In a previous section, we listed the gap and major UDEs that make it difficult to close the gap in both CI and auditing of organizations. Therefore, the criteria of a new solution (the desired effects, or DEs) can simply be stated as the opposite of the gap and UDEs defined in "Why change?" The DEs for a holistic CI and auditing system include: 1. Know where to focus scarce resources for the best result (despite complexity).

2. Provide a way to quantify the likely impact of changes (despite uncertainty).

3. Raise expectations especially with top management to ensure full support (despite obstacles).

4. Each stakeholder can actively contribute to ensure the change will result in a system improvement.

5. No complacency, inertia, or fear of failure.

6. Ongoing alignment/synchronization of contributions toward the goal of the organization.

7. Ensure a higher success rate of change initiatives (rather than 70 percent failure rate, we should target and achieve a 70 percent success rate).

8. Reduce the time to detect and time to correct for wrong assumptions or poor execution.

Direction of Solution to Breaking the Continuous Improvement Conflicts

To ensure that we don't make the common mistakes of omission and commission (within CI) and mistakes of early detection and correction (within auditing), we need a focusing mechanism that helps us identify what should be done (to achieve more goal units) and what should not be done (since it would waste resources or even decay performance).

TOC provides a simple and effective solution to this problem-no wonder that more and more organizations have been looking to TOC to provide them with the focusing mechanism needed to focus all improvements on what is good for the company as a whole (Breyfogle, 2008).

TOC's Five Focusing Steps

Goldratt (1990a, Chapter 1) defined a simple Five Focusing Steps (5FS) process for achieving continuous and step-change improvement that, if followed, would also likely prevent the errors of omission and commission as well as errors of detection and correction. The process is based on the simple premise that an organization can be viewed as a chain and, therefore, any organization's performance is limited by its "weakest link" or system constraint. To improve the organization's performance, management should therefore focus their limited time and resources on finding ways to "strengthen the weakest link." TOC's 5FS process enables an organization to continuously exploit and elevate its inherent potential that can be "unlocked" or "created" through focusing scarce resources on identifying, exploiting, and elevating the performance of its current system constraint. TOC's 5FS are as follows: Step 1: Identify the system constraint (the weakest link).

Step 2: Decide how to exploit (not waste the potential of) the system constraint.

Step 3: Subordinate everything else to the above decision.

Step 4: Elevate the constraint.

Step 5: If, in the previous steps, a constraint has been broken, go back to Step 1. WARNING: Do not allow inertia to cause a system constraint.

Frequently, the most difficult step is Step 3-subordinate everything else (all processes, policies, and measurements) to the decision on how to better exploit the system constraint-because it can result in local versus global optima or short-term versus long-term conflicts.

For example, if the constraint is in factory capacity, it might make sense for the factory to produce in larger batches to reduce setup and waste. However, if the constraint moves to the market and the company is starting to lose sales due to the fact that their lead times are too long or their unwillingness to accept smaller orders (both consequences of a policy to manufacture in only large batches), then the factory will face a new conflict. Should they now change the old rules (or not) to subordinate to the requirements of the new system constraint-the market-by producing smaller batches. Unless this conflict is broken, the company will not be able to exploit fully the market potential.

A similar conflict can arise when the company enters Step 4-elevate the system constraint. The company might have a policy in place not to hire any additional people or not to approve any capital expenditures, which, unless this conflict is broken, will block the company from elevating its system constraint and therefore constraining its improvement potential. Figure 15-7 shows a graphical representation of the 5FS and the related exploitation and elevation conflicts organizations might face when realizing they would have to challenge and possibly change some of the rules to better exploit or elevate the real system constraint.

FIGURE 15-7 Graphical representation of the TOC 5FS (Barnard, 2003).

But you may ask, what about the "non-constraints?" Should they not be improved?

The system constraint is the only part of the system for which "more is better" is valid. All other parts (non-constraints) have to maintain their performance at a level of "good enough." If their performance is below this level (too little), it will compromise the performance of the constraint and therefore needs to be corrected as soon as possible. We call an improvement at a non-constraint "local optima" if the improvement will raise the performance of the non-constraint significantly above the level of "good enough" (too much) and/or cause the performance of the constraint to deteriorate. Therefore, we should never make the mistake of thinking that TOC's 5FS says non-constraints are not important. Non-constraints are necessary conditions but have to be managed to perform within their required "threshold" level of good enough-not too much, but also not too little. If they are performing below their threshold, they must be improved.

