Episode 6

TOC Thinking Processes: A toolkit for thinking clearly (Part 1)

Category :  Thinking Process

Tune in to find out how we can think clearly and develop breakthrough solutions. Being a physicist Dr. Eliyahu Goldratt adopted the traditions, constructs, and rigor of the hard sciences, when he introduced a set of thinking tools to serve as a framework to raise questions regarding existing paradigms, identify problems in any environment (not necessarily business), converge on to the root cause of these issues and build robust solutions.

By the way, this episode has a small but interesting test that you can apply at your workplace to understand any problem, better.

Transcript
Shubham Agarwal : TOC or Theory of Constraints is a body of knowledge often defined as a powerful yet simple management philosophy that suggests that output of a system is always limited by the constraint of the system. If i were to give an analogy TOC can be describe as the strength of chain, how do we analyze the strength of a chain, it is by the strength of the weakest link and not by any other link. This simple law has given rise to powerful logistical solution for operations, distribution, retail, new product development, healthcare and many other domains of operations.

Eli Goldratt, the inventor of theory also developed thinking process, which are a set of tools to logically analyze problems and develop robust solutions. Now, while the logistical solutions are very popular, there isn’t much awareness about the thinking process. I also suspect that not many, actually use it. You will find a lot of case studies on the implementation of logistical solutions, but very few organizations in the world actually use the thinking process of TOC.

We have Satyashri Mohanty with us today. He is the director at the Vector Consulting Group and has been devising solutions using TOC thinking tools for Vector’s clients for 16 years now. Of late, he has started researching the topic of thinking process trying to relate its origin and relevance with work of giants in the field of philosophy starting with Socrates , Descartes , David Hume to modern philosophers like Karl Popper, Bertrand Russel and even the latest work of David Deutsche. Let us understand more about the topic from him.

Hi Satya how are you?

Satyashri Mohanty  : Hi, Shubham, thanks for having me here
Shubham Agarwal : Great. Satya lets dive into the topic straight.TOC is popular for the logistical solutions in operations but how does the thinking process fit in because it seems like its a forced add-on to the body of knowledge and why should one even learn the thinking process? I mean Is it really such a big deal?
Satyashri Mohanty : Shubham that’s a very interesting observation. I think you are reading a lot about TOC these days.Yeah, it’s a very interesting observation. because on one hand, we have a hard core operations topic. Like for example, if you take the drum buffer rope, which is the way you have to manage a plant, so we are looking into details of topics like how do I schedule an order? How do I prioritize? How do I quote a due date, or for that matter, even the new product development solution, so they are very detailed steps of what has to be done to transform that environment. Now that’s that’s the logistical solution. And suddenly, you have a topic which is called thinking process. Now that that’s actually a topic of philosophy. So you’re right that how a topic of philosophy and operations management are being combined and presented to the outside world, as one single body of knowledge, it sounds so confusing. Now, the puzzle depends on who you are. Right? It’s, it’s, it’s a big puzzle, if you are an academician or a student, or a trainer. Now, because for a student, or a academician or a trainer, your job is to understand the logstical solution and keep it away from the thinking process. So you attend a class of, let’s say, the drum buffer rope, compare it with MRP to kanban and your job is done, you get your marks in the exam, or or you are able to teach properly, what it is all about. But if you are a change agent, a consultant, or an implementer, then these two bodies of knowledge, which is the logistical solution and the thinking process are intertwined together, you cannot give off one and work with just one piece of the knowledge.

It would be great if you could help us with an example here. It would really help to understand what is the relationship between the two.

Okay, so let’s say you are an implementer. And you want to implement the TOC solution for a new product development environment. And there is a I can call it a standard solution for the environment because most of this new product development environment have a problem which TOC solves. And one of the big problems that they have is an environment of frequent priority changes. And because in many new product development environments, that team is common across many projects, so they have to serve many projects. So as a result, they’re pulled in multiple directions and and there is a priority change which happens and resources the designers multi task a lot and that’s a killer of capacity and time. So what toc does is tries to address this. So you go there to that organization and you see it is happening out there. But do you think that they understand that this problem of multitasking is damaging. They may not right otherwise they would have given it up. Yeah. So, the first thing is you need to understand why there are a lot of why’s that you have to answer in their environment. The first why that you have to answer is why the multitasking that is happening in this environment is damaging number one. Number two, why that you have to ask is why it is so, significantly high? Because somebody might say that yes, it is damaging, I know it intuitively, but it’s not such a big thing. So, you have to prove that why it is such a big thing, why there is a significant wastage of time and capacity much more than what the managers are thinking. And the third thing you have to also understand people are not fools, right? They are they are multitasking because they are forced to which means there are some valid need which is getting fulfilled. So, you need to understand where is this pressure coming from? And and why is it so?

