Title of Proposed Change
The BOXES in an S&T Tree, simply represent the CHANGES we believe are necessary & sufficient and their Implementation sequence in which they should be done (left to right) to best achieve a goal.
When we make the effort to define and communicate not only a title for each change, but also the Strategy (objective or WHAT FOR) & Tactic (required actions or HOW TO) for each change and their SEQUENCE/PRIORITY, it will go a long way to prevent stakeholders at all levels from
1) DOING WHAT WE SHOULD NOT BE DONE and 2) NOT DOING WHAT WE SHOULD BE DONE However, any logical tree (e.g. a S&T Tree) is only as valid as the assumptions on which it is based…yet none of the conventional approaches explicitly define underlying assumptions…
Tactic Strategy
Tactic HOW will this change be achieved?
WHAT FOR? Strategy
WHY? Necessary
WHY? Parallel
Assumptions
WHY is this Strategy possible? WHY will it be difficult/risky? Or
WHY is the Tactic the best way?
WHY? Sufficiency Assumption
WHY is this level of detail not sufficient (i.e. what should next level
be warned about )?
WHY?
So, what are the underlying assumptions related to any proposed change at any level that are normally not explicitly defined or validated?
3. TO WHAT TO CHANGE? Defining not just the WHAT and HOW…but also the WHY?
Meet Project Promises on
BUILD CAPITALIZE SUSTAIN
Rapid Project Completion capability
4. HOW TO CAUSE THE CHANGE STEP 1: DEFINE S&T AS HIERACHY OF PLANNED CHANGES WITH TITLES
H O
W H
AT F
O R
S
T
T
S
T
S
T
Build a decisive Competitive Edge in big enough markets and capitalize on it without exhausting resources or taking big risks
Very High DDP within Budget &
Scope
Growth in # of new Clients & or
Prices
Maintain DDP despite growth
Add Capacity as needed to protect
Sales
Achieve Profitable Growth of 20% pa within 4yrs or less
Bonus Deals from clients that get High Value on
Early Comp
markets
Satisfy Market Need for Early Delivery
Co. relentlessly reduce Project Lead Times
Continuous effort to further reduce Delays
& Task Durations
S
4. HOW TO CAUSE THE CHANGE STEP 2: DEFINE THE STRATEGY (WHAT FOR) & TACTIC (HOW) FOR EACH CHANGE
HOW?
WHAT FOR?
S
T
T
S
T
S
T
Build a decisive Competitive Edge in big enough markets and capitalize on it without exhausting resources or taking big risks
Very High DDP within Budget &
Scope
Growth in # of new Clients & or
Prices
Maintain DDP despite growth
Add Capacity as needed to protect
Sales
Achieve Profitable Growth of 20% pa within 4yrs or less
Bonus Deals from clients that get High Value on
Early Comp
markets
Satisfy Market Need for Early Delivery
Co. relentlessly reduce Project Lead Times
Continuous effort to further reduce Delays
& Task Durations
S
Strategy WHAT is the objective of the change?
The Company has very high due-date performance without compromising on the content or on the budget.
Parallel Assumptions
The Company implements Critical Chain Project Management (CCPM) culture and procedures
Sufficiency Assumption
4. HOW TO CAUSE THE CHANGE STEP 3: DEFINE & VALIDATE WITH STAKEHOLDERS, THE WHAT, HOW & WHYs FOR EACH CHANGE
NOW… FOR EACH CHANGE
WHY (2) is this change possible but difficult/risky?
WHY (3) is this level of detail not sufficient (warning)?
Not meeting promises (especially when hefty penalties are involved) may bring a company to its knees
• Critical Chain Project Management (CCPM) brings most multi-project environments to high due-date performance without compromising content or budget.
• Most compromises on content or budget stem from the pressure to meet the promised due date.
To ensure an outstanding start of a major initiative it is vital that the first substantial actions will result in immediate substantial benefits.
www.harmonytoc.com
RULE 1 - IDENTIFYING & PIPELINING ONLY CRITICAL PROJECTS (ALAP) (decide when and what to do and what NOT to do )
RULE 2 - CRITICAL CHAIN PLANNING & BUFFERING
(Plans that reduce Multi-tasking and FlowTime,)
RULE 3 – EXECUTION MANAGEMENT , AUDIT REVIEW & BUFFER RECOVERY (align priorities, do frequent reviews, check what red
tasks are waiting for and how best to recover buffer & identify & break subordination conflicts )
New Planning
2.1 2.2
2.1 2.2
New Design Rules
RULE 4 –THROUGHPUT ACCOUNTING Always quantify Company wide impact of any local
decision using impact on T (S-VC), OE and I
Global Impact = T (SR-VC) - OE (ROI) I
New Holistic Decision
- VE - VE
25% Faster
5. HOW TO ACHIEVE ONGOING IMPROVEMENT STEP 4: CONVERTING S&T INTO A PROJECT PLAN AND STARTING EXECUTION WITH CCPM RULES, USING THROUGHPUT ACCOUNTING TO QUANTIFY IMPACT OF CHANGES AND CONFLICT CLOUD TO RESOLVE PLANNING AND EXECUTION CONFLICTS
NEW APPLICATIONS IN S&T Types of Strategy & Tactic Trees
1. Transformational S&T − What changes are necessary and sufficient to achieve the desired/required
improvement for the organization/system as a whole and… What should be the sequence of implementation …
− Examples: 5 Goldratt S&T’s, Utah Case Study etc.
