Last week I was looking for something to read and I found a dusty book on my book shelf titled “The Goal: A Process on Ongoing Improvement” by Eiyahu M. Goldratt and Jeff Cox. This is one of the most influential books I have read years ago when I was a partner at the audit division with Arthur Andersen in Caracas, Venezuela.
Even though this book is in its 20th anniversary edition, the content is applicable to today’s business environment where making effective and informed decisions are key to creating sustainable growth.
The story is about a plant manager, Alex Rogo, whose plant and marriage are going downhill. He finds himself in the unenviable position of having only ninety days to save his plant. He is confused by the misconceptions and fallacies about the production process and he is trying to figure out a way to not only save his career but also save his marriage.
Realizing he had very little time left to make some very important changes, Alex Rogo remembered an old friend and tutor of his, named Jonah, which he had recently bumped into at an airport. They had chatted about the problems of the plant and Jonah asked him some questions that caused Alex to start thinking. Jonah turned into his Executive Coach and show him the way to the right questions and as a result to the right answers.
As a conclusion, there are three fundamental questions Alex needed to answer to have an ongoing process of improvement:
1. What to change?
2. To what to change?
3. How to cause the change?
In other words, understanding your business from a different prospective, evaluating your priorities and the way to measure the progress.
In the book, the goal is to make (more) money, which is done by accomplishing the following:
1. Increase Throughput (sales)
2. Reduce Inventory
3. Reduce Operating Expense
Goldratt defines throughput (T) as the rate at which the system generates money through sales. He also defines inventory (I) as everything the system invests in that it intends to sell. Operating expense (OE) is defined as all the money the system spends in order to convert inventory into throughput (sales).
As you can see there is a common denominator in the formula…money. Money in and money out. The ability to measure the three elements (T, I and OE) is directly linked to obtain the final goal.
Is money the ultimate goal for your business? If so, how are you measuring the money flowing in and out? How are your people aligned with the questions “What to change?” “To what to change?” and “How to cause the change?”
Although this book is excellent in the context of Operations, the “Goal” is to “make (more) money by…” is limited in its focus. Business performance in today’s increasingly competitive market depends on a variety of factors that exist outside the business. These include competitors, external opportunities, customers and the non-customers. Executives need to focus on these things in order to see the bigger picture.
The time to evaluate and answer the strategic questions is now! The time to start measuring your progress towards your goals is now!
Activate Group helps clients maximize their growth performance by providing strategies on the fly, knowledge, and motivation. Contact Pablo J. Perez at (305) 722-7215 or firstname.lastname@example.org
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Some Reference and excerpts taken from The Goal written by Eiyahu M. Goldratt and Jeff Cox.