Saturday, November 30, 2013

[book] The Goal

This book came recommended by none other than Amazon founder Jeff Bezos, and he’s right: it’s one of the better business books I’ve ever read. Written in a breezy, dialog style, it reads as much like a novel as a how-to book.

The “goal” in the title refers to the fundamental purpose of any business: Turn a net profit, with high ROI, while maintaining cash flow. How you do that: reduce operational expense and reduce inventory while simultaneously increasing throughput.

These principles are generalizable to any situation where you want to be more efficient, and the author suggests a “theory of constraints” based on a set of “five focusing steps” to help you do this:

  1. Identify the system’s constraints (aka bottlenecks) that prevent the organization from obtaining more of the goal in a unit of time.
  2. Decide how to exploit the constraints to get more out of them.
  3. Subordinate everything, realign the entire organization as necessary to support the decision above.
  4. Elevate the system constraints, making any other major decisions necessary to increase the capacity at the constraint (bottleneck)
  5. If in these steps, a constraint is broken, go back to step 1. Never allow a constraint to continue solely due to inertia.

Like most good theories, these ideas seem obvious – nearly trivial – when you finally notice them. I suspect the applications are more obvious in well-established systems than in situations where you’re building something new. But even then, it’s healthy advice to be aware of bottlenecks to manage your system as efficiently as possible

I can see how they apply to the field I know best (software development), and I’m surprised I haven’t run into this book before.