TLS - Theory of Cosntraints & LSS

TLS – Theory of Constraints, Lean and Six Sigma Integration Guest was Mark Woeppel of Pinnacle Strategies

Business901 Podcast Transcript

Mark Woeppel is a master of organizational transformation with a lengthy track record of successful turnarounds. He is a recognized expert in the Theory of Constraints, Supply Chain Management, Project Management, and Continuous Improvement. He has earned the founder’s implementer certification from the TOC-ICO. Mark is the president of Pinnacle Strategies and is located in Dallas, Texas.

He is an internationally known author, speaker and lecturer on the topics of Theory of Constraints, Drum Buffer Rope, Cost Accounting, Organizational Measurement, and Critical Chain Project Management.

He is the author of The Manufacturer’s Guide to Implementing the Theory of Constraints, published by APICS/St. Lucie Press, in English, Spanish and Japanese and Projects in Less Time, published by BookSurge in English & Japanese.

TLS – Theory of Constraints, Lean and Six Sigma

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Joe Dager: Mark Woeppel, the President of Pinnacle Strategies was my guest on the Business901 podcast and this is the transcript of our discussion. My first question to Mark was I ask him to give a little background on a bit about yourself and what Pinnacle Strategies is about.

Mark Woeppel: Sure, Joe. Pinnacle Strategies is a company that I formed to help organizations accelerate their bottom line improvement. So, we focus on three things.

One of them is transformation, organizational transformation, turnarounds, that sort of thing. The other thing that we focus on is project management, business excellence and continuous improvement.

I've been doing this since the late 80's when I first became associated with Goldratt and worked with Goldratt himself for -- I don't know -- five or six years or so. Pinnacle Strategies was really formed out of that relationship. What I found was there were a lot of people who could say the Theory of Constraints, but very few of the people could actually implement the Theory of Constraints.

So, my passion and my business is really all about creating bottom line results for people and using the tools at hand to make that happen.

Joe: I've noticed you had some background linked to Six Sigma, don't you?

Mark: That's correct. Through a number of my implementations...we always implement some kind of a process improvement in an organization. We've done a number of Kaizen events and done Lean and Six Sigma, process improvement, quality improvement specific to the organization that we're working in.

TLS – Theory of Constraints, Lean and Six Sigma

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So while I, myself, am not a Lean or a Six Sigma Black Belt, I had a broad understanding of what the tools do and how to deploy them in an organization to get results.

Joe: Do you work mostly with manufacturers?

Mark: I've worked with manufacturers. Primarily, with manufacturers, but also with organizations that are involved with large development projects. For example, one of the biggest projects that I was involved was an off-shore, sub-sea development project for Shell Oil doing the sub-sea development. And I've done some product development kinds of things for semi-conductor people in their launching of new products and that sort of thing. However, mostly I tell people that mostly I work with organizations that make things, big things, and small things.

Joe: When someone thinks of the Theory of Constraints, you remember “The Goal.” It was popularized so much. But, where has the Theory of Constraints went in the last 20 years?

Mark: Wow, in the last 20 years. I'll tell you it's really grown in terms of its scope. When I first became associated with it, a friend of mine had given me a copy of a goal, and I was designing a scheduling program and I said, "Hey, this makes a lot of sense". We did it and had some success. Then, a bit later I was a materials manager, and we did a global, system wide drum buffer rope implementation. This was between 1984 and 1986. We went from thinking about Herbies and bottle necks, to really a systemized approach of drum buffer rope. Since then, in the 90's, in the search for the ultimate constraint, the ideas that we can break any constraint that we want, and we were really struggling with the implementations because we could fix the shop floor and the rest of the organization would stagnate.

TLS – Theory of Constraints, Lean and Six Sigma

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Out of that came the Theory of Constraint thinking processes that we developed in the early 90's. Out of that, became some of the other tools like critical chain project management.

Most recently, the Theory of Constraints is really developed enough to become more of a holistic management approach, a philosophy if you will, of managing an organization and thinking about your organization that has applications in sales, and marketing, and engineering, and product development, and manufacturing and even human behavior and how we interact with our people.

So, what's happened is Theory of Constraints to sum that all up is it's grown from thinking about bottled necks, and Herbie and chasing bottle necks around the shop floor to thinking about the business as a system. Where is the bottle neck for? Where is the constraint of that system? Is it where I want it to be?

