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Why the 5 Focusing Steps are so Important

Most middle and senior managers do not understand or simply are not interested in how their business system works. They are content to focus on their local department and optimise that – rather than understanding the business as a whole to cause it to maximise results. Even top management (CEOs) often do not understand their business. They condone and even encourage their management teams to optimise their local departments – production, marketing sales, finance etc. Wherever local optimisation is the rule the business concerned will always harm the bottom line significantly. Local optimisation is a massive mistake!

The 5 Focusing Steps are guidelines that properly used will cause a management team to always reflect on their (local) decisions. Is the action or decision taken locally help or damage the business as a whole? As we will see the 5 Focusing Steps are a guide, but they do not replace a deep understanding of the business system.

What follows is a description of the 5 focusing steps, how to apply them, why each step is important and a series of examples of common practice that violate the 5-Steps. This third post is a short discussion of the second of the 5 steps.

The 5 Focusing Steps

Step 2: Decide how to exploit the constraint.

This is easy to say, but it is not so easy to do. How should I use my constraint to maximise profits (assuming maximum profit is the business goal)? Which of my products have the highest margins? Which of my products consume constraint capacity most effectively? What are the implications of my decisions in the market? What are the implications for the future? Clearly this is not an easy decision for any to make. It is in fact the responsibility of top management to decide!
If management does not take the decision or does not take it correctly the business will suffer. The bottom line will reflect this suffering. Unfortunately business results will not point to the culprit for less than optimal (even poor) results. The culprit is almost always the way we manage our system, our constraint, or could it be anything else? If it is something else let me know at rgb@vistem.eu!
The constraint might be our market. The market may not be buying enough of our products to fill our factories resulting in a less than satisfactory bottom line. Our decision may then be to cause our markets to buy more and more from us (and this must not be done with lower prices since our competitors can easily copy these). Some sort of powerful competitive advantage is essential.
It is important to remember that a policy ‘constraint’ should simply be changed. Deciding how to exploit an inappropriate policy does not make any sense. An inappropriate policy was originally put in place for a good reason. That is why it should be changed but not necessarily be eliminated. Chang such policies, KPIs or just the way work gets done.