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How To Identify & Resolve Business Problems

June 16, 2012

How to Identify Your Business Problems & Tips on How to Fix Them

Do you spend most of your time running around the office extinguishing fires? I’m talking about the kind of problems that you think you’ve solved one week, only to see them resurface a few days later. If you’re sitting there reading this thinking “Yes, that’s me”, it might be because you are addressing the symptoms, instead of the source of your problems.

So, how do you go from treating the symptoms to the cause? The answer lies within the power of visualization.

 

By visualizing your problem with a simple diagram, you quickly and easily gain a systemic understanding of your situation. It becomes much easier to see the relationships between your problems’ symptoms and their root causes. This strategy helps you focus on taking the best actions: the ones that will have the greatest positive effect on your business.

Identifying Business Problems

Identifying business problems is a big part of how you handle the issue of your company not making as much money as it realistically could be. Being able to quickly identify problems within your business is even more important when you’re company is losing money.

 

In many instances, a problem with a business may not be readily apparent from the start. It isn’t uncommon for a problem to go unnoticed until it’s been around long enough to cause some damage. At that point, you and your staff could find yourselves scrambling to deal with the issue so that you minimize the impact.

Even if you manage to catch it quickly, your revenue and market share could suffer just as easily as your reputation with your customers and clients. So how do you go about Identifying Business Problems so that you can deal with them as early as possible?

It’s Important to Ask Yourself Questions

You can’t come up with an answer unless you have a question first. When you’re looking for a way to identify a problem, it helps to ask yourself questions so that you can come up with potential solutions.

 

Let’s say that you have a customer who wants to return something that they purchased from your company. When they do attempt to return it, either you or one of your employee’s messes up the process, making it take longer than it should.

  • Why did it happen this way?
  • Was the employee in question properly trained in the return process?
  • Did they carefully listen to the customer’s concerns?

 

These are just a few of the questions that can arise in a situation like this. Without the right answers, you could not only jeopardize your relationship with this particular customer, but others who come after.

 

Identifying business problems by being able to answer these questions in a way that will only improve the area that’s being questioned is critical to solving a small issue before it has the chance to grow.

 

If you don’t work to appease the customer in the above example, for instance, who’s to say how many ears word of the customer’s negative experience could reach?

 

Without addressing the customer’s problem to their complete satisfaction, you could open yourself up to scrutiny from many, many others in the future.

Know What the Root Cause Is

Part of identifying business problems and dealing with them should ideally involve the goings on beneath the surface. Everything happens for a reason in business, good or bad.

 

Has more than one person returned the same product? There might be a problem with its design or construction. Do you feel as though you’re not getting enough business? You may need to increase your marketing efforts by doing some advertising. Has an employee’s performance dropped recently? There may be an issue in his or her personal life that’s causing it.

 

Beneath every problem is a deeper issue that has to be dealt with for the problem to be completely eliminated, rather than simply swept to the side. If you leave the underlying cause of a problem in place, you run the risk of the immediate issue coming back time and again.

Get Some Insight

Identifying business problems isn’t something that you should always try yourself. It could be that a problem exists right under your nose, but you’re not in any kind of position to notice it. That’s why it helps to get outside opinions. Talk to co-workers, customers, and entrepreneurs in the same industry and anyone else who might be able to find issues that you could be missing.

 

By consulting with people who are constantly exposed to parts of your business that you may not deal with every single day, you could potentially uncover issues that might have otherwise been allowed to persist.

 

That’s why it pays to practice a degree of transparency and open dialogue in business. Not only will you have other sets of eyes and ears that will notice things that you could overlook, but you’ll be establishing bonds of trust that could take your business places for years to come.

Don’t Waste Time

When it comes to identifying business problems, the worst thing you can do is let it sit. Problems have a tendency to snowball if you let them, so you need to be proactive. By having even a small role in every aspect of your business, you will have some idea of how things are run. That will expose you to the idiosyncrasies of that part of the business and show you what you can do about issues as they arrive.

 

As you become more familiar with your company’s different aspects, you’ll become better at identifying business problems and keeping them from growing to the point where dealing with them will take more time than it realistically should.