Okay. So trying to answer all these why’s Okay, you’re trying to generate an explanatory knowledge about that environment. So, while trying to answer this, you get a buy in of the audience, right? And the people understand Yes, I now understand this is damaging, and hence, I am willing to make a change. And I also understand the changes that you are suggesting is is not damaging at all. And hence I am willing to make the change, so you get your buying. But also another thing that happens is while trying to answer the question, you understand the nuances of the environment, and you find out that maybe the original solution cannot be implemented as it is, and it needs customization. So that’s how the thinking process meets both the needs you you help getting a pile, and plus you deploy the right solution, and you just don’t deploy your standard solution, but the right solution given the environment.

So if i hear you correctly you are saying that it helps us to go down to the root cause of the problem and help it solve from there as a consultant.

Shubham Agarwal : So as a consultant it would help i understand as an implementer it would really help but does it help a manager in decision making? Does it help a manager to learn this to help you know solve day to day problems?
Satyashri Mohanty : Yes, if you look at an organization, if you see organization is nothing but a collection of independent individuals, and one of the things that people have to do is particularly managers is to take decisions. And the decision while taking there has to be consensus around it. And also while implementing there has to be consensus around it. So because the decision makers could be different from the implementers, so there has to be consensus all around, right, otherwise, things don’t get implemented. So so that’s one part of the of the challenge in an organization where decision making you have to take people along. Now let’s look at another fact of life, which is being told to us by the behavioral economics, the behavioral economics, in last few decades of research, have proven us that we as an individual, right have lots of biases, we have confirmation bias, hindsight, bias, availability heuristic, there are various forms of biases, because of which our worldview is not objective. At times, we see it through our mental mindsets, or whatever, whatever we have, now just combine these two things together, that organization is a collection of individuals, and each individual could have a viewpoint of what is this problem? So you could have people with differing viewpoints.Subham add comment here

Yes differing view points will slow down organizations while taking a decision or while implementation. I see that possibility

And that’s, I think, is a unrecognized problem in organization.

the best thing is to you know, do an experiment and you can actually go and do it, you pick up a chronic problem in an organization, for example, the inventories are high or the sales are not picking up, pick up anywhere, right? And you pick up top 10 managers, okay. Ask them two questions.
What is your opinion about this problem? And why do you think this problem is happening in your organization? You will hear different kind of answers from the top 10 managers. It could be starting from that I don’t think the problem is as big as your are speaking, I don’t think it’s big. The second could be that the reason I attribute is to this department, and another guy would say no, this is that department and somebody might, somebody might say its because of the top management who have taken a decision and that’s why we are in this mess. So when you have differing viewpoints of what is the problem, whether the problem exists, how big it is and a different reasoning as to what needs to be done, you can’t get people to, you know, work in cohesion as a team. And that that is a problem, right?

So, so I really urge my listeners here to go and try this out, because I’m sure it’ll work the same. And the things would be really much better understood, I guess. Yeah, yeah. Yeah.

So people intuitively know about it. I mean, people know that there are different viewpoints about a problem and the way somebody has to approach it, there’s a different viewpoint. So how do people resolve this conflict? One of the ways is, people say, let the boss decide. Now, that’s not the right way to do because the bias of the boss becomes the basis of decision making, which may not be correct. Now, there are some more if I can say, a democratic bosses, who say, you know, let’s, let’s try to understand the reality by collecting data, because data will reveal the reality. And that’s a viewpoint that many people yeah, you remember the famous slogan in God, I believe, and for everything else, get me the data.

Shubham Agarwal : Subham : yes data driven decision making is important is what we are given to believe.
Satyashri Mohanty : Yes. So, and that kind of is a very dominant phrase, which affects the thinking of managers. So, so But the problem is, data is not there for everything, you can pick up any organization, there is never data available for all kinds of variables that can come to your mind. Just to give an example, a company in India, which is, you know, a consumer goods company, which is trying to sell through a distribution channel. Many of them do not have data of the retail ofttake what is a sale happening at the retail point?I think I don’t think is available with any industry in this.