2. Organizational S&T − What clarity/changes are needed to the roles and responsibilities and org
structure within an organization to remove or at least reduce what Dr. Goldratt called the “engines of disharmony”
− 1st Experiments: Premier Foods Case Study
3. Content S&T − What clarity/changes to product, project or service design OR to a body of
knowledge are necessary and sufficient to meet its objectives − 1st Experiments: SAP Project Scope, Throughput Acc. BoK, New Car Design,
NEW APPLICATIONS OF S&T Types of Strategy & Tactic Trees
Necessary Assumption Why is the change needed?
Strategy What is the objective of the change?
Parallel Assumptions Why is the change possible Why is the change difficult/risky?
Tactic How will the change be implemented?
Sufficiency Assumption What is this level of detail not sufficient? …as a warning to level below to prevent mistakes (next level doing what should not be done / not doing what should be done)
Necessary Assumption Why is your job (function) necessary to achieve organizational goal?
Strategy What must you (your job function) achieve on a ongoing basis (e.g. effectiveness, efficiency and compliance objectives)?
Parallel Assumptions Why you claim that what occupies your time is necessary and sufficient to achieve your Strategy?
Tactic Headings of what occupy most of your time to achieve your strategy?
Sufficiency Assumption What type of responsibility vs. authority gap “fires” consume your time? …as a warning to level below to help them define what they should do…and not do
Transformational S&T
Organizational S&T
Content S&T
Necessary Assumption Why is a redesign of this sub-system necessary for higher subsystem to perform to its required level / Why can’t we use subsystem from old design?
Strategy What is the required performance of this sub-system/part?
Parallel Assumptions Why do we claim the specifications of the new sub-system will ensure required performance?
Tactic How should the subsystem design be changed (which parts and in what way)?
Sufficiency Assumption Why is this level of detail not sufficient (i.e. why this change also requires a major redesign of sub-system components)
WHY1?
Dr. Eli Goldratt called the symptoms of misaligned and/or conflicting strategy and tactic definition, communication, planning & execution the “Engines of Disharmony”
Engines of Disharmony
1. Not knowing my own required contribution to Goal or not knowing how my contribution will be measured / recognized
1. Knowing exactly how I should contribute …and how my contribution will be measured and./or recognized.
2. Not knowing others contribution or how their contribution should be measured / recognized
2. Knowing exactly how others should contribute …and how their contribution will be measured / recognized.
3. Organizational Conflicts in which “rules” to use to best achieve organizational goal(s). 3. Systematically align “rules” with Goal of the
Organization (replacing local/short term optima with global optima rules)
4. Individual Conflicts due to unresolved Gaps between Responsibility and Authority (e.g. resulting in firefighting)
4. Systematically close Gaps between Responsibility and Authority using “fire-fighting conflicts as the trigger”
5. Inertia/Fear of Failure blocking necessary changes to achieve ongoing improvement
5. Put in place processes, skills and culture continuously improve by exposing inconsistencies and challenging basic assumptions (S&T help make these explicit)
Engines of Harmony How: S&T
APPLICATIONS OF S&T All 3 types help reduce/remove engines of disharmony
NEW DEVELOPMENTS IN S&T Facing Inconsistencies and challenging basic assumptions
1. Too Complicated…how do you do it? 2. Takes too long…we just don’t have time… 3. Only few people can do it…why bother… 4. We spent a lot of time on it…and then didn’t look at it
again
There is no doubt that S&Ts can be very powerful for the formulation, communication, validation and auditing of any change .. YES BUT common complaints are…
Time to FACE this inconsistency…and challenge some basic assumptions….to increase S&T adoption & value…
…. By STANDING on the SHOULDERS of GIANTS
NEW DEVELOPMENTS IN S&T Facing Inconsistencies and challenging basic assumptions
Potentially simpler and faster processes to create S&Ts…than just staring at blank sheet include:
1. GAP Common Mistakes S&T 2. GAP Change Matrix Cloud S&T 3. Using Balance Score Card Strategy Maps… 4. Using Traditional TP to build S&T (Filippo Pescara) 5. Using SWOT analysis (Dr. Danilo Sirias) 6. Others ??
