Effective Engineering e-Newsletter – 5/22/2003
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eN-030522:
Keep Your Eyes on THE GOAL!
By
Tom Dennis – President, Effective Engineering [tdennis@effectiveeng.com]
If you ask a typical engineer, “What is THE
GOAL of the company?”, you’ll typically get answers like, “to
build the best product”, or “to beat our competitors”, or “to
be the best”, or something of the like.
If you ask someone in marketing the same question, you typically get
answers like, “to provide the best value to our customers”, or “to
provide the best product at a great price”, or “to win”. Ask some more idealistic employees and you may get responses
like, “to help serve the community”, or “to build
environmentally friendly products”.
Ask yet others and you’ll generally get similar types of responses. While all of these answers may well be desirable, they are
not THE GOAL. Achieving THE GOAL
may enable these to happen, but unless THE GOAL is achieved, these other
outcomes are really meaningless. What,
then, is THE GOAL?
THE GOAL of any company IS TO MAKE MONEY!
If your company doesn’t make money, then, over the long run, you
can’t build the best product, you can’t beat your competitors, you can’t
be the best, you can’t provide the best value, etc.
If you don’t make money, you won’t be around long enough to achieve
any of these outcomes. Instead,
your doors will get padlocked, and all of your employees will find themselves
without jobs. This simple fact of
life, that a company must make a profit, is, sadly, not obvious to a lot of
people. Nor is how they can have
an impact on making this happen.
I have read a lot of business books over the years, some good, some not so
good. Some stick with you, some
fade away to distant memories. I
also happen to enjoy reading novels, primarily mystery novels.
I think that is why one business book in particular stands out and
remains my favorite of all times. It
has a great message and teaches great lessons; however, beyond that, it is
written in the form of a novel, with mysteries to be solved, and leads the
reader along in the story to solve the mysteries.
I think it’s great. This
book is “THE GOAL: A Process of Ongoing Improvement”.
While the book tells its tale from the perspective of a manufacturing
organization, the lessons it teaches apply equally well to product
development, and, in fact, most operations within any company.
It’s a quick read, and I strongly encourage people to read it.
The main thrust of the book is that all efforts in a company should be in
support of THE GOAL. To make
money, a company needs to increase its net profit, while increasing its return
on investment, and increasing its cash flow.
While this is true, it is not obvious to people in the trenches how
they can help make this happen. In
the case of manufacturing, which is detailed in this book, this is achieved by
increasing throughput (defined as the rate the system generates money through
sales), while reducing inventory (which is defined as all of the money
invested in things intended to be sold), while reducing operational expenses
(which are defined as all the money spent to turn inventory into throughput).
The key is identifying the bottlenecks that reduce the flow through the
system. These bottlenecks
determine the overall system flow. The
costs per hour for a bottleneck are the hourly costs of the entire system, not
the costs of the individual pieces flowing through that bottleneck.
What is required is to balance the bottleneck flow with market demand.
While this sounds complicated, it really isn’t, and the book does a
terrific job of taking you through it. Goldratt
is the creator of the Theory of Constraints, which he describes here very
well.
Achieving THE GOAL in product development means delivering products on or
ahead of schedule, while maintaining or improving product quality, while
keeping product and development costs within or below budget (see eN-021107
– Ineffective Engineering Costs You Time, Money, and Customers!,
eN-021121 – Late Projects Kill Companies,
eN-021205 – Poor Quality Products Imply a Poor
Quality Company, and eN-021219 –
Too Many Cooks Spoil the Broth).
Key to this is identification of and taking action on the bottlenecks
that reduce the flow through the product development process.
As with the manufacturing examples of the book, bottlenecks determine
the overall system flow, and what you want to do is to improve the overall
system throughput. Improving the
flow through the bottlenecks can significantly increase the flow through the
overall product development process. However,
improving the flow through non-bottlenecks will do nothing to increase the
flow through the overall product development process.
A system of local optimums is not an optimum system at all; it’s a
very inefficient system.
The first step, therefore, is to identify the bottlenecks.
These are generally not hard to find.
Identify places where work is piling up; this is generally a
bottleneck. Or, identify places where work can’t proceed because of
missing pieces; the sources providing those missing pieces are generally
bottlenecks. Do some
investigation to verify that these are real bottlenecks and not showing up
because of other real bottlenecks.
Then, see what can be done to attack the bottlenecks.
You may want to take resources from a non-bottleneck and apply them to
a bottleneck (see eN-030327 – Do Jobs Right;
Assign the Right People!). You may want to modify the product development process flow
to reduce or eliminate the bottleneck (see eN-030313
– Move the Rocks and People Travel Faster). You may want to find
tools that specifically address and improve the bottleneck flow (see eN-030410
– Use the Right Tools to Do the Job Right).
Think through other ways as well.
Keep in mind, however, that when you reduce or eliminate a bottleneck
one place, another will likely take its place.
It is an ongoing process to identify new bottlenecks as the process
evolves. I will address
bottlenecks, and what to do about them, in more detail in a later
e-Newsletter.
Just remember that everything you can do to increase the flow through the
bottlenecks will increase the flow through the entire product development
process. And doing that, while
improving quality, and reducing costs, will result in achieving THE GOAL.
______________________
“THE GOAL: A Process of Ongoing Improvement”, by Eliyahu M. Goldratt and
Jeff Cox, North River Press, Inc. © 1984 & 1986.
Copyright © 2003
Effective Engineering Consulting Services, All Rights Reserved