 

Poor leadership will not do the above and in particular:

  • Gather insufficient external and internal information for strategy      and planning
  • Wrong people involved in setting strategies and direction
  • Lack of depth of thinking to generate good strategies and plans

Business Management – Sales

Business management needs to focus on sales and financial control. Marketing and sales ranges from identifying target markets and customers to techniques for closing the sale. Key problems are little or no:

  • Marketing or creating brand awareness
  • Differentiation of marketing channels [web presence, email,      brochure, radio, TV, newspaper, magazines…]
  • Consideration of sales channels [web, telephone, in-person, retail,      licensing to third-party…]
  • Management measures associated with markets, target customers,      contact management, sales, repeat sales
  • Consideration of what demographic information should be captured to      identify new customers or channels

Business Management – Financial Control

To make money requires good financial management and to ensure that the business considers the financial impact of decisions. Poor financial management is:

  • Little or no financial forecasting and planning
  • Lack of consideration of expenses in relation to income – spending      too much money
  • Insufficient profit margin
  • Little or no consideration of cash flow; when money actually comes      in and when money actually goes out
  • Growth is paid for with debt and servicing the debt becomes an      excessive burden

Organisation – Policies

Business must comply with all applicable laws including company, health and safety, employment, taxation and have appropriate company policies. Key problems are likely to be no policies and/or contracts for:

  • Customers
  • Suppliers
  • Staff, contractors or temporary staff

Organisation – Staff

If problems exist here then staff management is likely to be haphazard at best and abysmal at worst:

  • Setting either unclear objectives or no objectives; what is      expected and by when and inconsistent follow through
  • Setting either unclear or no expectations about the quality of the      deliverables and the level of detail required
  • Changing the completion criteria before completion of tasks
  • Micro management of tasks
  • Lack of timely guidance and course correction for complex tasks
  • Inconsistent behaviour, too friendly, too strict, too generous, too      mean
  • Perceived or real inequality in treatment of staff, with impulsive or      reactive decision-making
  • Unclear or no procedures in place to address recruitment, staff      discipline or performance problems
  • Staff specialist knowledge leaves business vulnerable to staff      being unavailable [holiday, sick…] or leaving and the business struggling      to fill the gap

Other Reasons for Business Problems

The reasons for business problems are not simply restricted to the above list of internal items but also extend to external factors such as:

  • Natural disaster
  • Significant economic downturn
  • Bigger, better or faster competitors
  • New business entrant changing the rules of the game
  • Products or services becoming obsolete

Sounds tough, right?

Well, before you run out and hire a consultant, I’ve outlined a simple and effective technique you can use. Either by yourself or with your team, it will help you achieve great results.

 

What I’m talking about is actually a simplified version of the Theory of Constraints’ developed by Eliyahu M. Goldratt. For those of you unfamiliar with Goldratt’s Theory of Constraints, it’s an adaptation of the idea that “a chain is only as strong as its weakest link”. They key is not to use Goldratt’s Theory of Constraints in isolation but instead, combine it with the “thinking processes” outlined in Goldratt’s It’s Not Luck.

The main thinking processes you should use are as follows:

  • Current Reality Tree: Here you create a list of your irritants – called UnDesirable Effects (UDEs) –and then try to identify the root cause or causes of all your irritants. Once you’ve identified the UnDesirables, you can start coming up with potential solutions (injections).
  • Future Reality Tree: Visualize what your future will look like should you decide to enact some of those solutions. A Future Reality Tree is a great way to validate your proposed alternative.
  • Pre-Requisite Tree: A Pre-Requisite Tree (PRT) helps you uncover potential road blocks to the successful implementation of your solutions. It helps you think through the actions that you need to take to overcome those impediments.
  • Cloud: With a Cloud, you can solve an apparent conflict or dilemma between two actions.
    • When applying the thinking process method, there is a proper sequence to be wary of. A Current Reality Tree is always the best place to start. Once you’ve developed a CRT you follow up with a Future Reality Tree, and lastly a Pre-Requisite Tree. The Cloud, on the other hand, is used whenever you come across a conflict between actions.
    • By combining the CRT with the PRT and skipping the FRT altogether, you get a simplified and efficient way to identify and solve your problems. Once completed, you end up with a prioritized list of actions ready to be executed. It helps you alleviate any obstacles that would otherwise impede the implementation of the chosen solutions.
    • Production and distribution do not improve fast/significantly enough
    • Engineering is unable to deliver new products fast and reliably enough.
    • Companies don’t come up with sufficient innovative ideas in marketing.
    • In more and more cases the price the market is willing to pay doesn’t leave enough margin.
    • There is unprecedented pressure to take actions that will increase sales
    • Competition is fiercer than ever.
    • In advanced material industries there is a need to launch new products at an unprecedented rate.
    • In advanced material industries the constant introduction of new products confuses and spoils the market.
    • Sales people are overloaded.
    • There is increasing pressure to reduce prices.