Yeah. So you are selling through networks. So you after your primary sales is gone, you don’t really have data of demand, how it is picking up and, that’s a very important data. So many people don’t have data about simple things like inventory in the middle of the month, because they take data only at the end of the month. So and also, data is not available for nebulous topics, or or subjective topics like like, let’s say, stress, how much stress is there in your organization? Are your people loyal? Are your customers satisfied? It’s very difficult to, you know, put a number to those topics, and they’re very important topics.

Subham add comment

Shubham Agarwal : But there ways to do survey about these topics and put a number. But I do agree that there are so many subjective variables – it is not easy to make a scale and measure it. There is also lot of inaccuracies around these metrics like employee satisfaction and customer satisfaction. The word satisfaction may have many interpretations. So it is not easy.
Satyashri Mohanty : Yes and people have been able to, you know, create some metric out of it, but there are so many different topics, you can’t really get a number out of all these subjective topics, right. So what happens is, so number is not going to decide the fate, right? For example, if two people are fighting, you can’t just get a number and say, you know, this is what is the reality and that’s how the conflict should get solved. But when I when I say that number is not there for many topics, and and also some topics are subjective in nature, then how do you arrive at a common viewpoint? How do you deal with the different perceptions of people? How do you take a decision, right? And that’s where the TOC thinking process comes in.
Shubham Agarwal : Interesting. You claim we can objectively understand the environment, reach consensus even in environment where measurement is difficult?
Satyashri Mohanty : So, what it does is it tries to say that, okay, there are some topics on which data is not available, right? But that doesn’t mean I put it under the carpet, okay. So, there is a way to deal with it, how do you do it from the unseen cause from the unseen entity, right? I try to predict an effect through a ladder of reasoning. So I use a ladder of reasoning from the unseen, I try to predict what effect will materialize and I check whether that effect has materialized or not. And based on that, I see that yes, the causes, causes in place, so even when I don’t have a data by using a reasoning process, okay, by using a ladder of reasoning, I can predict an effect and if I collect a data of effect, then I can easily say that the cause exists.
Shubham Agarwal : I am not convinced. The process you are recommending is from the unseen or non measurable entity, you use a reasoning process to conclude logically on a predcited effect. Then check for the predicted effect. But people can create any story out from unseen cause to the seen effect.
Satyashri Mohanty : Okay. So, so, so, but there is a difficulty here. There’s a difficulty here is that the story that I built from the cause and effect could be a Harry Potter story could be any story right? Like for example, I don’t see God existing and I can build any story that you know, my own time delivery is bad, because you know, the God is not with me. So, you can you can create any story right. So, which means that this is if you if you try to build any story out of out of a cause, which cannot be seen then you are also nowhere.So here,  I think the important point is what David Deutsch has talked about good explanations. Now what he says is, while you’re trying to build that ladder of causation from the unseen cause to the scene effect, the explanation should be hard to vary. That means you should not change your explanations when somebody is refuting. Yeah. So, from the cause till the effect you are building a ladder of causation or or the explanation. Now the explanations should be such that after somebody is refuting it, right, you should not be able to vary it, but you should not change your stand.
Shubham Agarwal : David Deutsche tells about hard to vary explanations. So can you give an example for our listeners
Satyashri Mohanty : Okay. Let me give you an example. So let’s take a situation where somebody is saying that my on time is bad. Okay, on time delivery is poor. Now, you might ask the next question, why is it so the person explains that my on time delivery is poor because I have got a very complex environment, my environment is very complex. Now, this, by definition is not a good explanation. Because the word complexity has to be understood. So you ask a deeper question. And you say, Can you tell me what is this complexity that you’re talking about? Then he might say, you know, the complexity is because of the fact that I have got a lot of uncertainty, I’ve got variability in my environment. So you say, Okay, now I understand what is complexity about a lot of variability and uncertainty, and that is why on time delivery is bad. And he said, Yes, yes, you got it. Right. That’s why it is bad. Now you start refuting it, right? You say that, you know, what, I know an environment where the uncertainty and the variability is much more than what you have today. And they have a much better on time performance. Now faced with this refutation, if the proponent start saying, you know what, my product is very different. The example of the industry that you’re giving is a different industry, it’s a different product, my product is different, my industry is different. Now, what has happened here in this argument, you have suddenly changed your stance. Right? yeah. So you talked about uncertainty and something that our product was not fitting in and suddenly product starts fitting in industry starts fitting in. So So what is happening is if you see your explanations are easy to vary. So what David Deutsche has said that explanation should be hard to vary,
Shubham Agarwal : Can you take the same example and give a “hard to vary” explanation.
Satyashri Mohanty : right? Now, let me give you another explanation, which is hard to vary where the proponent has to let go faced with a refutation. Okay, so let’s take the same example. And I’m trying to give you an explanation. So the question goes, why is the on time delivery bad. So I say, you know, what you have, your management has a efficiency mindset, you want to keep your machines running, and highly efficient, always,
Shubham Agarwal : I see you started your explanation with a cause , a mind set, which is hard to measure. Go on with your explanation.
Satyashri Mohanty : because of which what is happening is you’re starting work centers have got a lot of excess capacity. So you’re pumping in material much ahead of time. And because of which the managers have a lot of choices. So they start doing cherry picking. And because of which, what is happening, some items are getting much ahead of time, much ahead of their due date, while others are getting delayed. And this is the fundamental problem for your bad due date performance. Now look at this explanation for a lot of people anyway. This explanation is pointing out that in your environment, you should definitely see some orders getting made ahead of time and some orders getting delayed. Now, if that is not happening, then you have no place to hide, you have to give up your explanation. It is hard to vary. Okay.Yeah, so I’ll just complete what I was trying to say and then answer your question. So what the toc thinking process does is it it creates a framework so that you build a good reasoning, a good explanation, which is hard to vary, right? And that’s why managers can use it to reach a common conclusion about objective reality without depending on data. So we solve the problem that despite having different perceptions, you can use this tool with minimal data, you can or minimal indirect data, you can reach a common consensus. So the problem that you talked about why managers should learn this, this is a reason why they should learn it. If they want to take faster decisions, if they want to take people along, right this is what they have to learn.