Capacity/ Customers/Products
Capacity/Customers/Product s
Protect
What IT Systems or IT System Change(s) Needed? What Business Process/Policy/Measurement Change(s) are needed?
HYPOTHESIS 1 TO SIMPLIFY S&Ts GAP Common mistakes/UDES at Level 1 S&T
Social Responsibility
GAPSynchronize & continuously improve
Focused Exploit/Elevate to improve & Balance Flow
PLANNING EXECUTION IMPROVE
Poor Buffering /Wasting buffer
Insufficient Protective Capacity
Identifying the Planning, Execution and POOGI conditions needed to continuously Improve and Synchronize Flow…
HYPOTHESIS 1 TO SIMPLIFY S&Ts GAP Common mistakes/UDES at Level 4 S&T
WHEN?
Why Change – The Undesirable Effects, related local and Global impacts of these
Strategy WHAT FOR?
The objective you want to achieve = More of the positives (Strategy 1 + 2) and none or fewer of of negatives (Risks 1 + 2)
Parallel Assumptions
The assumptions challenged in resolving the conflict which includes: • Conditions under which it is possible to achieve all the
positives without risk of Negatives • “Yes, buts” raised by stakeholders and how these can be
prevented/overcome that assisted in deciding on best Tactic
Tactic HOW?
New Tactic to Resolve conflict & address all “yes,buts..”
STEP 1 – WHY CHANGE Define an Undesirable Effect and check its importance
through its Local & System Impact
STEP 4 – HOW TO CAUSE THE CHANGE Everyone contribute by raising YES, BUTS… to improve New solution and turning it into new “Best Practice” S&T node
35
SYSTEM IMPACTSYSTEM IMPACT WHY CHANGE
Local / Dept impact of Undesirables Effect
LOCAL PERF GAPSLOCAL PERF GAPS WHY CHANGE
Summary of Problem or Undesirable Effect
UDEUDE WHAT TO CHANGE
STEP 2 – WHAT TO CHANGE Defining Planning and Execution Conflicts that block
resolution of problem
STEP 3 – TO WHAT TO CHANGE Using 4 WIN:WIN methods to resolve Planning &
Execution decision conflicts
Decision on HOW to resolve conflicts to achieve MORE Positives WITHOUT risk of Negatives using 4 methods
NEW TACTIC NEW TACTIC T1, T2, T1 + T2 or T3
STEP 5 – ADDING BEST PRACTICE TO S&T Add this Best Practice (together with others) to customize/create
your organizational S&T
CONFLICT Action/Decision to
RISK 1RISK 1
Negatives of CHANGE
CHANGE
Positives of NOT CHANGE
Negatives of NOT CHANGE
THREAT THREAT - ON GOAL
YOU to solve?
whole SYSTEM?
facing?
P e r f o r m a n c e P e r f o r m a n c e M e t r i c 1M e t r i c 1
GOAL
Achieving GOAL
Posi ve of NOT CHANGE
HYPOTHESIS 2 TO SIMPLIFY S&Ts GAP Change Matrix Cloud S&T
Achieve Growth and Stability
Capabilities..
Benefits to Customers...
Level 0 Realize Organization Vision
Level 4 …by Equipping our People with these
enablers…
Build Internal Capabilities
Deliver Customer Benefits
Both Balanced Scorecard (BSC) Strategy Maps and Theory of Constraint’s (TOC) S&Ts aim to reflect the “Cause and Effect Logic” for improving Organizational Performance
BSC STRATEGY MAP TOC S&T TREE
Level 3 …which must be Build, Capitalized on
and Sustained
Level 2 …through decisive competitive edge(s) in large enough markets
Level 1 ..by achieving a Viable Vision...
Level 0 Realize “EverFlourishing” company
Level 4 and 5 …by Implementing ONLY necessary &
sufficient Process, Policy and/or measurement changes one by one…
HOW?
HOW?
HOW?
WHAT FOR?
WHAT FOR?
WHAT FOR?
HYPOTHESIS 3 TO SIMPLIFY S&Ts BSC Strategy Maps S&Ts
Financial
BALANCE SCORECARD STRATEGY MAPS Strategy Maps describes how an organization intends to create value for its stakeholders.
©2005 Balanced Scorecard Collaborative, Inc. • bscol.com
The Stakeholder
"If we succeed, how will we look to our shareholders?”
Financial Perspective
"To achieve our vision, how must we look to our customers?”
Customer Perspective
"To satisfy our customers, at which processes must we excel?”
Internal Perspective
"To achieve our vision, how must our organization learn and improve
Learning & Growth
Higher Return on Net Assets
Example of turning Strategy Map into specific objectives and actionable steps
Objective: What this specific
Measure: How
Target: Performance
improvement
Objectives Targets InitiativesMeasures
HOW?HOW?
