Summary of Why Change?

In summary, the literature review on the failure rate of change initiatives found that regardless of the type of change (with the exception reported in the study on TOC projects), whether it was implemented within the private or public sectors, and/or how many inspiring successes have been reported related to that type of change, change/improvement initiatives are far more likely to fail than to succeed. Studies that have been repeated, such as the Chaos Report on IT Project Failure rates, also show that despite the significant insights gained and widely reported as to the consequences and causes of these failures during previous studies, the failure rate has not changed measurably, making it a much safer option for stakeholders to resist change or pay "lip service" during the launch but walk away saying "it will never work."

TABLE 15-2 Summary of "Why Change?"

Table 15-2 provides a summary of "Why Change?" in the format used in a TOC analysis, which includes a clear problem statement (the gap) and the undesirable effects (UDEs)-the effects that stakeholders would complain about that makes it difficult to close the gap (solve the problem).

However, what should be changed to eliminate or reduce these UDEs in the way managers identify, plan, execute, and audit CI and other change initiatives?

What to Change?

Introduction.

The fact that executives and managers keep trying new strategic or process improvement and other change initiatives despite their abysmal rate of failure is, as per Samuel Jackson's famous quote, "Like second marriages, a triumph of hope over experience." On the other hand, it may indicate just how much pressure top managers face to improve the performance of their organizations. The large failure rate of improvement methods triggers the classic innovator's dilemma (Christensen, 1997)-most innovations fail, but companies that don't innovate might die.

No wonder there have been calls such as "Innovate or Evaporate" (Tucker, 2002). But why are many necessary changes not implemented or implemented in time (errors of omission) and why does the high failure rate of implementing change persist (errors of commission) despite our evolving understanding of the cause-effects that govern ongoing success or failure of organizations? This is the question we will try to answer in this section.

Finding the Core Conflicts within Continuous Improvement and Auditing

In science, there is general consensus that by "defining a problem precisely, you are halfway to a solution" (Goldratt, 1990, 37). Goldratt proposed a method called the "Evaporating Cloud" (EC; sometimes referred to as a Conflict Cloud or Conflict Diagram) to provide a practical mechanism for "defining a problem more precisely" by verbalizing the unresolved problem as an unresolved conflict in trying to satisfy two different sets of necessary conditions within the same system. By understanding the conditions that create the conflict (underlying erroneous assumptions about the system and behavior of its parts), we can gain insight as to what few changes will be needed to solve the core problem-the few changes that would "evaporate" the core conflict cloud of the system and therefore reduce or even eliminate the performance gap and related UDEs. Figure 15-4 shows an example of the core conflict in deciding which organizational structure to use-the conflict of centralize versus decentralize. In order to achieve success (A-The common objective in the conflict), managers must ensure the organization is efficient (B-a necessary condition for success). In order to ensure the organization is efficient, management feels pressure to centralize (D-Assumed prerequisite for satisfying the necessary condition of be efficient)." At the same time, to achieve success the organization must be effective (C-another necessary condition for success), which results in pressure to decentralize (D'-Assumed prerequisite for satisfying the necessary condition of be effective). However, if they centralize too much, some stakeholders will complain about increased bureaucracy and slower decisions (the negative consequences of jeopardizing the need for be effective or "Not C"), which they believe can be corrected by decentralization. However, if you decentralize too much, other stakeholders will complain about increased noncompliance and duplication or waste in common resources (the negative consequences of jeopardizing the need for be efficient or "Not B"). This method of using the conflict cloud to better define the problem helped in this case to understand that the real problem is the unresolved conflict resulting in oscillation between centralization (to prevent noncompliance and waste) and decentralization (to prevent bureaucracy and slower decisions). This centralize/decentralize conflict and its consequences can be seen in many organizations today and will continue, until this conflict can be broken.

FIGURE 15-4 Example of core conflict within an organizational structure.

However, what are the unresolved core conflict(s) faced by managers related to achieving ongoing growth and stability in their organizations? Step 1 in the process to "define the problem more precisely as an unresolved conflict or set of conflicts" is to identify the UDEs or generic bad decisions related to the errors of omission and commission in CI and auditing: 1. Not changing when you should or changing when you should not-mistakes in deciding on When to Change.

2. Implementing the wrong change (e.g., unimportant/nonurgent changes) or not implementing the right change-mistakes in deciding What to Change.

3. Implementing the right change in the wrong way (e.g., without full consensus or not fully resourced)-mistakes in deciding How to Change.

