Science of Business

Science of Business

The economic growth in India, driven by domestic consumption and international demand, continues to surpass the growth observed in other developing nations and the developed countries.  This has led to organizational expansions towards new industries, higher order of entrepreneurial ventures, and foreign investments in India.  An irrefutable conclusion of these economic dynamics is higher order of competition – which is what India Inc is observing.  Most organizations – large or small – are faced with the challenge of winning against competition.  

Customer is King!  The only prudent direction to defeat competition is to delight the Customer.  Customers are seeking quality solutions to fulfil their needs and wants, with confidence of delivery commitments and within a reasonable price.  This is common sense knowledge.  Organizations should invest in creating a differentiated proposition, instead they often find themselves entrapped in the whirlwind of business operations.

 Creating Customer Delight

Factors for Customer Delight

The Science of Business is less understood by most organizations.  The outcome is ineffective deployment of resources and investments, resulting in lower than potential growth in profits.  As in the application of any science – there is a method to the madness of business planning & execution.  Theory of Constraints (TOC) has introduced the step-by-step process to establish a competitive differentiation thereby achieving customer delight. 

Overcoming Organizational Constraint

The Weakest Link

The set of functions and processes in an organization are akin to a chain of elements that collectively create and deliver value to the customer.  Each process is an element in the chain of required actions.  Necessarily, the weakest element of the chain will drive the effectiveness of the system.  This weakest element is known as the bottleneck of organization’s constraint.  TOC recommends a system’s approach to business planning, i.e. it is imperative to understand the whole chain, not only the isolated element.  A constraint is anything that prevents the organization from making progress towards its goal.  Organizations can have one or two constraint elements at any given time.  The irrefutable conclusion is that the organization should resolve the constraint to benefit from improved productivity and profit. 

Organizations are constantly firefighting to resolve issues either in operations or in the market.  Amidst this chaos and confusion, it becomes difficult to decide where to prioritize the actions and how.  The Five Focusing Steps for Constraint Management provide the guiding principles to overcome the constraint for the system’s improvement.  

Process of Ongoing Improvement

Five Focusing Steps

Identification of the constraint is only the starting point.  There must be a scientific process to achieve the desired change in the organization.  Theory Of Constraints has detailed the following solutions for different industry environments and organizational constraints.

• Drum-Buffer-Rope:  This is the application solution for manufacturing environments to synchronize the production system with the constraint element, while minimizing inventory and WIP. 
• Critical Chain Project Management: This is the application solution for project environments (infrastructure, product development, capacity elevation etc).  The critical chain is the constraint for achieving on-time project delivery.  Aligning the resources towards progress of the critical set of tasks provide confidence towards on-time project delivery within cost & scope.
• Replenishment Solution for Retail & Distribution: Application for distribution environments and Modern Retail, where customer flow is the constraint.  Deploying a pull-based mechanism for replenishment of products using the Buffer Management System.  This reduces cash stuck in inventory and increases the market reach. 
• Throughput Based Decision Making: Senior management is constantly conflicted with decision making with limited (and often conflicting) information.  Decision making application allows for impactful and speedy resolutions backed with confident rationale.

Business Impact Possible

The Science of Business, as expounded by Theory of Constraints, has one fundamental objective – to help organizations make more money now and in the future with reduced exposure to risk.  This is possible through building a competitive advantage, also known as a differentiated proposition.  The differentiated proposition propagated is based on operational excellence.  TOC has been implemented in more than nineteen different countries and across industries, with many case studies in India.  Godrej & Boyce, Bharat Bijlee, Tata Group, Trident Industries, Bajaj Electricals, Liberty Shoes, Raymond, Ashok Piramal Group and Kirloskar Brothers to name a few.  The benefits observed by these organizations can by synthesized as below:

Potential Benefits Through the Deployment of TOC

Building and exploiting the differentiated proposition is the primary responsibility of senior management.  The following bottom-line impact should be expected through implementation of TOC.  At a level of Operating Profit, the impact potential can be upto 80%! 

Theory of Constraints is a management philosophy that guides real world managers to make better decisions and enabling them to confidently pursue a course of action to achieve organizational objectives.  The primary essence of TOC is to align business operations to create customer delight.  This is achieved through collaboration of all functions towards the end objective of profit impact.  This business methodology is tried and tested, and is sure to create significant results.  An apparent conclusion is stronger alignment and teamwork across functions, creating harmony in the organization!

Harish Chawla is a TOC Certified Consultant with ten years of experience in the space of organizational growth through implementing Theory of Constraints.  His expertise are focused towards manufacturing industries, establishing differentiated propositions for delivery effectiveness.  Harish has been fruitful on the journey of Godrej & Boyce towards TOC and Business Excellence.