UDEs

Theory of Constraints

The theory of constraints (TOC) adopts the common idiom “A chain is no stronger than its weakest link” as a new management paradigm. This means that processes, organizations, etc., are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the outcome.

The analytic approach with TOC comes from the contention that any manageable system is limited in achieving more of its goals by a very small number of constraints, and that there is always at least one constraint. Hence the TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of five focusing steps.

 

The theory of constraints (TOC) is an overall management philosophy introduced by Eliyahu M. Goldratt in his 1984 book titled The Goal, which is geared to help organizations continually achieve their goals. Goldratt adopted the concept with his book Critical Chain, published 1997. The concept was extended to TOC with respectively titled publication in 1999.

 

An earlier propagator of the concept was Wolfgang Mewes in Germany with publications on power-oriented management theory (Machtorientierte Führungstheorie, 1963) and following with his Energo-Kybernetic System (EKS, 1971), later renamed Engpasskonzentrierte Strategies as a more advanced theory of bottlenecks. The publications of Wolfgang Mewes are marketed through the FAZ Verlag, publishing house of the German newspaper Frankfurter Allgemeine Zeitung. However, the paradigm Theory of constraints was first used by Goldratt.

Key assumption

The underlying premise of theory of constraints is that organizations can be measured and controlled by variations on three measures: throughput, operational expense, and inventory. Throughput is the rate at which the system generates money through sales. Inventory is all the money that the system has invested in purchasing things which it intends to sell. Operational expense is all the money the system spends in order to turn inventory into throughput.

 

Before the goal itself can be reached, Necessary Conditions must first be met. This typically includes safety, quality, legal obligations, etc. For most businesses, the goal itself is to make money. However, for many organizations and non-profit businesses, making money is a necessary condition for pursuing the goal. Whether it is the goal or a necessary condition, understanding how to make sound financial decisions based on throughput, inventory, and operating expense is a critical requirement.

The five focusing steps

Theory of constraints is based on the premise that the rate of goal achievement by a goal-oriented system (i.e., the system’s throughput) is limited by at least one constraint.

The argument by reductio ad absurdum is as follows: If there was nothing preventing a system from achieving higher throughput (i.e., more goal units in a unit of time), its throughput would be infinite — which is impossible in a real-life system.

 

Only by increasing flow through the constraint can overall throughput be increased.

Assuming the goal of a system has been articulated and its measurements defined, the steps are:

  1. Identify the system’s constraint(s) (that      which prevents the organization from obtaining more of the goal in a unit      of time)
  2. Decide how to exploit the system’s      constraint(s) (how to get the most out of the constraint)
  3. Subordinate everything else to above      decision (align the whole system or organization to support the decision      made above)
  4. Elevate the system’s constraint(s) (make      other major changes needed to break the constraint)
  5. Warning!!!! If in the previous steps a      constraint has been broken, go back to step 1, but do not allow inertia to      cause a system’s constraint.

 

The goal of a commercial organization is: “Make money now and in the future”, and its measurements are given by throughput accounting as: throughput, investment, and operating expenses.

 

The five focusing steps aim to ensure on-going improvement efforts are centred on the organization’s constraint(s). In the TOC literature, this is referred to as the process of ongoing improvement (POOGI).

 

These focusing steps are the key steps to developing the specific applications mentioned below.

Constraints

A constraint is anything that prevents the system from achieving more of its goal. There are many ways that constraints can show up, but a core principle within TOC is that there are not tens or hundreds of constraints. There is at least one and at most a few in any given system. Constraints can be internal or external to the system. An internal constraint is in evidence when the market demands more from the system than it can deliver. If this is the case, then the focus of the organization should be on discovering that constraint and following the five focusing steps to open it up (and potentially remove it). An external constraint exists when the system can produce more than the market will bear. If this is the case, then the organization should focus on mechanisms to create more demand for its products or services.

