Post on 24-Jan-2019
1© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Delivering Value –
Removing constraints for business growth
Presented By: Rami GoldrattDate: June 11th, 2014
2© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
2012 Chicago, TOCICO presentation…
Management AttentionAchieving results dealing with
complexity, uncertainty and conflicts.
3© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
HarmonySuccessful company
A
Cut back on cost / investments Maximizing efficiency's (get the maximum of current resources) Focus on short term profit (cash)
Make investments Allow protective capacity Focus on profit
Ensure smooth current performance
B
Ensure long term prosperity
C
Focus on current operations
D
Focus on long term health
D’
Osc
illat
ions
4© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Successful company
Ensure smooth current performance
Focus on current
operations
Focus on long term health
Ensure long term prosperity
Harmony GrowthStability
What is the direction?
5© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
The real constraint: Management Attention.
The Science of Management -Introduction
6© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Step 1: Identify the system’s constraint(s)
Step 2: Decide how to exploit the system’s constraint(s)
Management Attention
Focus on the core conflict –
bringing ongoing Stability and Growth...
- Build the Competitive edge
- Capitalize on the Competitive edge
- Sustain the Competitive edge
Build
Capitalize
Sustain
Applying the 5 steps…
7© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
“Value is created by removing a significant limitation for the customer, in a way that was not possible before, and to the extent that no significant competitor can deliver.”
Dr. Eliyahu M. Goldratt
The conventional way companies usually look to expand is to evaluate current assets and think how to leverage them.
However, in a value‐based process the starting point is the value. The quest to deliver the identified value generates the assets
that then create the competitive edge
Competitive edge – delivering exceptional value
8© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Exceptional value – Build.
Value Proposition
• Value Analysis
• Concept Design
• Concept Evaluation
Business Model
• Model Design
• Business Assessment
Execution Plan
• Concept Validation
• Technology Validation
• Mass production Validation
• Mass Marketing Validation
9© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
ImprovingProduct /Proposal
Value
CUSTOMER’S EYESAnalyzing customers Un Desirable Effects (UDEs)
MARKET’S EYESAnalyzing behaviors in different segments of the market (1,2,……n, n+1)
PRODUCT’S EYESAnalyzing impact of quantum changes in product parameters
Exceptional Value – Value Analysis
10© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Would the customer make the change?
Exceptional Value – Concept Evaluation
11© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
How big is the “pot of gold”?
How big is the “alligator”?
Which customer has the smaller crutches and “easy to leave” mermaids?
Are changes required in the concept to reduce the size of the crutches
and/or mermaids?
Exceptional Value – Concept Evaluation
12© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Educating the Market
Reference for Value
Reference for Price
Purchasing Situation
Distribution Channels
3rd party Collaboration
CompetitionBarriers
Exceptional Value – Business Model
13© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Referencefor value
Reference for price
Purchasing situation
Distribution channel
3rd party collaboration
CompetitionBarriers
Nurse, home security, or smoking alarm?
Monthly subscriptionfor a newspaper
Discharged patients
Hospital Ambulance companies and hospitals
Sign the big network of hospital
Nurse, home security, or smoking alarm?
Monthlysubscription for cables
TV late night commercial
Direct Ambulance companies
Sign media deals with local cables
Exceptional Value – Business Model
14© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
The success or failure of a major innovation is determined by the time to validate the model assumptions and take course corrections.
• Is the potential market big enough?
• Is this a lasting need? • What would be the margin?
Expected Returns
• How difficult is it to imitate?
• How long will it take them to catch up?
Window of Opportunity
• How much investment and added operating cost is required?
• What is the implication on the company’s internal constraint(s)?
• How long will it take to start seeing the return on the investment?
Time, Effort& Cost
Exceptional Value – Business Model
15© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Step 3: Subordinate everything else to the above decision
Applying the 5 steps…
16© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
The 3 fundamental mechanisms wasting and distorting management attention:
The fear of Complexity -> driving to dissect the system to sub-systems and bringing damaging local optima.
The fear of Unknown-> driving to manage by finer and finer detail resolution, optimizing within the noise.
The fear of tug of war -> struggling with unacceptable compromises.
Applying the 5 steps…
17© 2014 TOCICO. All rights reserved.
TOCICO 2014 Conference
Step 3: Subordinate everything else to the above decision
Remove the mechanisms blocking management attention
from building, capitalizing and sustaining a competitive edge:1. Maintain FOCUS: Identify the key constraints and protect the
flow. Remove disruptive local optima.
2. Maintain FOCUS: Clean distortions created by excessive
accuracy – Manage buffers.
3. Maintain FOCUS: Don’t optimize on key conflicts – challenge
assumptions and find Win-Win solutions.
Applying the 5 steps…