4. Not correcting or stopping (a change) as soon as possible when we recognize one of the above three mistakes were made-mistakes in auditing changes.

Step 2 simply involves verbalizing the actions/decisions related to each of these UDEs as part of an unresolved conflict. In Box D, we write the action we feel the most pressure to take when dealing with the problem. Box D' represents the (opposite) action that caused the problem. Boxes B and C are the needs each action is trying to satisfy (or the needs that will be jeopardized if the actions in D and D' are taken) and last, Box A is the common objective or goal for that system or subsystem. As an example, if the UDE/problem is a growing performance gap, then D-the action to deal with the problem-is "Change now" to satisfy a need (B) of "Improve Performance/Stop Decay." The opposite action (D') is "Don't change now" to satisfy a need (C) of "Maintain Stability/Personal Security" and the common objective is "Ongoing Success."

Figure 15-5 shows the three generic (core) conflicts for when to change, what to change, and how to change (including when to stop a change).

Mistakes of omission (when or what not) and commission (what and how) are closely linked. Although mistakes of omission can simply be due to ignorance (e.g., when the change needed is unknown or counterintuitive), the main reason people make mistakes of omission is that they fear making mistakes of commission (Ackoff, 2006). From the outside, it frequently appears as if the assumptions on which such fears or claims of "not knowing" are based are not rational. Therefore, to prevent these mistakes, we need to identify what assumptions are ultimately driving the wrong decisions when faced with these conflicts and then find a way to show that these assumptions can and should be challenged.

Finding a Simple and Systematic Way to Break Conflicts

Leonardo da Vinci (14521519) said, "All our knowledge (and decisions) has its origins in our perceptions (our assumptions about reality)." The decisions relating to when to change (and when not to change), what to change (and what not to change) as well as how to change (and how not to change), and whether to stop or rework are influenced by our individual and organizational assumptions or "paradigms."

With the TOC Thinking Processes (TPs), the key to finding any breakthrough solution is to identify, invalidate, and remove one or more of the "erroneous" or limiting assumptions that block us from breaking the conflict (what to stop thinking or doing) and to replace it with a "more valid" assumption that will enable achievement of a better win-win (what to start thinking or doing). The simplest and frequently most effective and efficient way to find such erroneous assumptions is to focus on the conflict arrows within each of the core conflict clouds (Barnard, 2007) i.e. Why D jeopardize C, why D' jeopardize B, why D and D' is in conflict and why there is not another way (E) to satisfy B and C.

FIGURE 15-5 Core conflicts related to knowing when, what, and how to change.

Challenging Assumptions Related to WHEN (and WHEN NOT) to Change

There will be disagreement on when to change and when not to change as long as some stakeholders believe it is not possible to change or that they are doing the best they can (due to an assumption of "a constraint that is out-of-my-control") or that the change is not necessary (due to an assumption of "we still have time"). To break this conflict, we need a reliable way to validate (or invalidate) that the all constraints can be overcome and that we don't have any more time (without risking serious consequences).

Challenging Assumptions Related to WHAT (and WHAT NOT) to Change

There will be disagreement on what to change and what not to change as long as some stakeholders believe that more is always better, that every local improvement will result in a global improvement, or that focusing scarce resources on a few high-leverage opportunities is too risky or not fair (i.e., we should capitalize on all improvement opportunities). To break this conflict, we need an acknowledgment that management must focus their scarce resources on high-leverage changes, which requires a way to differentiate between all the many parts (of a complex system) that can be improved from the few that must be improved now to get more goal units.

Challenging Assumptions Related to HOW (and HOW NOT) to Change

There will be disagreement on how to change and how not to change as long as some stakeholders believe that the earlier we start, the earlier we finish-an assumption that is true only when we are not bad multitasking. Other related assumptions that will result in this type of conflict is whether to wait until we get full consensus or can fully resource the initiative, or when some believe that failure is bad and therefore any attempts to audit or stop any changes not making the planned progress should be resisted. To break this conflict, we need a way to validate (or invalidate) that starting new initiatives (that share resources with existing initiatives) sooner will not simply result in both the current and new initiative finishing later (see Chapters 3, 4 and 5 on the effects of bad multitasking). Or further, that not reviewing or not stopping initiatives that are not delivering will be a lose for all stakeholders especially when these initiatives consume scarce resources.

