Goldratt, Rami 2014 Value TOCICO_Rami_2014_Value_TOCICO.pdfDr. Eliyahu M. Goldratt The conventional...

1© 2014 TOCICO. All rights reserved.

TOCICO 2014 Conference

Delivering Value –

Removing constraints for business growth

Presented By: Rami GoldrattDate: June 11th, 2014



2012 Chicago, TOCICO presentation…

Management AttentionAchieving results dealing with

complexity, uncertainty and conflicts.



HarmonySuccessful company

A

Cut back on cost / investments Maximizing efficiency's (get the maximum of current resources) Focus on short term profit (cash)

Make investments Allow protective capacity Focus on profit

Ensure smooth current performance

B

Ensure long term prosperity

C

Focus on current operations

D

Focus on long term health

D’

Osc

illat

ions



Successful company

Ensure smooth current performance

Focus on current

operations

Focus on long term health

Ensure long term prosperity

Harmony GrowthStability

What is the direction?



The real constraint: Management Attention.

The Science of Management -Introduction



Step 1: Identify the system’s constraint(s)

Step 2: Decide how to exploit the system’s constraint(s)

Management Attention

Focus on the core conflict –

bringing ongoing Stability and Growth...

- Build the Competitive edge

- Capitalize on the Competitive edge

- Sustain the Competitive edge

Build

Capitalize

Sustain

Applying the 5 steps…



“Value is created by removing a significant limitation for the customer, in a way that was not possible before, and to the extent that no significant competitor can deliver.”

Dr. Eliyahu M. Goldratt

The conventional way companies usually look to expand is to evaluate current assets and think how to leverage them.

However, in a value‐based process the starting point is the value. The quest to deliver the identified value generates the assets

that then create the competitive edge

Competitive edge – delivering exceptional value



Exceptional value – Build.

Value Proposition

• Value Analysis

• Concept Design

• Concept Evaluation

Business Model

• Model Design

• Business Assessment

Execution Plan

• Concept Validation

• Technology Validation

• Mass production Validation

• Mass Marketing Validation



ImprovingProduct /Proposal

Value

CUSTOMER’S EYESAnalyzing customers Un Desirable Effects (UDEs)

MARKET’S EYESAnalyzing behaviors in different segments of the market (1,2,……n, n+1)

PRODUCT’S EYESAnalyzing impact of quantum changes in product parameters

Exceptional Value – Value Analysis



Would the customer make the change?

Exceptional Value – Concept Evaluation



How big is the “pot of gold”?

How big is the “alligator”?

Which customer has the smaller crutches and “easy to leave” mermaids?

Are changes required in the concept to reduce the size of the crutches

and/or mermaids?

Exceptional Value – Concept Evaluation



Educating the Market

Reference for Value

Reference for Price

Purchasing Situation

Distribution Channels

3rd party Collaboration

CompetitionBarriers

Exceptional Value – Business Model



Referencefor value

Reference for price

Purchasing situation

Distribution channel

3rd party collaboration

CompetitionBarriers

Nurse, home security, or smoking alarm?

Monthly subscriptionfor a newspaper

Discharged patients

Hospital Ambulance companies and hospitals

Sign the big network of hospital

Nurse, home security, or smoking alarm?

Monthlysubscription for cables

TV late night commercial

Direct Ambulance companies

Sign media deals with local cables




The success or failure of a major innovation is determined by the time to validate the model assumptions and take course corrections.

• Is the potential market big enough?

• Is this a lasting need? • What would be the margin?

Expected Returns

• How difficult is it to imitate?

• How long will it take them to catch up?

Window of Opportunity

• How much investment and added operating cost is required?

• What is the implication on the company’s internal constraint(s)?

• How long will it take to start seeing the return on the investment?

Time, Effort& Cost




Step 3: Subordinate everything else to the above decision




The 3 fundamental mechanisms wasting and distorting management attention:

The fear of Complexity -> driving to dissect the system to sub-systems and bringing damaging local optima.

The fear of Unknown-> driving to manage by finer and finer detail resolution, optimizing within the noise.

The fear of tug of war -> struggling with unacceptable compromises.




Step 3: Subordinate everything else to the above decision

Remove the mechanisms blocking management attention

from building, capitalizing and sustaining a competitive edge:1. Maintain FOCUS: Identify the key constraints and protect the

flow. Remove disruptive local optima.

2. Maintain FOCUS: Clean distortions created by excessive

accuracy – Manage buffers.

3. Maintain FOCUS: Don’t optimize on key conflicts – challenge

assumptions and find Win-Win solutions.


Goldratt, Rami 2014 Value TOCICO_Rami_2014_Value_TOCICO.pdfDr. Eliyahu M. Goldratt The conventional...

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