Wonderful, yeah.

But this is a very how should I put it common sensical intuitive process? Yeah, right? Do we really need to learn this process the thinking process? Or can a smart man just intuitively go about this?

So the, the question that you wanted to ask is, why can’t smart men do it? Right? It’s it’s very intuitive, common sense, logical, and basically, I’m talking about using logic in the way you verbalize things. So smart men already do it. So I agree a lot of people the smart people actually use this process. But there are two sides to it. Why is that only few people use it and not many people. And one of the reasons I believe is because philosophy where, you know, logic is taught is in the class of philosophy, philosophy is not taught in MBA schools. And and that’s why people use don’t use this reasoning in the perfect way there is a grammar of using logic and that is not known to many, but yes some people intuitively know it, but the problem lies where they are in the hierarchy. If they are in a very hierarchy driven organizations this the fact that they are smart makes no difference, because if you look at the process, what does this process want the process says that you create an explanation, which is hard to vary and which is refutable which means by definition, you should allow for criticism, right? Otherwise, how do you refute, so I say an explanation somebody should be able to refute it right. Now, refutation means criticism. So just imagine a hierarchy driven organizations where there’s a junior and a boss gives an explanation and the junior does not like it, what are the chances that he will criticize it the chances are very low, because the the bosses decide your fate, right, and criticism in a hierarchy driven organization is not seen in a good light, right? That’s the reason why the culture of the organization needs to undergo a change, if you really want this process to be the DNA of a company.

Right. So, I understand that, you know, culture is also a concern here we will try to ponder upon that sometime later. However, during the discussion, you said you need not have a lot of data for such kind of decision making, right? I mean, you don’t have to use data to take data driven decisions and companies are investing heavily into data driven decisions software and you are suggesting to go the other way around. Why so?

