The Theory of Constraints in BI & CPM

By: Mitra Hooman (6/5/2008)

 

A white paper released earlier in May from Hitachi Consulting offers a quick introduction to what the author calls “The Theory of Constraints” in Business Intelligence and Corporate Performance Management.  This first-in-a-series of papers is concise and might have benefited from a more detailed case study, but it describes the theory enough that you get a fair understanding of what author Prakash Jha means.

 In a nutshell, “The basic premise of [the] Theory of Constraints is that the maximum organizational objective improvement comes from addressing the very few current constraints and looking forward to what and where the next constraint will arise.”  In other words, unblock existing bottlenecks and anticipate where the solution runs out of gas – where you hit the next bottleneck.

Jha suggests six steps for implementing this theory into real business practice: 

  1. “Identify the systems constraints” – that is, what needs to change and why.
  2. “Determine the strategy to exploit that constraint to the fullest capability.”
  3. “Align all the processes to the decision made about the Goals and Objectives.”
  4. “Subordinate all other actions to that exploitation strategy (Drive out footshooting policies and activities -- Don't let other aspects of the system inhibit the throughput of the constraint)” -- here one wonders if Jha has ever worked in a large corporation with a variety of political fiefdoms.
  5.  “Elevate the constraint (typically by acquiring more constraint capability or offloading from it to another piece of the system).”
  6. “When the constraint is ‘broken’ and another aspect of the system now becomes its limiting factor, go back to step 1.”

The paper then embarks on an example that, truthfully, lacks sufficient detail to follow the implementation of this process.  He suggests, “One of the benefits of using this process was that it clearly identified that there were certain areas where there was excess e.g. Accurate Production. All the systems to meet this objective were in place. However, other activities had impact on it. This resulted in better utilization of plan capacity.”  Yet, he offers scant data to prove this. 

In any case, there will be more such papers from Hitachi on the Theory of Constraints, and it does offer an approach to BI & CPM that goes beyond B-school theory and into practical application.

Those interested in the paper can find it here http://www.informationweek.com/whitepaper/Business_Intelligence/business-intelligence-and-corporate-performance-mawp1209649129907?articleID=12700003

 

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