September 14, 2011

Book Review: The Goal

The following Book Review has received II Prize in the Book Review Competition held at Indian Institute of Management, Raipur.
The Goal is an international bestseller business novel. It was authored by Dr. Eliyahu M. Goldratt and Mr. Jeff Cox and was first published in 1984 by The North River Press.
Dr. Goldratt was an Israeli physicist, who later became a business management guru. He has written this book as a piece of fiction. In the introduction of the book, Dr. Goldratt has stated that science can be utilized to understand and solve many industrial issues. Secondly, he has said that the main requisite for expanding the learning about anything is the courage to face inconsistencies and to question the existing popular beliefs and methods. “The Goal” also demonstrates the effectiveness of Socratic way of approaching and resolving problems, which in this story, includes the complexities of a manufacturing unit as well as marital issues. Dr. Goldratt has justified this by asserting his belief that the deductive process is the only way through which we can learn. The book aims at explaining the validity of and logic behind Dr. Goldratt’s Theory of Constraints.

The story describes the exciting journey of one Mr. Alex Rogo, in which he discovers the obvious flaws in the current industry practices, and with the help of his ex-teacher and physicist - Dr. Jonah, sets out to fix them. Alex is the plant manager at one of the manufacturing units of UniCo in a town called Bearington. UniCo has been running in losses for the last few years, and one of the major reasons for this is the unprofitability of the division to which Alex’s plant belongs. The conditions in his plant are also very tough. Everything seems to be delayed and utterly urgent. Most of the orders are running late by weeks. Everybody seems to be busy all the time, and yet, the unit is running into losses. All of this is despite the fact that this plant is equipped with the latest technology including industrial robots and computer systems.
On the other hand, a parallel storyline depicts the marital problems faced by Alex with his wife Julie. This highlights the difficulties faced by managers, especially those who are obsessed with their work, in their personal lives. Alex is repeatedly accused by Julie of not paying enough attention towards her and their children.
The story begins at a point when Mr. Bill Peach, the division vice president, asks Alex to make his plant profitable within three months. In case of failure, the plant was to be shut down by the management. Alex has the option to look for another job, but he decides to do whatever he can to save the plant. Here, he recollects a conversation he had with Dr. Jonah, when the latter, through a few simple questions, convinced Alex that the hi-tech robots in his plant are not contributing to the actual goal of the company. He also encouraged Alex to figure out the true goal of his organization. Faced with grave difficulties, Alex figures out that the true goal of the company is to make money. Equipped with this newly-found answer, he immediately gets in touch with Jonah and asks for his help and guidance.
Jonah explains to Alex that for generating profits, only three components of the system need to be in order. They are:
1.       Throughput: this refers to the money generated by sales and needs to be maximized.
2.       Inventory: this refers to the money invested by the system in purchasing things that it intends to sell, and must be minimized.
3.       Operational Expenses: this refers to the money spent by the system in converting inventory into throughput, and must be minimized.
Alex takes into confidence four people working in the plant - Bob Donovan (Production Manager), Ralph Nakamura (runs data processing for the plant), Stacey Potazenik (inventory control manager) and Lou (Plant controller). They discuss the three new points of measure, and conclude that they make great sense. Thereafter, Jonah, through telephone conversations and even personal visits to the plant, explains to them that the traditional points of measure such as efficiency of individual equipments, wages, etc. do not represent the true state of the system. And the reason for this is the combination of the two phenomena that exist in every plant – dependent processes and statistical fluctuations.
Alex gets a closer and better look at this concept during a forest hike with his son and other kids, where he realizes that the speed of the whole line depends on the speed of the slowest kid (bottleneck or constraint), and to improve the speed of the line, the slowest kid must be enabled to move faster. Alex, with his team, sets out to apply these principles in the plant. They successfully manage to discover bottlenecks in the system and accordingly used them to improve the throughput and reduce the inventories and operational expenses.
Needless to say, they observe huge improvements in the plant as the pending orders start shipping at a fast rate. Moreover, they successfully deliver a very large order from an important client and get themselves a long term contract as well as the faith of the marketing manager Johnny Jons.
Following a similar route and constantly debating and understanding the principles taught by Jonah, Alex and his team finally figured out the precise steps for the process of improvement:
1.       Identify the system’s constraint(s).
2.       Decide how to exploit the constraint(s).
3.       Subordinate everything else to the above decision.
4.       Elevate the system’s constraint(s).
5.       If, in a previous step, a constraint has been broken, go back to step 1, but do not allow inertia to cause a system’s constraint.

Socratic approach has been given a lot of emphasis in the book. At one point, Jonah tells Alex that he would not provide him with straight solutions, as it would be detrimental to his understanding of the concepts. Instead, Jonah gives Alex the basic principles and some relevant questions, which helps him in figuring out the solutions himself. Besides, this approach has also been adopted by Alex to resolve the marital issues with Julie, by looking for an answer to the question: what is the goal of their marriage?
Overall, “The Goal” is a very interesting and entertaining novel, which, at the same time, provides a basic and simple understanding of the Theory of Constraints. This theory, despite being plain common sense, seems far from the conventional approach of manufacturing. Moreover, the implications of these principles are applicable in many other fields and industries.
The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati.
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1 comment:

  1. This is a terrible novel and a great business book. That's a little unfair, it's better to think of it as a novel which exists only to illustrate Goldratt's Theory of Constraints which sounds a little dry. So for my third attempt I'll say this is a book about a man fighting to turn a factory around from being overwhelmed with uncompleted orders and quality problems to a successful, thriving business. It's good fun and a great little read.