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Eliyahu M. Goldratt: The Goal

Eliyahu M. Goldratt: The Goal

About the book

If you want to try a business novel – this is the book. The Goal is a great business novel. It is also a shotgun book where the story is so fascinating that you might want to read it in a fast forward mode. The actual book is so heavy that you might want to consider to read it as a e-book or as audiobooks.

How was the book?

The Goal will be inspiring you to think numerous topics such as change management, people management, work-life balance, how to use consults etc. As the title tells us – this book is all about processes. And how to keep continuously improving processes. One special topic is brought up in the end and it’s how to position sales and marketing in a company. There is also a human interest story about a marriage and it makes this business book somewhat different.

The Goal will teach you how to understand processes. The case example in the book is a factory, but the thinking and the methodology of the book can be applied into great many other disciplines than manufacturing industry. 

What are the key learnings of the book? 

Goldratt is teaching us three different concepts. By managing those concepts on can manage ones processes. Key concepts and the definitions of the concepts are:

–      Throughput (incoming money) “is the rate at which the system generates money through sales”.

–      Inventory (money stuck inside) is all the money that the system has invested in purchasing things it intends to sell”.

–      Operational expense (money going out) “is all the money the system spends in order to turn inventory into throughput”.

And what is the plot of the book? The plot is that the people in the factory are searching for a goal. They are forced into the change management situation via an executive decision. With the help of one consultant they come up with the idea that what is the goal. Their “goal is to reduce operational expense and reduce inventory while simultaneously increasing throughput”.   

The operational expense, inventory and throughput are main characters in the business novel. Bottleneck, flow and batch sizes are doing sidekicks. To identify a bottleneck one has to be very familiar with the process and especially with the metrics.

The bottleneck showcases an important learning to the organisation, because “an hour lost at a bottleneck is an hour lost for the entire system”. Flow is a desired state, because it will “balance the flow of product through the factory with the demand from the market”. That way you get process flow into daily operational mode. “Batch sizes” is important in order to understand that with what one can achieve the best performance. 

Goldratt offers five focusing steps to utilize the process of on-going improvement:

–      IDENTIFY the system’s constraint.

–      Decide how to EXPLOIT the system’s constraints.

–      SUBORDINATE everything else to the above decisions.

–      ELEVATE the system’s constraint.

–      If in the previous steps a constraint has been broken – go back to step 1, but do not allow inertia to cause a system constraint.    

The key learning would be common sense, because typically problems are solved with common sense. Not with great theories nor with IT-systems that have too many dimensions. Consultants can bring insight into the problems by asking the right questions. The Goal endorses that the business owners should find answers with their common sense.  

What should I personally do? 

Re-evaluate the operational expense, inventory and throughput in my operations.

Summary

The book in six words: “Common sense is not common at all (Mark Twain).”