Critical Chain: A Business Novel

by Eliyahu M. Goldratt

What she likes about Alistair is that he never avoids the issue.

"The U-2 was developed in a surprisingly short time. Eight months after start, this airplane was already flying over Russia, taking pictures."

"In computer programming we say that a project will always run out of time but never run out of excuses."

the problems common to all projects are," and turning to the board I write as I continue to talk, "the high probability of, 1. Budget overruns; 2. Time overruns; and many times, 3. Compromising the content."

I cannot stop myself from commenting, "There is something common to all of them. Do you see it?" Ted is the first one to jump. "It's all somebody else's fault. The weather, the vendors, the Malaysian government."

"There is a pattern here. The lower the level of the person, the more the finger points internally, rather than externally. You'll find the same thing in my report."

"Particularly bad weather," he quotes, "unforeseeable difficulties, longer than expected. . . . They are all expressions of uncertainty; of the things that are hard to estimate at the start of a project."

"Let me see. What you claim is that the major, negative financial ramification does not stem from spending too much money." "Financially, the overruns are much less important than the overdue," I stress.

"Rick, Rick, when are you going to grow up? Join the real world? You never combine two articles into one; you always try to turn two into more."

Two minutes ago I was afraid that this session would turn out to be a boring mathematical drag, now I have an animated discussion on my hands. It's good. That's the way education should be. Connected to real life. Passionate.

I found the enemy, it is me.

We have come to know it as the Pareto principle. Focus on solving twenty percent of the important problems, and you'll reap eighty percent of the benefits. This is a statistical rule. But those who teach statistics know that the twenty-eighty rule applies only to systems composed of independent variables; it applies only to the cost world where each link is managed individually.

Decide how to EXPLOIT the system's constraint(s).

"Step three: SUBORDINATE everything else to the above decision.

fourth step: ELEVATE the systems' constraint(s).

"We have found the process to focus. This is the focusing process of the throughput world. But at the same time, do you agree with me that these steps are also the ‘process of on-going improvement'?" Fascinating, isn't it? In the throughput world, focusing and process of on-going improvement are not two different things, they are one and the same."

"TOC adopts the definition accepted in the accurate sciences. A problem is not precisely defined until it can be presented as a conflict between two necessary conditions."

whenever we witness a conflict, it is a clear indication that someone has made a faulty assumption, a faulty assumption that can be corrected, and by doing so the conflict removed.

"We are chasing compromises, degrading our performance, making our life miserable, because of an assumption that is apparently wrong."

"Tell me how you measure me and I'll tell you how I'll behave.

"I don't think that there is much point in asking computer programmers to evaluate their chance of finishing on time. Computer programmers will never admit ninety percent chance, not even eighty, because a programmer who finished on time has not yet been born.

"The first one is that the time estimates are based on a pessimistic experience, the end of the distribution curve. "The second is that the larger the number of management levels involved, the higher the total estimation, because each level adds its own safety factor. "And the third is that the estimators also protect their estimations from a global cut. "When you add it all up, safety must be the majority of the estimated time for a project."

"Because the team that finished ahead of time won't report it. You see, the way we are set up, there is no reward for finishing early, but there is, in fact, a big penalty." And he explains, "If you finish early you just invite pressure from management to cut the times. Your friends, in charge of other similar teams, will not like it, to say the least."

"A delay in one step is passed, in full, to the next step. An advance made in one step is usually wasted."

"In the case of parallel steps, and in any project there are many of them, the biggest delay is passed on to the next step. All other early finishes do not count at all." "What you are telling us," Ruth is thinking hard, "is that most of the safety we put in doesn't help at all." "Correct."

Ruth blushes a little, but she is not going to be bullied. "Still, let's face what we see here. The only thing that counts is the performance of the project as a whole. At the end, it doesn't matter how many steps were not completed on time, as long as the project was delivered when promised. And what do we do? We try to protect the performance of each step. Most of this protection is wasted. So even though we put in that much safety, the project as a whole is exposed."

ony critical chain shokuld have safety?

"The only thing that counts is the performance of the project as a whole." That sounds much more like the throughput world mentality.

"Multi-tasking is probably the biggest killer of lead time," I say. "And we all suffer from it. Call it meetings, call it emergencies, call it other jobs. The impact is the same. Lead time inflates. If you think about it, whenever you give a time estimate you know that the actual time is just a fraction of your estimate, but you intuitively factor in the impact of multi-tasking."

there is no rush so start at the last minute.

multi-tasking.

dependencies betwe...

‘1. IDENTIFY.'

QED."

‘exploit,' then ‘subordinate,' then ‘elevate' and ‘go back.'

We are accustomed to believing that the only way to protect the whole is through protecting the completion date of each step. As a result, 2. We pad each step with a lot of safety time. 3. We are suffering from three mechanisms which, when combined, waste most of the safety time: a: student syndrome, b: multi-tasking and c: delays accumulate and advances do not.

"a bottleneck is a resource with capacity that is not sufficient to produce the quantities that the market demands. In this way the bottleneck prevents the company from making more money."

"So what is the constraint of a project? What should we choose as the equivalent to the bottleneck?" I repeat. "The critical path."

"Don't waste the time allotted for the critical path."

"Of course," I say. "Murphy does exist. But we are going to put the safety where it's going to help us the most. We are going to put it so it will protect the constraint. What is our constraint?" "The critical path."

"Exploit the constraint," I start. "Don't lose any time on the critical path.

most problems that impact the critical path do not occur on the critical path itself.

"Well, we changed the way we measure progress. Progress for us is now measured only on the critical path; what percent of the critical path we have already completed. That's all we care about."

three. If you recall, the main changes were: One. Persuading the various resources to cut their lead time estimates; Two. Eliminating milestones or, in other words, eliminating completion due dates for individual steps, and Three. Frequent reporting of expected completion times."

We must understand that a three months' delay sometimes costs us more than giving another ten percent to all our vendors."

the penalty of not finishing on time is related to the delay in getting the expected benefits."

sales." "We want to quantify it," I remind him. "Now, a minute ago you were not sure if we need to know ‘expected sales.' Do we need it?" "Without a doubt."

I see your point. It's not just money delayed, a major portion of it is money gone forever."

there is a way to trade lead time for money,"

have a problem. I don't know what to do in a case where several projects are done by the same pool of people and one of the skills is a bottleneck."

"I see your point. If the request for proposal specifies relatively short lead times coupled with penalties, no other contractors will dare to bid. The developer will get a much higher return on his investment with much less risk, and the fast contractor will make much more profit."