So, we say, "Where do we want it to be?" and "What should it be for our organization?"

That's the approach that we've been taking in the last, I don't know, four years - the Theory of Constraints practitioners have anyway.

Joe: I think it's very interesting because I always looked at it, like you said, from the Herbie concept in attacking the constraint. But, looking at where do you want the constraint? It's really flipping it 180 degrees and looking at it in a different direction. That does seem very different to me.

Mark: Well, it is very different, and you think about it. Most people aren't thinking in terms as their business as a process where we find opportunities, and we create opportunities, and we turn those opportunities into prospects and prospects become customers. Then they place orders and we do all the things. Then, we collect the money. If you think about it, the business is a process, and it's a fairly sequential kind of a process.

TLS – Theory of Constraints, Lean and Six Sigma

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Most people don't think of their business like a chain where the weakest link determines the strength of that chain. So, it is very different. We call it a 'paradigm shift', which is a horrible, overused term. But, we don't have anything better to describe.

Joe: When I talk about Lean and Six Sigma: Six Sigma always is more project defined, Leans more cultural defined. When you talk about the Theory of Constraints, and you talk about it as a culture.

Mark: Well, I don't want to say as a culture because the culture is really a collection. I think a culture is a collection of behaviors in an organization. Culture is the way of describing those kinds of behaviors within the organization and outside the organization.

But, it's really more of a philosophy of an approach to managing your business. Find the constraint. Focus on the constraint. It really is about focus. Don't get distracted. Focus on the constraint. Protect the constraint. Then, we use the tools in the Six Sigma toolbox and in the Lean toolbox to really focus to help us improve where we want to go in the context of where's the constraint of the business.

So, you think of Theory of Constraints as a focusing mechanism in a way of approaching your business, and then you've got all the different tools for Lean and Six Sigma, and even within the Theory of Constraints, there's a set of tools that really help you push or drive the organization to where you want it to go.

Joe: Why do you think a lot of improvement efforts fall short or aren't lasting?

Mark: That's a really good question. The research that I've done shows - I think there are two things that continuous improvement programs fall short. One of them is that we just pick the wrong projects. If the strength of the change is determined by its weakest link, what we find is we've got a lot of people out there polishing the strongest link, and they're not focused.

TLS – Theory of Constraints, Lean and Six Sigma

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on the weakest link of the business. So, they don't get any kind of results. They get of a shiny link. The people that are working in that link are nice. But, the business never sees that. People aren't thinking in terms of constraints. But, there's a second thing and this was brought out in the research in the Malcolm Baldridge Awards Recipients is the thing that gets results is leadership. A lot of continuous improvement programs, and I'm talking about Lean, and Six Sigma and even Theory of Constraint's implementations.

What they don't have is that they don't have leadership. And by leadership I mean that the management team decides that we're going to do Six Sigma, or we're going to do Lean because we need results. What they do is they go and set up a department of Lean.

They call it 'Business Excellence' or whatever it is that they call it. This team is supposed to go out there and improve, whatever improve means. But, there's no connection of this independent entity that's going to go do Lean on Six Sigma in the strategy or the business end of the business. So, there's no leadership to force the Business Excellence Team to create accountability for results.

Joe: You talked about a theory that you call: TLS. What does that mean?

Mark: Well, TLS is Theory of Constraints, Lean, and Six Sigma. It was really born - the kernel of the idea came from a fellow at a semi conductor or an electronics manufacturer that had done a study across like 22 plants comparing TOC or TLS with people that did Lean alone and people that did Six Sigma alone and the results were pretty astounding.

We're talking 15 times more return on investment for the companies for the plants that did TLS than those that did Lean or Six Sigma alone out of that. I was also reading about the Lean practitioners and how so many of them are frustrated with their slow progress towards world class. What I was really looking for was how can we combine all of these so that we can use what is arguably some of the best tools in the world in terms of process management, in terms of Six Sigma, TLS – Theory of Constraints, Lean and Six Sigma

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in terms of Operations Management, and Lean and how can we combine them and do it in a systematic way? Really, that is the essence of the TLS system is really to take all of these different things, put them together and use them systematically to create the results that really matter for organizations. When I say matter, they matter to the customers, and they matter to the shareholders because, after all, if you're not profitable than nothing else counts.