Shubham Agarwal : Also there is a view point that data driven decisions are scientific. Is the method you are suggesting scientific ?
Satyashri Mohanty : Yeah, yeah. So there is this mad rush for data. What I strongly believe is any organization whatever state it is in, it can make significant improvement from whatever little data that they have, if they use this kind of a thinking process. Now, what has happened over the years is management as a body of knowledge or or let’s management as practiced is heavily influenced by a particular way of doing science. So, if you see the history of science, there are two ways of doing science there is one way where you know, you look at your observations, you look at what what are the data in front of you, or the observations and you develop a theory out of it, the best example is the book built to last. So, you study the good organizations and then then you try to see what is common amongst them and develop a theory. Now, this is one way of doing and in fact, in physics, there are quite a good examples of theory development using this process, where you look into the data and develop a theory after that, right. But there’s a very different way of doing science, which was first proponent of that usage was Einstein when, for him when he started looking at explanations of gravity he went into topics which is very difficult to perceive, you know, the curvature of space time and all that so, it’s very difficult to perceive those things right. So, he came about with the fact that I can I can create a theory first Okay, through a through a creative conjecture, I can I can I can create a theory first and based on that theory, I try to predict the various effects that can happen okay. And then this theory connects the unseen world with the seen world okay. So, he said that gravity is because of curvature of space time I cannot perceive curvature of space time. Yeah. So, he said that okay. What you can maybe perceive is the pressure of gravity and the force of gravity you perceive that, but it’s because of curvature of space time, then you start predicting what are the other effects that can happen? rightOh so that’s a hypothesis driven approach?
Shubham Agarwal : you are saying theory first without observations, then observe the predicted effect because of theory.
Satyashri Mohanty : Actually what you are saying has some sense if we read history of science.
The predicted effect of general relativity theory of Einstein was proven by the bending of star light as was seen in the famous experiment during a solar eclipse of 1919. The theory of general relativity was established by the observed predicted effect from the theory. A theory which had difficult to directly measure variables like curvature of space-time..Yes. So you you you develop the theory first or the or the hypothesis first, which is actually not coming out from any observations or experience it is just in fact it is creativity. It is it is problem solving. It’s a theorisation that you did. And then you start predicting that what are the effects that should happen? And if those effects are correct, then your theory stands corrected.
Shubham Agarwal : or even falsified.
Satyashri Mohanty : That sounds extremely interesting. So you’re saying we come up with a theory first and then predict the effect from it? If that matches with the reality? So how did you arrive at the theory first, in the first place?Yeah. So this, this theorization is it’s coming from a problem. Okay. And the fact that the existing theories are not being able to solve it. So you think through, it’s a mental exercise, and you create a hypothesis, okay, which is not from any observations or anything. So you create that, and then you predict that this must be happening, that must be happening, that must be happening or, this should happen, or that should happen. And people developed tests around it.

Subham I understand how the suggested method has been used in development of theories dealing with topics of too large or too small or too much in past where causative data is not easily available. We can use the same method in management because we have similar data issues on many variables.

This way of thinking also reduces burden of experience in management. Many years of Experience is valued a lot for an environment.

So when you apply this methodology, you can actually, without an experience, you can walk into an environment and find out a solution. And that’s the real power.

Is that really possible?

Yeah, for example, the biggest example is Ellie Goldratt himself. He, he never visited software, he is not a software guy. He is not. It’s not that when he wrote the book goal, or when he developed the theory drum buffer rope, it is from, you know, seeing hundreds of plants, he was a physicist, so how on earth could he develop a breakthrough idea? And a lot of people say that, you know, because he was a genius, right? But he always used to say, I’m following a thinking process. Okay. and very similar to what Einstein Einstein did. Now, some people might find it too preposterous that combining Ellie Goldratt with Einstein but both of them followed a process where the theorisation is done through a through a mental process, and then you try to predict the effect, it should have in reality.

So you’re saying I, or anyone across our listeners, or anyone who can learn this thinking processes is the philosophy of going through this process?

Yes. And then you can innovate, you can create breakthrough ideas. And and and that’s, that’s very important.

If you follow this process, you can deal with topics which are around which data is never available, for example, employee satisfaction, lost sales, potential sales, all these topics suddenly can come on the forefront. And now it is not that I will only manage the world that I can collect the data. And remember the Einstein’s famous quote.  Not everything that you can count counts.

Okay? And the other way round.

Shubham Agarwal : I will need to hear an example how a breakthrough idea was generated without having much experience about the environment. But that is topic of next session.
Satyashri Mohanty : This is definitely great. Yeah. And I really feel as if you know, we’ve stepped on a goldmine right now. I’m really interested to know more about this and this process, go deeper into it and understand why does it work? How does it work? And how can everyone who’s listening to us implement it? So we’re going to go deeper, but we’re going to leave this right now here and come back in the next episode. Yeah. For all the listeners, if you have any questions or doubts, which I think you have many, because Satya has touched upon a very, so to say interesting topic. Feel free to drop your queries or your comments on the links, provided in the details, and you can also reach out to us on social media handles. Thank you. Until next time, bye bye.
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