 

Types of (internal) constraints

  • Equipment: The way equipment is currently      used limits the ability of the system to produce more saleable      goods/services.
  • People: Lack of skilled people limits the      system. Mental models held by people can cause behaviour that becomes a      constraint.
  • Policy: A written or unwritten policy      prevents the system from making more.

 

The concept of the constraint in Theory of Constraints differs from the constraint that shows up in mathematical optimisation. In TOC, the constraint is used as a focusing mechanism for management of the system. In optimization, the constraint is written into the mathematical expressions to limit the scope of the solution (X can be no greater than 5).

 

Please note: organizations have many problems with equipment, people, policies, etc. (A breakdown is just that – a breakdown – and is not a constraint in the true sense of the TOC concept) the constraint is the thing that is preventing the organization from getting more throughput (typically, revenue through sales).

Buffers

Buffers are used throughout the theory of constraints. They often result as part of the exploit and subordinate steps of the five focusing steps. Buffers are placed before the governing constraint, thus ensuring that the constraint is never starved. Buffers are also placed behind the constraint to prevent downstream failure to block the constraint’s output. Buffers used in this way protect the constraint from variations in the rest of the system and should allow for normal variation of processing time and the occasional upset (Murphy) before and behind the constraint.

 

Buffers can be a bank of physical objects before a work centre, waiting to be processed by that work centre. Buffers ultimately buy you time, as in the time before work reaches the constraint and are often verbalized as time buffers. There should always be enough (but not excessive) work in the time queue before the constraint and adequate offloading space behind the constraint.

 

Buffers are not the small queue of work that sits before every work centre in a Kanban system although it is similar if you regard the assembly line as the governing constraint. A prerequisite in the theory is that with one constraint in the system, all other parts of the system must have sufficient capacity to keep up with the work at the constraint and to catch up if time was lost. In a balanced line, as espoused by Kanban, when one work centre goes down for a period longer than the buffer allows, then the entire system must wait until that work centre is restored. In a TOC system, the only situation where work is in danger, is if the constraint is unable to process (either due to malfunction, sickness or a “hole” in the buffer – if something goes wrong that the time buffer cannot protect).

 

Buffer management therefore represents a crucial attribute of the theory of constraints. There are many ways to do it, but the most often used is a visual system of designating the buffer in three colours: green (okay), yellow (caution) and red (action required). Creating this kind of visibility enables the system as a whole to align and thus subordinate to the need of the constraint in a holistic manner. This can also be done daily in a central operations room that is accessible to everybody.

Plant types

There are four primary types of plants in the TOC lexicon. Draw the flow of material from the bottom of a page to the top, and you get the four types. They specify the general flow of materials through a system, and they provide some hints about where to look for typical problems. The four types can be combined in many ways in larger facilities.

  • I-plant: Material flows in a sequence,      such as in an assembly line. The primary work is done in a straight      sequence of events (one-to-one). The constraint is the slowest operation.
  • A-plant: The general flow of material is      many-to-one, such as in a plant where many sub-assemblies converge for a      final assembly. The primary problem in A-plants is in synchronizing the      converging lines so that each supplies the final assembly point at the      right time.
  • V-plant: The general flow of material is      one-to-many, such as a plant that takes one raw material and can make many      final products. Classic examples are meat rendering plants or a steel      manufacturer. The primary problem in V-plants is “robbing” where      one operation (A) immediately after a diverging point “steals”      materials meant for the other operation (B). Once the material has been      processed by A, it cannot come back and be run through B without      significant rework.
  • T-plant: The general flow is that of an      I-plant (or has multiple lines), which then splits into many assemblies      (many-to-many). Most manufactured parts are used in multiple assemblies      and nearly all assemblies use multiple parts. Customized devices, such as      computers, are good examples. T-plants suffer from both synchronization      problems of A-plants (parts aren’t all available for an assembly) and the      robbing problems of V-plants (one assembly steals parts that could have      been used in another).

 

For non-material systems, one can draw the flow of work or the flow of processes and arrive at similar basic structures. A project, for example is an A-shaped sequence of work, culminating in a delivered project.

Applications

The focusing steps, this process of ongoing improvement, have been applied to manufacturing, project management; supply chain/distribution generated specific solutions. Other tools (mainly the “thinking process”) also led to TOC applications in the fields of marketing and sales, and finance. The solution as applied to each of these areas is listed below.