To determine what this threshold level is for non-constraints, TOC uses the concepts of capacity, stock, and time buffers. If the buffer for which a non-constraint is responsible (e.g., Human Resources department to ensure a sufficient pool of skilled craftsmen; Procurement to ensure sufficient stock and acceptable lead times of raw materials and purchased parts) is in the "red," this indicates that one of two changes in the starting conditions occurred. Either the demand has increased (which means the capacity of the non-constraint might have to be elevated) or the supply performance is less reliable than assumed or is not sufficient to maintain the buffer (which means the non-constraint's performance must be improved). At the same time, if a buffer is maintained without too much red zone penetration, it means the performance of the non-constraint is good enough should not be improved further until red zone penetration becomes too much (more than 10 percent).

In summary, the 5FS provide a generic process for achieving CI in any organization, and should be the focusing mechanism for all process improvements.

FIGURE 15-8 Applying TOC's 5FS to a brewery.

Applying the 5FS to Achieving CI at a Brewery

Figure 15-8 shows how the 5FS can be used within a TOC-based CI process at a brewery to: Identify the flow constraint (fermenting vessels-FV); Decide how to better exploit the flow constraint (by reducing capacity lost on setups and cleaning, planned and unplanned maintenance, starvation and blockage, and excess/over-production); and Determine the subordination actions-the change initiatives (projects) needed to better exploit the constraint (faster cleaning-in-process or CIP project, critical equipment reliability improvement project, brew house cycle time reduction project, adding a shift pool to buffer against absenteeism, adding a "War Room" to report on the status of buffers every shift, and deciding on corrective actions and a project to reduce batch sizes to reduce over-production).

Each of these subordination action decisions was the result of breaking a previous subordination conflict that blocked better exploitation of the system constraint. For each project, the impact on Throughput (T), Operating Expenses (OE), and Inventory (I) are calculated as well as the time to implement duration to determine the value unlocked (Value = Benefit Costs). This one-page summary is referred to as a "Constraint Exploitation Sheet" that can also be used for capturing, communicating, and auditing the impact of the constraint exploitation change initiative.

Applying the 5FS to Develop a Business Strategy-the Viable Vision Process

The most effective way of using the 5FS is when it is applied at the organizational level. In his recent public "Now-and-into-the-future" seminars, Goldratt recommends that in the case of for-profit companies we should start with the assumption that (at the highest level) the constraint for profitable growth is simply management time (bandwidth). But how do we apply the 5FS to management time? To help identify where management should focus (not waste) their scarce time, we should view the market as a strategic constraint and apply the 5FS accordingly.

This means that "Step 2-Decide how to exploit the system constraint" is really deciding what conditions, if satisfied, will get customers to pay more or buy more (i.e., the conditions for building, capitalizing on, and sustaining a decisive competitive edge). As a result, "Step 3-Subordinate everything to the above decision," requires that process improvement initiatives be focused on only those processes, policies, measurements, or behaviors that block the company from satisfying the conditions for building, capitalizing on, and sustaining a decisive competitive edge.

In 2005, Goldratt shared the process he uses himself for analyzing companies to determine which few changes are needed now for a company to become an "ever flourishing company."-a company with exponential performance growth and improved stability. He called the process the Viable Vision (VV) Process and it includes the following six questions: 1. What is the VV growth/improvement target for the company?

2. How much do sales have to increase in order to reach the VV growth target (calculated by determining what price and/or volume increase in sales is possible and subtracting the associated increase in totally variable cost)?

3. Is the existing market large enough to allow the required increase in sales (through either price or volume increase) to be achieved with better exploitation or will it require elevation of the market constraint (with new products into existing markets or existing products into new markets)?

4. How can this increase in sales be accomplished (what conditions, if satisfied, will enable increased price and/or sales volume and what changes are needed to satisfy these conditions)?

5. How much additional capacity, Operating Expenses, and Investment will be required to support this level of sales (by exploiting before elevating)?

6. Can the company (and its suppliers) support the necessary change(s) required to achieve the growth targets (its management, systems, suppliers, cash, etc.). If not, what additional changes are needed to ensure that non-constraints don't turn into constraints?