Flights on time
The example below to illustrates the differences and similarities between BSC Strategy Maps and TOC S&T Trees.
Example Of BSC Strategy Map for Southwest Airlines
Profits & RONA
Grow Revenue
Fewer Planes
FINANCIAL
CUSTOMER
INTERNAL
3.1.1 BUILD
“On-time” DCE
incentives
Edge
Edge
Decisive Competitive Edge
TACTIC: Achieve Fastest Ground Turnarounds
STRATEGY: Capitalize on customer “low price” need
TACTIC: Achieve lowest cost to offer lowest price
STRATEGY: Growth in Profits and RONA
TACTIC: More customers with fewer planes
Crew Scheduling
Crew Scheduling
4.11.2 SYSTEMS
TACTIC U 6S t
STRATEGY: Increase Sales from “On-time” advantage
TACTIC: “On-time” advertising campaign
TACTIC: Align skills & incentive scheme for POOGI
STRATEGY: Sufficient crew always available
TACTIC: Implement Crew Scheduler Software
Appoint Ramp Agent to
delays identified
Develop “Delay TACTIC: Develop “Delay Pareto analysis” system & job function
Example Of TOC Strategy & Tactic Tree for Southwest Airlines
4.11.1 Pareto Analysis Why is the change needed? Necessary Assumption
Considering the complexity and interdependencies of the system, it is difficult to know which delays have the biggest impact on ground turnaround times
What is the objective of the change? Strategy
Critical delays with the biggest impact are identified asap
Why will the change achieve the objective? Parallel Assumptions
TOC’s buffer penetration analysis is an effective mechanism to identify which delays have the biggest impact on lead time A focusing mechanism requires a responsible person to drive it
How will the change be implemented?
Tactic
Develop “Delay Pareto analysis” mechanism (based on TOC’s Buffer Penetration analysis) and appoint Ramp Agent to lead efforts
Summary of S&T Basics
• S&Ts can help us better exploit our limited ATTENTION by defining and getting agreement on WHAT TO CHANGE/FOCUS ON…and as importantly…WHAT NOT.
• The Strategy & Tactic Tree structure is designed to organize and communicate key assumptions of necessity, sufficient and sequence logic and their resulting Strategies and Tactics of key CHANGES to achieve an objective
• There are different types of S&Ts, each guided by different questions • Transformational S&Ts • Organizational S&Ts • Content S&Ts …and probably will discover new applications in the future…
• S&Ts is conceptually quite simple…and can be done by anyone….but that does not mean anyone can do it well…and simple does not mean easy…
• It takes practice, patience and ongoing reviews (with others) to help expose our own blind-spots or bad assumptions…
• We are continuously developing better, faster and simpler ways to benefit from the S&T structure…by STANDING ON THE SHOULDERS OF GIANTS…
ABOUT THE PRESENTERS Dr Alan Barnard (PhD)
Dr. Alan Barnard is considered one of the leading experts in the world in Theory of Constraints (TOC) frequently working with Dr. Eli Goldratt, creator of Theory of Constraints on large and complex projects around the world.
Alan is CEO of Goldratt Research Labs (USA), Director of Goldratt Group Africa (RSA), Chairman of Realization Africa (RSA), Aphos (RSA) and The Odyssey Institute (USA).
In 2009, Alan was awarded a PhD in Management of Technology & Innovation, from the Da Vinci Institute in 2009 with a thesis titled “How to identify and unlock inherent potential within organizations (private & public) and individuals?”.
Alan is a past-President of SAPICS (2000 to 2002) and past-President of TOCICO (2003 to 2005).
He has worked with global companies such as ABB, BHP, Cisco, SAP, Random House Publishing, Tata in the Private sector and also with UN DP, UN WFP and InWent in the public sector on applying for example Theory of Constraints to City Councils in Developing Countries in the Public Sector to help them identify and unlock inherent potential to achieve more with the same resources in less time.
He is currently involved in initiatives to help apply TOC to significantly increase yields in a win:win:win way in agricultural (Africa) and accelerate construction (Japan) and developments of new enabling technologies in high-tech and health sectors (USA and India).
Workshop Summary
• The introduction by Dr. Eli Goldratt in 2002 (Goldratt 2002) of a “new” TOC- based Thinking Process called a “Strategic & Tactics” Tree (S&T) is being viewed by more and more executives and managers, as one of the most important breakthroughs in ensuring that holistic business or organization strategies are defined, properly validated, communicated and implemented to achieving harmony within organizations.
• The S&T can for the first time provide us with a practical process and logical structure for defining and communicating all the necessary and sufficient changes as well as the sequence of implementation of these changes to achieve more goal units for the organization. It not only answers the question WHAT and HOW, but as importantly the WHY.

tocico 2014 conference introduction to strategy & tactic

Documents