Operations

Within manufacturing operations and operations management, the solution seeks to pull materials through the system, rather than push them into the system. The primary methodology use is drum-buffer-rope (DBR) and a variation called simplified drum-buffer-rope (S-DBR).

 

Drum-buffer-rope is a manufacturing execution methodology, named for its three components. The drum is the physical constraint of the plant: the work center or machine or operation that limits the ability of the entire system to produce more. The rest of the plant follows the beat of the drum. They make sure the drum has work and that anything the drum has processed does not get wasted.

 

The buffer protects the drum, so that it always has work flowing to it. Buffers in DBR have time as their unit of measure, rather than quantity of material. This makes the priority system operate strictly based on the time an order is expected to be at the drum.

 

Traditional DBR usually calls for buffers at several points in the system: the constraint, synchronization points and at shipping. S-DBR has a buffer at shipping and manages the flow of work across the drum through a load planning mechanism.

 

The rope is the work release mechanism for the plant. Orders are released to the shop floor at one “buffer time” before they are due. In other words, if the buffer is 5 days, the order is released 5 days before it is due at the constraint. Putting work into the system earlier than this buffer time is likely to generate too-high work-in-process and slow down the entire system.

Supply chain / logistics

In general, the solution for supply chains is to create flow of inventory so as to ensure greater availability and to eliminate surpluses.

 

The TOC distribution solution is effective when used to address a single link in the supply chain and more so across the entire system, even if that system comprises many different companies. The purpose of the TOC distribution solution is to establish a decisive competitive edge based on extraordinary availability by dramatically reducing the damages caused when the flow of goods is interrupted by shortages and surpluses.

 

This approach uses several new rules to protect availability with fewer inventories than is conventionally required. Before explaining these new rules, the term Replenishment Time must be defined. Replenishment Time (RT) is the sum of the delay, after the first consumption following a delivery, before an order is placed plus the delay after the order is placed until the ordered goods arrive at the ordering location.

  1. Inventory is      held at an aggregation point(s) as close as possible to the source. This      approach ensures smoothed demand at the aggregation point, requiring      proportionally less inventory. The distribution centers holding the      aggregated stock are able to ship goods downstream to the next link in the      supply chain much more quickly than a make-to-order manufacturer can.      Following this rule may result in a make-to-order manufacturer converting      to make-to-stock. The inventory added at the aggregation point is      significantly less than the inventory reduction downstream.
  2. In all      stocking locations, initial inventory buffers are set which effectively      create an upper limit of the inventory at that location. The buffer size      is equal to the maximum expected consumption within the average RT, plus      additional stock to protect in case a delivery is late. In other words,      there is no advantage in holding more inventories in a location than the      amount that might be consumed before more could be ordered and received.      Typically, the sum of the on hand value of such buffers is 25–75% less      than currently observed average inventory levels.
  3. Once buffers      have been established, no replenishment orders are placed as long as the quantity      inbounds (already ordered but not yet received) plus the quantities on      hand are equal to or greater than the buffer size. Following this rule      causes surplus inventory to be bled off as it is consumed.
  4. For any      reason, when on hand plus inbound inventory is less than the buffer,      orders are placed as soon as practical to increase the inbound inventory      so that the relationship On Hand + Inbound = Buffer is maintained.
  5. To ensure      buffers remain correctly sized even with changes in the rates of demand      and replenishment, a simple recursive algorithm called Buffer Management      is used. When the on hand inventory level is in the upper third of the      buffer for a full RT, the buffer is reduced by one third (and don’t forget      rule 3). Alternatively, when the on hand inventory is in the bottom one      third of the buffer for too long, the buffer is increased by one third      (and don’t forget rule 4). The definition of “too long” may be changed      depending on required service levels, however, a general rule of thumb is      20% of the RT. Moving buffers up more readily than down is supported by      the usually greater damage caused by shortages as compared to the damage caused      by surpluses.

 

 

Once inventory is managed as described above, continuous efforts should be undertaken to reduce RT, late deliveries, supplier minimum order quantities (both per SKU and per order) and customer order batching. Any improvements in these areas will automatically improve both availability and inventory turns, thanks to the adaptive nature of Buffer Management.

