Executives are under too much pressure to spend time looking for and developing new and better solutions to running their business. They are aware of the need to manage their business as a system but on the whole do not do so, because they are lacking the tools to do so. Goldratt’s five focusing steps are a way to solve this missing capability by focusing on the very few constraints any (business) system can have. Policies (the way things are done) are key constraints to better profits and improved SVA and many need to be changed. Some examples show how policies from the past are blocking businesses from earning much better SVAs.
There is an explanation (attributed to Dilbert) why top executives make so much money going around the World Wide Web. It begins with two statements that we all know and believe. They are “Time is Money” and “Knowledge is Power”. The engineering formula that “Power equals Work divided by Time” completes the premises. So, when we substitute Power with Knowledge and Time with Money we get the new equation that “Knowledge equals Work divided by Money”. Solving this for Money we get: “Money equals Work divided by Knowledge”. So the conclusion is that - as Knowledge approaches zero, Money goes to infinity – explaining executive salaries!
Not very flattering if you happen to be a senior manager! However before we dismiss this Dilbert impudence we should consider that behind humour lurk real problems. (Russians are famous for innumerable jokes critical of their political system and politicians and with good reason.) Dilbert often puts his finger on some painful truths, so maybe we should look for the real problem(s) hiding behind this story. Maybe understanding it will lead us to some very significant shareholder value.
Over at least the past thirty years there have been a number of studies trying to understand how busy executives manage their jobs. No one was really surprised to learn that most top-level managers address a large number of issues every day, and influence or make many decisions. We also learned that these people do not solve every problem or issue from scratch – they use their vast experience to respond quickly to almost any situation. They use paradigms - guidelines and rules developed from experience. Could this be bad? Relying on paradigms inevitably prevents (or at least slows down) a person from developing and applying new knowledge. Maybe this inertia, sticking to paradigms, is why managers’ knowledge seemingly approaches zero over time.
Every management problem actually requires two decisions – the decision that solves the problem itself, and the decision of how to solve the problem. Should a manager solve the problem from scratch or use paradigms he is used to and has been successful with? This second decision is what interests us here, because it defines whether or not an executive wants to (or can) improve. Should he invest his valuable time in developing better (more competitive) solutions or should he use his paradigms to arrive at a quick solution – and move on?
All executives are acutely aware of the need to look for better and better solutions. If they do not, they are putting their business in danger. If they do look for better solutions they could also be putting their business at risk, because some important problems or issues might not get addressed or should not be entrusted to others. Executives always face this contradiction. Should they look for and try new and better ways, or should they stick to what they know? The dilemma is – to question, or not to question (paradigms).