Identifying Limiting versus Enabling Paradigms in Continuous Improvement

We can classify the types of assumptions that need to be challenged by organizations wishing to continuously improve based on the five generic improvement challenges (Barnard, 2007) faced by managers of any form of complex system.3 The assumptions and related beliefs used by managers to decide how to best deal with these five challenges can turn the challenges into either obstacles (that lock-in current performance) or opportunities that will allow managers to see and unlock inherent improvement potential within their organization. The five challenges include: 1. How to deal with constraints, especially those considered "out of your control," when setting targets and expectations for improvement.

2. How to deal with the inherent complexity of your organization, especially when deciding where to focus your improvement efforts and scarce resources or when trying to predict the impact of changes on the organization as a whole.

3. How to deal with strategic and day-to-day policy or resource allocation conflicts within your organization between stakeholders from the same or different parts of the system, especially in environments where there is significant distrust.

4. How to deal with the uncertainty and potential risk when having to decide on which changes are needed, what the impact of these changes will be (on achieving more goal units), when to start these changes (to not trigger bad multitasking or resistance to change), and when to stop a change if there are insufficient resources or it is not delivering the expected benefits (errors of detection and correction).

5. How to deal with "bad behavior" of people that has resulted or could result in significant UDEs for the system, especially in cases where the way we deal with such people could have other repercussions (e.g., union strikes, etc.).

We have a choice as to which set of assumptions (paradigms) we use to make decisions related to these five challenges and on what we focus as a result. Figure 15-6 provides a summary of the limiting (traditional/conventional) versus enabling (systems approach/TOC) assumptions or paradigms that govern how a manager will deal with these five challenges and whether the challenge is viewed as a major obstacle or a major opportunity on which to be capitalized.

1. We can assume that constraints are inherent (limiting) or that there is always inherent potential for improvement-that all constraints can be overcome (enabling).

2. We can assume that the best way to improve complex systems is to break up these systems into simpler parts and improve each part (limiting) or instead, that the best way is to find the inherent simplicity-the constraint in physical flow or the few root causes that explain most UDEs in any system-the leverage points of the system (enabling).

3. We can assume that the best way to deal with conflicts is to compromise or focus on the win for you even if it causes a winlose (limiting) or we can assume that a winwin is always possible when we collaborate to move from "me versus you" to "us versus the problem" (enabling).

4. We can assume that there is inherent certainty by looking for optima points according to some textbook formula (limiting) or we can assume that since uncertainty is inherent, we should rather find a logical solution and a "good enough" starting point and use feedback to detect and correct cases of "too much" or "too little" (enabling).

5. We can assume that bad choices or bad behavior are made by bad people and that we should get rid of such people (limiting) or that since we believe that people are good, we assume that bad choices or behavior are made by good people with bad assumptions, so we rather find and get rid of the bad assumptions.

Summary of What to Change

There are three generic conflicts managers face in deciding when, what, and how to change to achieve ongoing success for their organizations. Within each of these conflicts, there are key assumptions that can and need to be challenged to enable managers to know how to break these conflicts in a win-win way. These "limiting" assumptions when used to make decisions on how best to deal with constraints, complexity, conflicts, uncertainty, and bad choices can result in errors of omission, commission, detection, or correction. A new set of "enabling" assumptions is proposed by TOC (and other systems approaches) that can help prevent these management errors. The famous line of Qui-Gon Jinn of Star Wars: Episode I-The Phantom Menace fame can summarize the enabling assumptions, "Your focus determines your reality."

FIGURE 15-6 Limiting versus enabling paradigms to deal with five improvement challenges.

Focus on everything that can be improved and the possible becomes impossible. Focus on the few things that must be improved now (to get more goal units), and the impossible becomes possible.

What do we mean by focus? Simply doing what should be done and not doing what should not be done-the opposite of the mistakes or errors of omission (not doing what should be done) and errors of commission (doing what should not be done), which provides the simple answer to "What to change?"

The next section explores the answer to the question "To what to change?"

To What to Change?

Introduction.

To answer "To what to change" in a TOC analysis, we have to answer four questions which we will apply to our analysis on designing a holistic CI and auditing system: 1. What are the criteria we should use to judge a real breakthrough solution?

2. What is the direction of the solution that will break the core conflict and prevent (or at least reduce) the major undesirable effects within the current reality we are trying to improve on?

3. How do we translate the generic solution into a specific solution for various applications?

4. What changes will be needed to prevent the new solution from causing unintended negative consequences (potential UDEs) through either its failure or success?

Criteria to Evaluate a New Solution