 

A stocking location that manages inventory according to the TOC should help a non-TOC customer (downstream link in a supply chain, whether internal or external) manage their inventory according to the TOC process. This type of help can take the form of a vendor managed inventory (VMI). The TOC distribution link simply extends its buffer sizing and management techniques to its customers’ inventories. Doing so has the effect of smoothing the demand from the customer and reducing order sizes per SKU. VMI results in better availability and inventory turns for both supplier and customer. More than that, the benefits to the non-TOC customers are sufficient to meet the purpose of capitalizing on the decisive competitive edge by giving the customer a powerful reason to be more loyal and give more business to the upstream link. When the end consumers buy more the whole supply chain sells more.

 

One caveat should be considered. Initially and only temporarily, the supply chain or a specific link may sell less as the surplus inventory in the system is sold. However, the immediate sales lift due to improved availability is a countervailing factor. The current levels of surpluses and shortages make each case different.

Finance and accounting

The solution for finance and accounting is to apply holistic thinking to the finance application. This has been termed throughput accounting.[8] Throughput accounting suggests that one examine the impact of investments and operational changes in terms of the impact on the throughput of the business. It is an alternative to cost accounting.

 

The primary measures for a TOC view of finance and accounting are: throughput, operating expense and investment. Throughput is calculated from sales minus totally variable cost. Totally variable cost is usually calculated as the cost of raw materials that go into creating the item sold.

Project management

Critical Chain Project Management (CCPM) is utilised in this area. CCPM is based on the idea that all projects look like A-plants: all activities converge to a final deliverable. As such, to protect the project, there must be internal buffers to protect synchronization points and a final project buffer to protect the overall project.

Marketing and sales

While originally focused on manufacturing and logistics, TOC has expanded lately into sales management and marketing. Its role is explicitly acknowledged in the field of sales process engineering. For effective sales management one can apply Drum Buffer Rope to the sales process similar to the way it is applied to operations (see Reengineering the Sales Process book reference below). This technique is appropriate when your constraint is in the sales process itself or you just want an effective sales management technique and includes the topics of funnel management and conversion rates.

The TOC thinking processes

Main article: Thinking Processes (Theory of Constraints)

The thinking processes are a set of tools to help managers walk through the steps of initiating and implementing a project. When used in a logical flow, the Thinking Processes help walk through a buy-in process:

  1. Gain      agreement on the problem
  2. Gain      agreement on the direction for a solution
  3. Gain      agreement that the solution solves the problem
  4. Agree to      overcome any potential negative ramifications
  5. Agree to      overcome any obstacles to implementation

 

TOC practitioners sometimes refer to these in the negative as working through layers of resistance to a change.

 

Recently, the current reality tree (CRT) and future reality tree (FRT) have been applied to an argumentative academic paper.

Development and practice

TOC was initiated by Goldratt, who until his recent death was still the main driving force behind the development and practice of TOC. There is a network of individuals and small companies loosely coupled as practitioners around the world. TOC is sometimes referred to as “constraint management”. TOC is a large body of knowledge with a strong guiding philosophy of growth.

Criticism

Criticisms that have been leveled against TOC include:

Claimed sub optimality of drum-buffer-rope

While TOC has been compared favorably to linear programming techniques, D. Trietsch from University of Auckland argues that DBR methodology is inferior to competing methodologies. Linhares, from the Getulio Vargas Foundation, has shown that the TOC approach to establishing an optimal product mix is unlikely to yield optimum results, as it would imply that P=NP.

 

The P versus NP problem is a major unsolved problem in computer science. Informally, it asks whether every problem whose solution can be quickly verified by a computer can also be quickly solved by a computer. It was introduced in 1971 by Stephen Cook in his seminal paper “The complexity of theorem proving procedures” and is considered by many to be the most important open problem in the field. It is one of the seven Millennium Prize Problems selected by the Clay Mathematics Institute to carry a US$ 1,000,000 prize for the first correct solution.

 

The informal term quickly used above means the existence of an algorithm for the task that runs in polynomial time. The general class of questions for which some algorithm can provide an answer in polynomial time is called “class P” or just “P“. For some questions, there is no known way to find an answer quickly, but if one is provided with information showing what the answer is, it may be possible to verify the answer quickly. The class of questions for which an answer can be verified in polynomial time is called NP.