Joe: The root causes of a poor continuous improvement effort. What do you think they are?

Mark: Management of the projects. They pick the wrong projects, and they are not focused on the constraint. They're focused other places and they are not connected to the organizational strategy. So, there set up is sort of the side organizations, and they're not integrated with the management team.

You know, the biggest complaint that Lean practitioners have is resistance to change -- nobody wants to implement our stuff. Nobody wants to eat our dog food -- from senior managers, to middle managers, to front line managers, to the employees. Lean's answer, the Lean practitioner's answer, is to do more training and do more training. And training is good and it's necessary. But, it doesn't address the core problem and the core problem is that these initiatives are not connected to the manager, who is supposed to be doing this.

So, what is the role of a manager? The role of a manager is to manage and improve his area. Here we have these tools of Lean. People come in and say, "does this Lean stuff, and you'll be better" and he'll be saying, "No. I don't want to". And the reason he doesn't want to be not because he's a bad manager. But, he doesn't do it because he is not rewarded for doing it. He's rewarded for something else.

TLS – Theory of Constraints, Lean and Six Sigma

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I'll give you an example. I spoke with a Large Aerospace manufacturer, the other day. It was a week ago, I guess. No, it's not Boeing. But, I was talking to the guys, and they've got this continuous improvement program and nobody wants to eat their dog food. So, you've got a group of talented guys that are, essentially, sitting on the bench and not being used to their full potential.

The reason why is because management is saying, senior management is saying, "The most important thing that we do is deliver on time". So, if you don't deliver on time, nothing else matters".

Well, the Lean guys are working on 5S and Poka Yoke and the other kinds of techniques, and they're not offering anything for the management team to say, "Help us deliver on time". So, as a result the local managers are listening to the senior managers saying, "I've got to deliver on time". And here's somebody that comes in and says, "We've got to do 5S". You say, "No. I've got to deliver on time. Leave me alone". So, management is sending a conflicting message. So, the core problem is really we're not connecting the efforts of our continuous improvement team to the strategy and initiatives that are being imposed by the customers in the business.

Joe: So, at Pinnacle Strategies, how do you go about doing that and showing that with the Theory of Constraints, or TLS, that you can accomplish what Lean can't?

Mark: Well, let me answer that in two ways. First of all, I want to say that Lean will do what it's supposed to do when it's focused in the right way. So, I don't want to say in any way that Lean is bad or Six Sigma is bad. That's not what I'm saying at all.

Joe: It's a tool, used properly it works.

TLS – Theory of Constraints, Lean and Six Sigma

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Mark: Absolutely, and as I said earlier, I employed Lean in a number of my implementations. In fact, almost everyone, I've done some form of Lean. But, the way that I approach the problem is really to educate management on the idea that if we're not focused on the constraint, then anything that you do will be...I don't want to say wasted, it would be kind of a strong term. But, I think we'll engage in a little hyperbole.

If you're not engaged on the weakest link in your business, if you're not focused on your constraint, you are wasting your time.

So, what I have to do, the role of Pinnacle Strategies, is to work with all levels of management to teach them what the constraint is? How does it affect their business?

What can they do to have the kind of impact that managers want to have?

There are very few people that come to work and go, "I'm going to do a crummy job today". Most people come to work, and they want to have an impact. They want to see improvements, and they want to see results.

The Theory of Constraints gives them that framework to do that. Here's what we need to do. Focus here. What I do in my implementations is I spend time educating senior management, middle management, front line management. This is a constraint. This is not a constraint. This is why it's important.

Then, help them, management, build processes and measurement systems to create the right kinds of reinforcements and build alignment in the organization. And that's what we do. We create alignment. Alignment of purpose to the constraint and alignment with the organization's purpose in the market place.

TLS – Theory of Constraints, Lean and Six Sigma

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Joe: I have to agree with you, totally, because the thing about Theory of Constraints and doing that is just like you said. If you're not working on your constraint, your major constraint, you probably are wasting your time because nothing's going to be solved.

