E119 | The Theory Of Constraints with Andy Watt
Eli Goldratt wrote a book called The Goal, which Verne Harnish has described as one of the most important business books ever written. With such an accolade, we had to have Andy Watt, MD of Goldratt, on the show.
Andy is a founding member of the Theory of Constraints International Certification Organisation (TOCICO) and a Chartered Fellow of CILT (Chartered Institute of Logistics and Transport). He’s also the owner and driving force behind Goldratt UK, and he has the singular aim of increasing the exposure of Theory of Constraints (TOC) in the UK.
Over the last fifteen years, Andy and Goldratt UK have worked with hundreds of organisations implementing TOC including Bentley, McLaren, Honeywell, Masterfoods, Bombardier, Eurostar, Siemens and Johnson Matthey.
Today, Andy talks about managing constraints, not just in a manufacturing or engineering business, but in any business that runs project work.
The idea that constraints should be managed is applicable to so many businesses, regardless of their industry. The common thread is that people often know what the constraint is, and what the solution to the problem is, but somehow can’t fix it themselves.
“Fundamentally, it’s how you release work into the system, which is really important. So we release it at the rate at which the constraint can produce it. So shoving it in doesn’t make it come out, which is a lesson that most people don’t understand.”
We also discuss how many CEOs and business leaders have a belief problem that they need to overcome and that the actual constraint might be a belief and not a real thing.
This is a fascinating conversation, we hope you enjoy it as much as we did.
On today’s podcast:
- Why a physicist wrote a business book
- Eli’s algorithm to release work into the system
- The constraint is often the most simple thing
- Flow dynamics/ flowing capacity
- Knowing what done/good looks like
- Overcoming beliefs
Managing Constraints with Andy Watt
Eli Goldratt wrote a book called The Goal, which Verne Harnish has described as one of the most important business books ever written. With such an accolade, we had to have Andy Watt, MD of Goldratt, on The Melting Pot.
Andy is a founding member of the Theory of Constraints International Certification Organisation (TOCICO) and a Chartered Fellow of CILT (Chartered Institute of Logistics and Transport). He’s also the owner and driving force behind Goldratt UK, and he has the singular aim of increasing the exposure of Theory of Constraints (TOC) in the UK.
Over the last fifteen years, Andy and Goldratt UK have worked with hundreds of organisations implementing TOC including Bentley, McLaren, Honeywell, Masterfoods, Bombardier, Eurostar, Siemens and Johnson Matthey.
But what is a constraint and why did a physicist end up writing a bestselling business book?
Eli Goldratt
Eli did his PhD in the flow of liquids. A friend of his ran a manufacturing company that wasn’t doing so well and he asked Eli, because he knew about flow and capacity, if he could help run this factory.
“Eli walked into this company not knowing a thing about manufacturing and checked it out and said, ‘Okay, well, it’s just the same as any flow of liquids. Basically, there’s a pinch point, there’s a point that flow is slower than everywhere else. So let me go find that’.”
And he did. Eli found the pinch point and got it working, and output went up. But then people weren’t ready for the machine to work, which created another pinch point.
“So he then says we’ve got to do something about the release now. And really, fundamentally, it’s how you release work into the system, which is really important. So we release it at the rate at which the constraint can produce it. So shoving it in doesn’t make it come out, which is a lesson that most people don’t understand.”
It’s all about creating release mechanisms to manage the output.
“Decide where, get control of that, get the output massively on that and release work at the rate at which that works as well. It’s very, very simple. And what’s gonna happen is, if that’s not the constraint, the constraint will show up, because I now have control of release.”
And most of the time, when you identify the constraint, you can move it where you can control it, i.e. for a manufacturing plant, you want the constraint in the forge, where you can control output and start to make real money.
Constraint in business should be sales
For most businesses, the constraint is in sales. If it isn’t in sales, then you’ve got a problem and you might need to call in Andy.
“I often say to people, ‘I’ve never been in a company that’s not hitting its sales number, but is doing the activity’. It’s the same thing with a constraint. The people we’re paying to sell aren’t actually selling, somehow we’ve got them doing something else.”
Be constraint obsessed
Andy recommends that CEOs and business leaders and people in charge of projects should be constraint obsessed. If they don’t have it in their psyche, they need to learn it.
“Constraint obsessed is one of the behaviours we want to try to get people to be. You know, be obsessed about the constraint. Don’t ignore it. You should know what’s going on in the constraint and business.”
Find the constraint and move it to where you want it to go, to where you can control it.
The misbelief of being efficient
The problem comes when people, managers, believe they’re being efficient and effective. And they’re not.
“We have the analogy of rocks, gravel, and sand. If you think of an engineer’s capacity as a bucket, you throw the rocks in. But there’s still lots of gaps, lots of spare capacity. So you throw some gravel in, and then you throw some sand in.”
In this analogy, in the project environment, the rocks are the things that are part of a project that absolutely have to be done by an engineer. But that isn’t all they have to do. Those may be the big aspects of the project, but there are always other things to be done.
If you want to maximise an engineer’s capacity, they have to learn to think differently, that once they’ve finished doing their part on a project they hand it off and begin to work on the next thing. They don’t stop just because they’ve finished working on a big rock. They have the sand and the gravel to consider too.
“So for projects, you go like a relay runner, I get the baton, I go as fast as I can, I hand the baton to the next person. That’s the sort of Road Runner/relay runner mentality that we want. If I start something, I want to finish it. I’ve just gone as fast as I possibly can. But once I’ve handed that baton over, then I fill my capacity out with other things that aren’t so due date constrained.”
But then they shouldn’t prioritise the sand and the gravel over the big rocks either, ie, people shouldn’t come into work and immediately open their emails and work on those, when there are big projects with due dates to be worked on.
“It’s about how you manage those interruptions for people and it’s part of the behavioural change. It’s got absolutely not very much to do with processes. Most processes are very simple. It’s a change in behaviour.”
Knowing what done looks like
The next problem is that people don’t always know what done looks like, or what good looks like. So they don’t know when to stop and hand on the project.
“So I start a task. I don’t know what ‘finished’ looks like. So that’s the first thing. Let’s get a very good definition of done. Once you understand that, then I can check – do I have everything I need to complete that done? If not, then I better go get it because I can’t start.”
And what does good look like for them?
“Well, that’s the important thing, because, for lots of engineering departments and project arenas, people don’t actually know what they’re doing, what a good job is like, so they make their own up. They made their own good up.”
Which goes back to Tony Robbins who says that constraint in business, in most cases, is the way people think. And you need to train your people to think differently. And that is what Goldratt is trying to do.
Book recommendations
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