 

Consider the subset sum problem, an example of a problem that is easy to verify, but whose answer may be difficult to compute. Given a set of integers, does some nonempty subset of them sum to 0? For instance, does a subset of the set {−2, −3, 15, 14, 7, −10} add up to 0? The answer “yes, because {−2, −3, −10, 15} add up to zero” can be quickly verified with three additions. However, there is no known algorithm to find such a subset in polynomial time (there is one, however, in exponential time, which consists of 2n-1 tries), and indeed such an algorithm cannot exist if the two complexity classes are not the same; hence this problem is in NP (quickly checkable) but not necessarily in P (quickly solvable).

 

An answer to the P = NP question would determine whether problems that can be verified in polynomial time, like the subset-sum problem, can also be solved in polynomial time. If it turned out that P does not equal NP, it would mean that there are problems in NP (such as NP-complete problems) that are harder to compute than to verify: they could not be solved in polynomial time, but the answer could be verified in polynomial time.

 

Aside from being an important problem in computational theory, a proof either way would have profound implications for mathematics, cryptography, algorithm research, artificial intelligence, multimedia processing and many other fields.

Unacknowledged debt

Duncan (as cited by Steyn) says that TOC borrows heavily from systems dynamics developed by Forrester in the 1950s and from statistical process control which dates back to World War II. And Noreen Smith and Mackey, in their independent report on TOC, point out that several key concepts in TOC “have been topics in management accounting textbooks for decades.”

 

People claimGoldratt’s books fail to acknowledge that TOC borrows from more than 40 years of previous management science research and practice, particularly from PERT/CPM (Program Evaluation and Review Technique / Critical Path Method) and JIT (Just-In-Time). A rebuttal to these criticisms is offered in Goldratt’s “What is the Theory of Constraints and How Should it be Implemented?”, and in his audio program, “Beyond The Goal”. In these, Goldratt discusses the history of disciplinary sciences, compares the strengths and weaknesses of the various disciplines, and acknowledges the sources of information and inspiration for the thinking processes and critical chain methodologies. Articles published in the now-defunct Journal of Theory of Constraints referenced foundational materials.

 

Goldratt published an article and gave talks with the title “Standing on the Shoulders of Giants” in which he gives credit for many of the core ideas of Theory of Constraints. Goldratt has sought many times to show the correlation between various improvement methods. However, many Goldratt adherents often denigrate other methodologies as inferior to TOC.

Business Problem Solving

Very rarely do entrepreneurs find quick, easy and long-lasting solutions to business problems. Most problems are complex and must be analysed from a number of perspectives before solutions can be generated. However, by following a systematic approach to problem solving, entrepreneurs and their mentors can build a deeper understanding of specific business problems and find solutions that provide the biggest reward with the lowest risk.

 

There are three main steps in solving business problems:

  1. Identify the problem.
  2. Consider your options.
  3. Choose the best solution.

Step 1: Identify the Problem

At times, you may be too tightly wound up in your business to notice a problem, especially at the early stages. Even when you start to think something’s wrong, you still might not know what the real problem is. Some problems are actually symptoms of other more complex problems. Consider this example:

Entrepreneur: “I have a big problem. I don’t have enough staff to do all the work my company has committed to.”

Mentor: “Why don’t you have enough staff? You hired three new employees last quarter.”

Entrepreneur: “They all quit. That’s my problem!”

 

It’s important to understand the causes of the problem, rather than simply looking at its effects. Here is a process for problem identification:

Ask “why?” until an answer cannot be provided. By asking “why?”, you back up to the true cause of the problem. In a continuation of the example above:

Mentor: “Why did all your staff quit?”

Entrepreneur: “I don’t know.”

Mentor: “OK, now we’re getting to your problem.”

State the problem. For example: Staff quitting in under three months.

Develop a detailed problem description by answering the following questions:

  • When did the problem first appear?
  • What factors or events led to this problem?
  • What factors or events made the problem more evident?
  • How and to what extent is this problem affecting the business?

 

With a clear understanding of the nature and extent of the problem, you can move on to Business Problem Solving Step 2: Consider Your Options.