Mark: That's exactly right. People mistake effort with progress. I hate to tell people that - well, I'll tell you, Joe. I wasn't brand new to business. But, I had been in business ten years or so. The first time that I did a Theory of Constraint implementation, well, after I learned it. I was kicking myself going, "What was I thinking?" I'm wasting all of this time doing these things that were not effective.

Joe: When you look at different Lean, Six Sigma, Black Belt training anymore, there is a section on Theory of Constraints that they normally get into. They get into the critical chain, and they talk about that a bit. But, TOC never really has become an equal to Lean and Six Sigma. Why do you think that?

Mark: I don't think that it can be because Theory of Constraints is a theory of management. Lean and Six Sigma are not theories. Six Sigma and Lean is not a way of managing your business. So, it's a different animal completely. If you're asking the question why hasn't Theory of Constraints been more widely accepted, there's a whole bunch of reasons. I'm not really sure I know the answer to it. I know what Dr. Goldratt thinks. He thinks that the reason the Theory of Constraints has not been well accepted is not due to its lack of success. Every implementation of Theory of Constraints that anybody has ever done has resulted in improvement.

But, I think that a lot of organizations, they don't understand it. And the consultants, the Theory of Constraints doesn't create a lot of consulting. So, there's not a lot of market place energy around creating Theory of Constraints implementations. This is a hypothesis.

Whether it's true or not, we don't know.

TLS – Theory of Constraints, Lean and Six Sigma

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Joe: That's an interesting take on it because I think the Theory of Constraints, people are attracted to it very quickly with “The Goal” and then the philosophy of the critical chain looking for your largest constraint, but they get a little lost when you go into the drum buffer rope and even further when they get into the thinking process. It becomes a little foreign to them, I believe.

Mark: Yeah, I think so. I think that we, as Theory of Constraints practitioners, have not done a good job of really explaining what is the Theory of Constraints and how does it work. There are a lot of people out there waving the banner, look at these huge successes and that kind of stuff. But, I'll tell you that in the Theory of Constraints community, there are a lot of technicians, a lot of engineers, a lot of competent people, but not a lot of good marketers. So, they're really good at making stuff happen. But, as far as advertising the wonderful stuff that they did, there are not a lot of good ones.

Joe: What you go back to is where Six Sigma would be if it weren't for Jack Welch.

Mark: Exactly, how widely implemented would Lean be without James Womack and “The Machine that Changed the World.”

Without that kind of energy, the Theory of Constraints won't be accepted as widely accepted as Lean and Six Sigma. But, I think that it's getting more. I've been told that Toyota is doing some Theory of Constraints and that what's happening in Japan and Asia, in particular, India and Japan and China are that Theory of Constraints is getting a wider and wider audience. In fact, I'll tell you this. Something I do know for a fact is The Public Works Ministry in Japan has publicly said that all public works projects will be done using the Theory of Constraints critical chain project management. And that's huge.

TLS – Theory of Constraints, Lean and Six Sigma

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So, I think what's going to happen is Theory of Constraints is going to go to Japan.

They're going to be successful, and then it will come back to the US and then we'll say, "Look what Japan did".

Joe: I go back to an old line I have, and it's, "The expert always carries a suitcase". The farther away you go, the smarter you are, funny how that works. Demming is a prime example or Duran.

You have a new paper out that talks about this, that talks about being able to double your profits or get 15-23 times better results than Lean alone or Six Sigma alone.

Explain that a bit of that to me. They are pretty big claims, Mark.

Mark: I'll tell you that the claims are based on both my experience working with companies, but also based on a design of experiments that was done on these 22 plants.

So, it was a blind experiment, design of experiments that said, "What are the things that are creating a significant shift in results?" And that's how I justify that claim with data to back it up. And it's not my data, it's somebody else's. So, the TLS process is really - first of all, identify the constraint and focus on the constraint. Make sure your measurements are in line so you can remove any of the conflicting messages that you're sending to your organization, build your governing structure so you can have your improvement teams connected with your business strategy.

So basically, you don't have the rogue improvement team, guys going out and improving stuff, but the improvement teams are commissioned and owned by line managers, people who are responsible and accountable for getting results. Then, what we do is we say, "Let's deploy our projects to the constraint, and we're going to focus there. We're going to drive waste out of the constraint. We're going to stabilize our process, and while we're doing this, we're watching for the constraint to be moving“.

