Theory of Constraints: Repairing Your Broken Link

We are quickly approaching half time for FY 2022/2023. How is your business performing? Does your leadership team understand, and are working towards, your greatest priorities for the next 6 months? Perhaps you need to refocus, and look for the bottleneck in your company, the one thing that will have the greatest impact. 

The Theory of Constraints is a management theory introduced by Eliyahu Goldratt in his book “The Goal”. It explains that within every organisation there is always going to be a constraint, also known as a bottleneck. And this bottleneck is where you need to focus your attention in order to achieve your goal. 

Imagine a piece of chain. There is always going to be a weakest link. The link that has corroded, or deformed. The link that isn’t as strong as all of the others. By improving all of the other links, but ignoring the weakest, nothing will change. You need to repair the weakest link. 

By implementing the Theory of Constraints, organisations can more effectively scale up their business, achieve financial goals, and deliver the best outcomes to customers. Removing the bottleneck will give you better control over operations, less inventory and reduced conflicts between team members. 

Ideally, a business should eliminate all constraints. However, as one constraint is removed, another one will arise. Therefore, the process of removing constraints is an infinite one. Goldratt has broken down the theory of constraints into 5 steps. 

Step 1: Identify the constraint

Every business is going to have a constraint. It is the single part of the overall process that limits the ability to achieve your goal. It could be a person, a process, a machine, a policy etc. In general, a service business is going to be trickier to identify than a manufacturing business. During this step, be sure to identify the ONE constraint that is causing the largest negative impact on your business, and leave all others.

Step 2: Exploit the constraint

Deciding how to exploit the constraint will be different based on whether the it is internal to the organisation or external in the market. In this step, you want to try to resolve the constraint, or reduce the impact of the constraint to make quick improvements using either your existing resources or resources which can be acquired easily. 

Step 3: Subordinating Everything to the Constraint 

Review all other activities in the process or system to ensure that they are aligned with and truly support the needs of the constraint. Avoid changes anywhere that may overload the constraint, and instead work to support the constraint.

Step 4: Elevate the constraint

If the constraint still exists, consider what further actions can be taken to eliminate it. Look beyond your existing resources and be prepared to make capital investments. If necessary, you may need to review all of your business processes. You will remain at this step until the constraint has been resolved (ie, the weakest link has been repaired).

Step 5: Repeat with a new constraint

When you resolve your bottleneck, or your weakest link, a new one will arise. That is the nature of business. The theory of constraints is a continuous improvement cycle, so one must never become complacent. 

As Scaling Up Coaches, we can help you refocus your business. Get in touch with our team for a free consultation. 

TED BONEL, SCALING UP COACH – STRATEGY & EXECUTION BUSINESS ADVISORS

Need assistance to help your team achieve your objectives to grow your business? Contact me at tedb@strategyandexecution.com.au to schedule a free 30-minute discovery meeting.

ABOUT STRATEGY & EXECUTION

We have been providing organisations and their leaders with facilitation support and executive education focused on strategy development and strategy execution for more than 20 years. Using business models such as Scaling Up, Exponential Organizations, E-Myth Mastery, Outthinker etc, we support organisations seeking to create or refine excellent strategies and execute them quickly and effectively.

Our expertise is based on a mixture of wide business experience, effective tools as well as a great deal of consulting and executive education. Our approach to working with clients is as unique as our specialist focus. We always seek to challenge our clients’ thinking – but equally are unafraid to roll up our sleeves and help execute the ideas we help generate. Learn more about us here or view our upcoming workshops and events.

If you are preparing for strategy development and/or a strategy implementation challenge and are committed to creating value for your organisation, we look forward to hearing from you. Contact us now