Step 2: Consider Your Options

Even when problems are correctly identified, they are often not given the attention they deserve nor the action they require. Once you know what the problem really is, you must take action to solve it. Try this approach to come up with some potential solutions to act upon:

Consider the specific factors that must be addressed in the solution. By spending some time looking at the problem from an open and objective perspective, you will be able to generate a clearer picture of the factors that need to be addressed in the solution. Create two vertical columns on a page. In the left column, list all the factors you can think of.

Identify potential solutions that address most or all of the factors. In the right column of the page, write down potential solutions beside each factor to be addressed. Be creative!

With several potential solutions identified, you can move on to Step 3: Choose the Best Solution.

Step 3: Choose the Best Solution

Evaluate the alternatives. Use the grid on the following page to help you evaluate your options. For each potential solution, determine where on the grid it fits, according to how easy it would be to implement and what level of impact the solution would likely have on your business goals. With this analysis, you can narrow down your alternatives and select one or two tentative solutions.

 

Weigh the risks of your tentative solutions. This is your opportunity to prepare for and take steps to avoid any potential negative effects of your final decision, at no cost.

For each of your alternatives, ask yourself the following questions:

  • What RISKS do you see in the solution? Or in other words, what could go wrong?
  • How would you MITIGATE the risk?
  • Who would take the RESPONSIBILITY to mitigate the risk?

 

Choose the most appropriate solution to implement. This should be easier by now!

 

There’s an old joke that a consultant is someone who listens to the employees, tells management what they are saying and takes a fee for it. This is truer than most consultants would like to admit. If you want to solve a problem without paying a big consulting fee, learn to do three things:

  • Listen to yourself
  • Listen to your team
  • Do what makes sense

 

Yes, it’s really that simple—90% of advanced tools like process reengineering, project management and quality management are just common sense. My mom once asked me what I did for a living. When I explained it to her, she said, “but that’s just common sense.” I replied, “It’s because you call it common sense that I’m so good at it.” Good old mom!

The Common Sense Approach
1. Fix what you can, instead of blaming others. Sure the economy sucks, suppliers mess up, and customers are a royal pain. That is as true for your competitors as it is for you. What makes winners different is what we do about the problems we can solve, and how we inspire our team to take a can-do attitude and do good work.

2. Fix the right problem. Think like a doctor. You wouldn’t be happy if your doctor gave you stomach medicine for a heart condition. In business, though, we often fix the wrong problem. For example, when sales are low, we push the salespeople. Most likely, they’re already doing a good job, and the problem is in marketing. Remember: The cause of a problem is almost never where the symptom shows up. Find the cause and fix it; you can’t fix a symptom.

3. If the problem comes back, find out why, and fix it. Say you have some defective parts in your products. Getting rid of them isn’t enough. How do you know more defects won’t arrive with the next order? Instead:

  • Check with your supplier: How can they      confirm that there will be no future defects?
  • Change your contract: Add a penalty      for defective parts.
  • Change the way you choose suppliers: Go for quality, and prevent the problem.

 

Now that you know how to fix problems, you just need to find the problems that need fixing.

4. Find problems by complaining. I recommend complaining. There’s a great technique for finding your problems–and blowing off some stress–from Barbara Sher’s book WishCraft. She calls it the power of negative thinking. Stand in front of a friend and deliver a standup comedy routine titled What’s Wrong With My Business? Complain about everything. Be specific. Rant, rave and get it out of your system. Have your friend write down every complaint. There’s your list of problems. Now start solving them.

Which problem do you solve first? It doesn’t matter. If you have time and energy, fix the one that will be the biggest boost to your bottom line. If you’re running around like a chicken with your head cut off, then fix the one that is bugging you the most.

5. Listen to your team. Go to your team, and tell them you want to make a fresh start. Tell them you want them to enjoy their jobs more and get more done. Ask each person on the team for three problems that you can fix to make their lives easier. If you haven’t done this before, it may take a while before they take you seriously, but you’ll get there. And when you do, you’ll find that after you help them, they’ll be ready to help you.

6. Your business works best once you’ve fixed the pipes. Be the plumber for your business. When you fix all big leaks, things start to flow. When you fix all the small problems, profits shoot through the roof. What flows in a business? Products, services, and solutions flow to your customers and money flows to you.

I hope you’re not in business just to make money. The purpose of a business should be to do what we love, love what we do, make our customers happier and better off and the world a better place. But money is the measure of a business. Track money–gross revenue, expenses and net revenue–to find what is working, and what is not.

 

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