Learning from the Books - The Goal By Eliyahu Goldratt & Jeff Cox

Updated: Jan 24, 2019


I am a business owner who has not attended a business management school. But that does not stump the curious and the determined. I have two of the greatest and most brilliant learning resources at my disposal - first, the people I've met in my travels across the world, including my family and second - the BOOKS. The world of books holds an un-parallel fascination from me from the age I could string together sentences. It is inspirational, available at your fingertips, omnipresent and never-ending supply.


Sailing through fictional to non-fictional, finally as an aspiring businesswoman I have arrived at the genre of business & management. My first read has been 'The Goal' By Eliyahu Goldratt & Jeff Cox. Its power lies in its simplicity of explaining intrinsic concepts and fundamentals of achieving targets in business world which can also be applied to personal life. Following are the lessons that left strong impressions:


  • Post-it 01: Productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive. Productivity is meaningless unless you know what your goal is.


  • Post-it 02: List of all the items people think of as being goals: cost effective purchasing, employing good people, high technology, producing products, producing quality products, selling quality products, capturing market share, communications, customer satisfaction, etc. But they are not the goals themselves; they're just the means of achieving the goal.


  • Post-it 03: Three measurement to know if company is making money: net profit, Return on Investment and cash flow. Goal: To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.


  • Post-it 04: Different set of measurements - Throughput, inventory, operational expense. A measurement not clearly defined is worse than useless.

Throughput: the rate at which the system generates money through sales. [Money coming in]

Inventory: all the money that the system has invested in purchasing things which it intends to sell. [Money currently inside the system]

Operational expense: all the money the system spends in order to turn inventory into throughput. [Money we have to pay out to make throughput happen]

Goal: Increase throughput while simultaneously reducing both inventory and operating expense.

  • In order for corporations to make money, the value of the product - and the price we're charging - has to be greater than the combination of the investment in inventory and the total operational expense per unit of what we sell.

The goal is not to improve one measurement in isolation. The goal is to reduce operational expense and reduce inventory while simultaneously increasing throughput.
  • This is dependent on two phenomenon:

Dependent events: an event, or a series of events, must take place before another can begin…the subsequent event depends upon the ones prior to it.

Statistical Fluctuations: Some types of information can be determined precisely, others cannot. These types of information vary from one instance to the next. They are subject to statistical fluctuations.


  • A mathematical principle says that in a linear dependency of two or more variables, the fluctuations of the variables down the line will fluctuate around the maximum deviation established by any preceding variables. Explanation: the slowest in the process is the one who will govern throughput [Bottleneck].


  • Bottleneck: is any resource whose capacity is equal to or less than the demand placed on it. Non-bottleneck is any resource whose capacity is greater than the demand placed on it. You should not balance capacity with demand; instead balance the flow of product with demand from the market - Balance flow, not capacity.


  • How to address a bottleneck: look at all resources, compare them against market demand, find one in which demand is greater than capacity - adjust capacity so the bottleneck is at the front of production. Do not attempt to turn bottlenecks into non-bottlenecks. The bottlenecks stay bottlenecks. What we must do is find enough capacity for the bottlenecks to become more equal to demand.

The level of utilization of a non-bottleneck is not determined by its own potential, but by the bottleneck/s in the system.


  • Activating a resource is not the same as utilizing a resource.

Activating a resource: equivalent to pressing the ON switch of a machine; it runs whether or not there is benefit to be derived from the work it's doing.

Utilizing a resource: making use of the resource in such a way that moves the system toward the goal. We MUST NOT seek to optimize every resource in the system. A system of local optimums is not an optimum system at all; it is a very inefficient system.


Learning:

  • Timekeepers needs to set aside a dedicated time and space to decide on its Goal/s. Process has been initiated by referring to 'Business Model Generation' by Alexander Osterwalder & Yves Pigneur.

  • Do not get confused between goals and means of achieving goal.

  • Do not be hasty in deciding goal. Give it the due attention just that each aspect of Timekeepers is defined by it.

  • Connect your daily operations to determine if an company action is taking you towards your goal or away from it.

Things to learn and practice:

  • Do not give answers, just ask the questions.

  • Learn how to persuade other people, how to peel away the layers of common practice, how to overcome the resistance to change.

The journey of a thousand miles begins but a small step. This is just the first few wavering steps for Timekeepers.

Thank you @Chaitanya Kekre for introduction to this wonderful book of knowledge.

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