This process is aligned with the focusing philosophy that has been applied by many successful CEOs such as Jack Welch, ex-CEO of General Electric. He stated (Pande et al., 2000, 6) that, The best Six Sigma Projects begin, not inside the business but outside it, focused on answering the question: How can we make the customer more competitive? What is critical to the customer's success? Learning the answer to that question and learning how to provide the solution is the only focus we need.

The VV Process is also in line with the need to understand the cause-effect relationships of which internal changes are needed to increase and sustain higher value to customers and shareholders recommended by Kaplan and Norton (2002, 69) in developing a strategy map on which a balanced scorecard can be based (a cause-effect map showing the relationship between financial, customer, internal and learning and growth perspectives). At the top of the strategy map should be the financial targets (how shareholders will benefit). Below this should be the competitive edges (how customers will benefit and why customers will pay more or buy more). Below this will be the necessary changes in processes and policies to build these competitive edges, and at the bottom of the strategy map should be the necessary enablers to support ongoing improvement and learning.

TABLE 15-3 Simplified Generic Continuous Improvement Process Using TOC's TP

TOC's Thinking Processes

The TPs of TOC were invented to help managers when they get stuck with finding an answer for one or more steps of the 5FS. These TP can also be used in isolation to deal with day-today management challenges,4 but are generally used in combination as part of a holistic analysis on an organization or specific subject matter. Goldratt (1990a) originally grouped the analysis/change process into three questions, starting with "What to change?" However, this might create the impression that all stakeholders already agree on the need for change. Since both a literature review (e.g., Kotter, 1990) and field experience show that this is not always a reasonable assumption, we should add "Why change?" as Step 1 if we want to use the TP as a generic analysis and CI and auditing process (Barnard, 2003). In addition, the third (and last) question proposed by Goldratt was "How to cause the change?", which does not link back to "Why change?" to create a "closed-loop" framework for a process of ongoing improvement. To close the loop we should add, "How to measure the change and achieve a POOGI?". The Five Question Change Framework provides a generic CI process as summarized in Table 15-3.

These five questions provide a simple analysis and consensus roadmap for any CI initiative and can generally be presented and applied in a five-day workshops5-one day per step as long as all the key stakeholders are present.

Step1 (Day 1) aims to get agreement on the new systems approach (transition from the conventional limiting to the enabling paradigms of TOC). It also includes getting agreement on the answer to "Why change?" for the system and its stakeholders being analyzed by identifying the system's performance gap, consequences of not closing the gap, and the list of UDEs of each stakeholder that make it difficult for them to contribute to closing the gap.

Step 2 (Day 2) aims to answer and gain consensus around "What to change?" by getting each stakeholder to verbalize their conflict in addressing their UDEs, showing how these are examples of a deeper core conflict, and then identifying possible erroneous assumptions and related policies and measurements that block closing the gap effectively and efficiently.

Step 3 (Day 3) is dedicated to answering "To what to change?"; achieving consensus on which new assumptions and related policies or measurements will break the conflict; remove the UDEs; and close the gap without creating new UDEs.

Step 4 (Day 4) is focused on answering "How to cause the change?" by identifying the possible risks (negative branches and implementation obstacles) and how to prevent or overcome these risks by constructing a sequenced implementation plan.

Step 5 (Day 5) is focused on agreeing how specific contributions will be measured and recognized as well as how stakeholders will know that the gap is really closing, which provides the answer to "How to measure the change and create POOGI?"Figure 15-9 shows a graphical representation of how to use the TOC TP as a generic CI and auditing process.

TOC's Functional Management Solutions and Their POOGI Mechanisms

The simplified TOC TP analysis roadmap also provides a simple framework for capturing the full TOC analysis and solutions for each of the main functions within organizations: Operations, Finance, Projects, Distribution, Marketing, Sales, Managing People, and Business Strategy. For each of the applications, the simplified TP roadmap with the five change questions can be used to communicate a summary of the TOC analysis. This answers the five change questions, including the gaps in prime measurements (how we know improvement in this area is really needed), the typical UDEs that make it difficult to close the gap, the core conflicts, the erroneous assumption and related "old rule" or core problems that should be challenged, the new TOC insight to break the core conflict and related change in policies, measurement, or process (new rules), the steps to implement the change, and finally the POOGI.

Figures 15-10, 15-11, and 15-12 show the summary of the TOC analysis and CI opportunity and solution for managing Operations, Projects, and Distribution/Supply Chain. Appendix A contains the TOC analysis and CI opportunity and solution for managing Finance, Marketing, Sales, People, and Business Strategy.