TLS – Theory of Constraints, Lean and Six Sigma

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Now, the beauty of the Theory of Constraints is that we can go macro, and we can say from a global organization, "I've got a client that has plants all over the world". And from a global standpoint, where's their constraint? Well, their restraint's probably in a plant in Africa, if I had to pick. Now, I'm speculating. I don't know this is true.

But, if I go into their plant in Aberdeen, I would say, "What's the constraint of this plant?"

So, even in a micro level, "Well it's the MCX10. It's that machine right over there, the vertical torrent lathe or something". That's the constraint or product development, or whatever. But, the point is from a systems standpoint, we can say, "The constraint exists in the global sense. But, it also exists in the micro sense".

So, if I'm accounts payable, is there a constraint in accounts payable? If I focus on improving accounts payable, does it focus on helping me make more money as a business, probably not? But, my point is that the approach in how we deploy these projects is focused around what is the constraint in the area that I'm working in so I can achieve results in the context of the goal in that area.

So, connecting from a global standpoint, TLS is really about connecting my improvement process to my business strategy and my business objectives. So, I'll go and deploy my Lean and Six Sigma teams to the areas of the constraint, in the area that is a constraint that I don't want to be a constraint, and I create a synchronization through the organization. Then, I go back and break that constraint and move my team to the next constraint, because as soon as I fix the weakest link, the strength of the chain is still going to be determined by the weakest link. It will just be a new weakest link.

So, TLS is really about governance, tying your team to the organization's strategy and focusing your projects around the constraint and then doing it again, and again and again.

TLS – Theory of Constraints, Lean and Six Sigma

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Joe: If someone's interested in contacting you, what's the best way to contact you?

Mark: The best way to contact me is to pick up the phone. My office number is 972-899-1734 or you can just head over to my website at Pinnacle Strategies -- don't forget the dash -- .com. There, you'll be able to find the white paper that we've been talking about. You can download it. It's free. You just have to surrender your email address. And what I'm finding is, a lot of people, they surrender their Yahoo! Address.

But, that's fine.

Mark: I just want to know where's my paper going and how much recognition is the paper getting? It's not a sales pitch. The paper is really all about doing the research and laying out a logical approach to continuous improvement. So, I wanted to put it out there and let as many people have it as wanted it.

Joe: I think it's a great resource for people to look at it and your website was a good resource also, as I've browsed through it and looked at it. I think both your books , what brought me to you, because I had looked at both your books and had read them in the past. I can remember the one on Project Management very well. It's got a unique cover with the clock on it. Both books are valuable resources. I encourage people to take a look at on Amazon. To listen to this podcast, of course you can download it at the Business 901 ITunes store and there also will be a transcript later posted on my website for people to view after the podcast is finished here. So, I'd like to thank you very much for your time, Mark. It's been very informative. I appreciate it and I hope we can talk again.

Mark: Your welcome, Joe. It's my passion. I appreciate you and what you've done.

Thank you.

TLS – Theory of Constraints, Lean and Six Sigma

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Joseph T. Dager Lean Six Sigma Black Belt

Ph: 260-438-0411

Fax: 260-818-2022

Email: jtdager@business901.com Web/Blog: http://www.business901.com Twitter: @business901 What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe's ability to combine his expertise with "out of the box" thinking is unsurpassed. He has always delivered quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with." James R.

Joe Dager is President of Business901, a progressive company providing direction in areas such as Lean Marketing, Product Marketing, Product Launches and Re-Launches. As a Lean Six Sigma Black Belt and a certified coach of the Duct Tape Marketing organization, Business901 provides and implements marketing, project and performance planning methodologies in small businesses. The simplicity of a single flexible model will create clarity for your staff and as a result better execution. My goal is to allow you spend your time on the need versus the plan.

An example of how we may work: Business901 could start with a consulting style utilizing an individual from your organization or a virtual assistance that is well versed in our principles. We have capabilities to plug virtually any marketing function into your process immediately. As proficiencies develop, Business901 moves into a coach’s role supporting the process as needed. The goal of implementing a system is that the processes will become a habit and not an event. Part of your marketing strategy is to learn and implement these tools.

TLS – Theory of Constraints, Lean and Six Sigma

Business901

Product Marketing

Lean Marketing