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Once you’ve squeezed all the blood you can from a stone, it’s time to get more stones. In its essence, that’s what the uplift step is all about.
[ Listen to audio version, read by David Hodes]
This is Part 6 of our series on The 5-Step FOCUS:
Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7
But, we must proceed with caution when pursuing this penultimate step of the 5-Step FOCUS, as it is an investment decision we’re about to make, and those decisions are highly consequential. My experience teaches me that investments are usually made too soon before the optimise and collaborate steps have had their chance to work their magic. Or, they are made in the wrong place and don’t deliver the step-change in the business’s long-term trajectory.
At a simple level, let’s look at a machine manufacturing widgets and the case where demand for widgets exceeds my capacity to produce them. I stop to consider if we have done everything we can to squeeze every last drop of production from my machine, its operators and its maintainers (note: if we’re using TOC practices, this doesn’t mean working people to the bone—merely optimising the work schedule). Some questions I might ask myself: Have I used quick changeover techniques to minimise downtime arising from product changes or maintenance events? Should I be running 24/7 shifts? Are there any operations performed by the machine that we could offload onto other machines? Could we contract a vendor to supply an intermediate product that will relieve the bottleneck capacity? Do we have the product mix right, meaning should we change the mix to something more profitable while simultaneously lessening the demand on the constraint?
We could ask some of the same questions when it comes to managing our knowledge work. Replace the idea of a machine for a person or group for whom there is a high demand and a scarcity of supply, and you can repeat the cycle. Managing production is not a synonym for managing manufacturing. Whether in a factory or laboratory, an office or a studio, everyone produces a product or service that they hope their customers will value.
The exercise above should have you thinking about being careful about the assumptions you make when you’re ready for the uplift, and then being thorough as you consider the nature of that uplift. I have worked with a manufacturing organisation that had spent twenty-three million pounds on a new state-of-the-art machine, which was utterly unnecessary. I watched a mining house invest six hundred million dollars on an expansion of port capacity years ahead of when they needed it. I witnessed a global ERP rollout that had only a thirty-three per cent utilisation of the developers needed to design, build, and test the business solution.
But okay, there does come a time when you have to make an investment call. You’d hope that investment would align with your business strategy. And at this point comes a fascinating question. What business are you in? In Good to Great, Jim Collins told the story of Kimberly-Clark giving up their tissue mills to invest and focus on the consumer end of the market.
I recently set my mind to thinking about the implication of what such a choice might mean for a client of mine who runs an integrated mineral mine and processing plant—from pit to port. What, I wondered, if they were to give up the mining operation and focus on the processing alone? Could they sell the mine, generate great wads of cash from the sale and contract with the new owners to provide on-grade ore for the long term?
What would be the implication of being able to find alternate sources to their inputs? Better performance from the existing mine because it has to compete without the cover of being part of the same organisation? More opportunity to blend ores that could make the processing plant deliver higher volumes at lower costs? What would it mean if the processing plant focused on creating the intellectual property to run their processes at the bottom of the first quartile of the cost curve? In other words, what if, through leadership excellence in technology, process and people, they became the worldwide benchmark for processing their mineral?
No doubt they would be able to look at any other processing plant, anywhere in the world, using the same technology and know precisely how to get the maximum value from it. Could this mean that their best uplift step would be to embark on a strategy that included acquiring similar plants across the world whose operations could get a significant boost from the adoption of the newfound ways and means of their intellectual property?
Most uplift steps are reformations of the basic underlying business. You take a value chain, invest in its modernisation across people, process and technology and buy yourself a ticket to keep playing the game. In other words, reformation is changing the means, but not the ends. Transformation, a much-overused word, is changing both the means and the ends.
An uplift step that leads to the continuous improvement of a mineral processing plant, a software factory or an engineering consultancy is a reformation—selling the mine to become the world’s best at mineral processing is a transformation. A software factory or engineering consultancy transforms when it shifts its relationship from offering repeatable services—able to be replicated by any number of competitors—to partnering in defining their customer’s customer’s constraint and working symbiotically to exploit that innovative idea.
Whether your uplift step is reformative or transformational, you need to back it with an understanding of how it fits with your strategy to decrease the risk of failure. It also takes a significant amount of planning. When I was a student in London, Sir John Harvey-Jones was famous as the CEO of Britain’s then-largest corporation, ICI. He famously had this to say about the subject of planning:
Planning is an unnatural process; it is much more fun to do something. And the nicest thing about not planning is that failure comes as a complete surprise rather than being preceded by a period of worry and depression.
The uplift step’s planning function is related to the ideas contained in Elliott Jaques’s levels of work. The strategist’s mode of thinking, which correlates with their cognitive capacity, will govern the plan’s furthest horizon. You wouldn’t have a corporal make determinations about what is in the long-term interests of national security—that’s the job of the commander-in-chief.
You cannot say that you have completed your uplift planning if you haven’t tested the consequence of your decisions with where the constraint will move to. Furthermore, it is preferable to run scenario models of what you consider to be plausible and relevant to not only develop an optimal solution but also to mitigate the effects of the wishful thinking that you can come up with a single silver-bullet solution.
The deeper the horizon you are studying, the more complex and uncertain the terrain, the more adept you will need to be to accommodate the constraint. Supply may be compromised—what would you do? The market may collapse—what then? Your capacity to meet opportunistic demand is constrained—what action would you take? This scenario-based approach is not fanciful thinking when you consider the disruptions caused by, for example, the Corona pandemic. Who’s to say what the next disaster might be and what opportunities may present themselves as a consequence?
Once you know the compass setting for the uplift step, the work has barely begun. Implementing the uplift sits in the world of portfolios, programs and projects. It demands a thorough understanding of organisational change and how the big investment’s business benefits can be realised through its people. To quote Sir John Harvey-Jones again:
It is impossible to change organisations which do not accept the danger of their present way of doing things…organisations only change when the people in them change, and people will only change when they accept in their hearts that change must occur.
So, not only do we have to have the necessary execution capability to deliver the business benefits on our uplift investments—to scope, on time and on budget —but we also need to make the required investment in people to foster a culture with a high capacity for learning.
In conclusion, the uplift step is a function of how you define the system and its goal, where the current constraint is, how well you have optimised it, and what your ambition is for your enterprise’s future. As I said at the start, when you’ve squeezed all the blood you can from a stone—get more stones.
This is Part 6 of our series on The 5-Step FOCUS.
Part 1: Identifying the System
Part 2: Setting the Goal
Part 3: Find the constraint
Part 4: Optimise the Constraint
Part 5 : Collaborate Around the Constraint
Part 6 : Uplift System Performance
Part 7 : Start Again
The change from standard thinking to Theory of Constraints (TOC) is both profound and exhilarating. To make it both fun and memorable, we use a business simulation we call The Right Stuff Workshop.
We’d love to run it with you. To learn more:
[Background image: Francisco Torres on Unsplash]
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