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  - Feb. 1, 2012 -  

Supply Chain News: Dr. Elli Goldratt's "Unplugged" Interview with SCDigest


One of Our Most Popular Articles of All-Time

  by SCDigest Editorial Staff  

Last week, we noted the 2011 death of Dr. Eli Goldratt, originator of the "Theory of Constraints," author of "The Goal," which introduced TOC to the world, founder of the Goldratt Institute, and much more. (See Industry Lost Dr. Eli Goldratt in 2011).

This week, we are republishing Part 1 of an outstanding "Unplugged" interview SCDigest editor Dan Gilmore had with Goldratt all the way back in 2006. It is still very much relevant today.


Goldratt Says:
The problem is that the win-win solution is usually blocked by erroneous assumptions, and that's why it's hard to find it. But when you find it, it's obvious...

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Gilmore: What are the key concepts behind the Theory of Constraints?

Goldratt: There are two pillars to the Theory of Constraints. One is the starting assumption of all the hard sciences, which is that in all real-life systems there is inherent simplicity. If you can just find that inherent simplicity, you can manage, control and improve the system.

The other pillar is “that people are not stupid.”

Gilmore: (after a pause): I was waiting for some further explanation of that second point (laughter).

Goldratt: Have you ever heard the concept “people resist change?” And that the bigger the change, the more the resistance? Doesn’t this in essence say that people are stupid?

Let’s do a “for instance.” If someone comes up and suggests a change that is good for you, do you automatically resist it?

So, if I say you will resist the change just because it is change, I am actually saying you are not very bright. People certainly do, however, resist change that they have a reason to believe will hurt them.

Gilmore: Yes, or they lack enough information to know.

Goldratt: No – they believe the change is likely to hurt them.

Sometimes they are wrong because of a lack of information, but usually they are right!

Most changes might be right for the company, but are not right for the majority of people from whom they are asking for collaboration. So no wonder there is a lot of resistance.

Gilmore: There is a certain logic there, no question.

Goldratt: Because of that, it means the emphasis of change must be on win-win-win for all of the parties which you need to collaborate.

Gilmore: Well, that sounds great in theory, but for example if you have to do a restructuring…

Goldratt: What you are saying is that you don’t think it’s feasible, and what I have tried to demonstrate in my books and hundreds of projects is that it is always possible – always!

Let’s take your restructuring example, where a lot of people will get hurt. This means the solution is wrong! There must be a better way that will get you what you want, but will be a win-win.


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Gilmore: That would be great - if it was true...

Goldratt: Have you read any of my books?

Gilmore: Just “The Goal”

Goldratt: Did what was said in that book seem true, even simple? Common sense?

Gilmore: Yes…

Goldratt: Do you want a bigger proof that it is possible? Let’s say there is a manufacturing plant, where everything is against it. It’s on the verge of collapse, it looks impossible to do anything in the time of three months, which is all the time there is to fix it.

Nevertheless, it is so possible, providing you find the simplicity, and be careful to look for win-win solutions.

The problem is that the win-win solution is usually blocked by erroneous assumptions, and that’s why it’s hard to find it. But when you find it, it’s obvious, because your own reaction and that of everyone else is “Isn’t that obvious. Why didn’t we see it before?”

Gilmore: I’d still like a more concrete example…

Goldratt: “The Goal” is an example, my other books are examples, because each one of them are based on things that really happened.

The real-life validation we have had from the books and our own consulting is huge. One time a top executive from a U.S. company wrote me and said, “Dr. Goldratt, your book is no longer a novel any more, it is a documentary! Because I’ve done what you propose in the books, and I’ve achieved all the results. The only difference between what’s in “The Goal” and our story is that my wife didn’t come back yet!” [The main character in the novel, Alex Rogo, also has some marital issues.]

Everyone who attempts it achieves the results. Every one. It’s amazing.

Gilmore: “The Goal” is really plant/manufacturing focused, and many people associate the Theory of Constraints as dealing largely with production issues. How do we tie this all together, both the factory and the larger company issues and opportunities?

Goldratt: Bottlenecks are just a prime example of inherent simplicity. If you are looking at a system, what makes it complex is that if you are touching one place, it has a ramification in other places.

In other words, it is the cause and effect relationships that make it seem so complicated. This means that if you realize that the fewer the number of points you have to touch to impact the whole system, it actually has fewer degrees of freedom.

The more complex the system is, the less the degrees of freedom, which means that if you can find the few elements that if you touch them then they impact the whole system, you’ve found the key elements of the system.

Since they control the entire system, they are the constraints of the system, and therefore also the levers. If you can figure out what they key constraints of the system are, and what are the cause and effect relationships between these constraints and the rest of the system, now you have the key!

However, what you have to be able to do in order to successfully change the system is to look to the other pillar and recognize that only a win-win solution can be implemented. And in terms of all the options that exist, there is always at least one win-win solution. The key is described in my second book, which in most places is called “The Goal II.” Now, Alex isn’t a plant manager but a vice president, involved not just in production but supply chain, marketing, sales, etc. Still, the same concepts are demonstrated. How do you find the controlling factors, and create win-win? How do you unearth the false assumptions that lead you to believe that the only way out is a compromise, which means someone will lose?

Then, usually there is so much resistance that even if you can implement what you intended, it will be so diluted that most of the results will be lost.

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