These templates can be used as an auditing tool to identify CI opportunities within your organization. If your organization suffers from the performance gap and the UDEs stated in any of the "Why change?" boxes, it is likely that the associated TOC solution (Answers to "What to change?" "To what to change?" and "How to cause the change?") can provide a simple and powerful way to unlock inherent potential. The way to measure and achieve ongoing improvement and the mechanisms needed to achieve this are defined in the "How to create the POOGI" boxes.

Details of TOC's Buffer Management to Focus Ongoing Improvement Efforts

In "Standing on the Shoulders of Giants," Goldratt (2009)6 suggests that the key to the success of Henry Ford and Taiichi Ohno was the fact that they built their management philosophy and planning and execution rules around what Goldratt calls "the four concepts of supply chains": 1. Improving flow (or equivalent lead time) is a primary objective of operations.

2. This primary objective should be translated into a practical mechanism that guides the operation when not to produce to prevent overproduction. (Goldratt showed that Ford limited space; Ohno limited inventory.) FIGURE 15-9 Barnard's new simplified TOC analysis roadmap.

FIGURE 15-10 Applying the five questions: Managing operations the TOC way.

FIGURE 15-11 Applying the five questions: Managing projects the TOC way.

FIGURE 15-12 Applying the five questions: The TOC analysis on managing distribution/supply chains the TOC way.

3. Local efficiencies must be abolished.

4. A focusing process to balance flow must be in place.

The fourth concept, "a focusing process to balance flow (between demand and supply)" is needed to identify where to focus process improvement. Goldratt says that Ford used direct observation (of where flows were delayed), while Ohno used the gradual reduction of Kanbans (the number of containers and then the gradual reduction of parts per container) as per his famous "river flow over the rocks analogy"; reduce the water level-the Kanbans-and the rocks that stick out are the parts that have to be improved next to improve and balance the flow of products through the supply chain. For the more generic case where space and stock buffers cannot be used (i.e., where time buffers7 are needed to control flow release), the mechanisms used by Ford and Ohno have to be expanded.

Goldratt proposed two simple mechanisms to identify where further process improvements are needed to improve the flow (reduce flow time and increase flow rate) and to balance flow of products or services with demand (if the demand changed). The first "rough mechanism" (simple and fast) is similar to that proposed by Ford-simple observation of where WIP is building up in the system. The "bottleneck" that is limiting further improvements in flow is behind the WIP buildup and that is where process improvement (to better exploit scarce capacity) or capacity elevation needs to be focused to improve flow.

The second (more sophisticated mechanism) capitalizes on the buffering mechanism used by TOC. If a specific order or project task's time buffer goes into the red, or a specific material or product's stock buffer goes into the red or black (stockouts), then not only should this order or task be prioritized and expedited to ensure due date or availability commitments are not jeopardized, but we should also record "What (resource) the order or task was waiting for?" (Knight, 2003). On a frequent basis (e.g. weekly), these reason codes are then analyzed using Pareto to determine which resource caused most of the "reds" and "blacks." This resource is where process improvement or elevation should be focused for the next period. This second focusing mechanism is now the recommended focusing method by Goldratt8 for the TOC way of managing operations, managing distribution, managing projects, and managing the sales funnel. An example of the details of the focusing mechanisms proposed by Goldratt for driving systemic CI can be found in the later section "Using the S&T to Monitor Execution."

Lessons from CI Methods Developed by Ford and Ohno and Other Giants

Ford and Ohno were probably the first to find a systematic way to break the CI conflicts. Both Ford and Ohno ensured that a culture of continuous experimentation was put in place within each department and within every level of the organization to identify improvement opportunities that would help improve flow and reduce waste and then to encourage development and testing solutions to do processes better, faster, simpler, and with less waste. In both organizations, management was responsible for ensuring that departments focused their limited resources on those improvement opportunities that would help them realize their vision for reducing the total time from raw material to finished product with the least waste (Ford) or to reduce the total time from order to receipt of cash with the least waste (Ohno's vision for Toyota).

In Ford's (1926) Today and Tomorrow, he gives an indication of his CI approach when he says, "We do not make changes for the sake of making them, but we never fail to make a change once it is demonstrated that the new way is better than the old way" (1926, 53) and "our method is essentially the Edison method of trial and error" (1926, 64).