Technology Can Bring Benefits…

I have started listening to Beyond The Goal: Theory Of Constraints by Eliyahu Goldratt.

In the first chapter, Goldratt has come up with an explanation as to why, if tried, his Theory of Constraints has failed. He doesn’t mention this, he keeps saying that everyone who has tried TOC has succeeded, but I think his argument can be applied to Agile/DevOps or any other radical system/process/framework in any industry that fails to succeed. This is my interpretation of what he says.

The first thing he asks is the following….

Technology can bring benefits, if and only if it diminishes a limitation.

Note, The statement does not say that Technology that does diminish a limitation will bring benefit. This is why I have underlined the can. Its is not a will.

Now before you agree or disagree with the statement, Eliyahu does not say what the limitation is. It could be known or unknown.  If it is not known, is the statement still true?

So what is a limitation – well, its something that prevents us or limits us from doing something. When we as humans hit a limitation, what do we do? Give up and do nothing? Not likely, we work around it. We develop policies, rules, measurements, processes etc to accommodate the limitation.

Now, lets say we introduce a technology that eliminates this limitation. Yay, its gone.  Now, what happens if we do not change the policies, rules, measurements, processes etc that were developed to accommodate the limitation? Well, not a hell of a lot. Despite the fact that the limitation has been removed, we act as if it is still there. The limitation is virtually still there.

As an example, Eliyahu brings up the MRP (Material Resource Planning) software industry.  Before MRP software was developed, it was typical for a factory of 300 workers to have about 20 staff work on their material requirements planning. Calculations were tedious and error prone, they were done manually. It would take about a month to work out the requirements. So orders for materials were done monthly. Lets say you are a customer and make an order for 100 widgets. The factory will receive your order, it would then go into the system. The calculations would be made and if you were lucky, the materials for your order would reach the factory in a month. Then you had to wait for the factory to make your widgets and then finally you would receive them. If you missed the montly cut-off, you might get the orders fullfilled in 2 months.

Then the first MRP software was developed. One of the first companies to use MRP software was Black and Decker in 1964. At the time, MRP was in response to the Toyota Production System which was barely known in the west at the time. Black and Decker did so well with MRP, they became one of the most profitable companies in the world. You have to remember too that at the time, software was done by punch cards, not terminal screens like it is today. We’re talking a very basic system compared to what is available today.

It took time, but by 1975, about 700 companies world wide were using MRP software. These companies were getting the same results as Black and Decker. Reduced inventory, more profitable results etc. At this point, the rest of the world started to notice. More and more companies wanted MRP software. So, by 1981, about 8000 companies were using MRP software. Then the murmurs of not getting the same results started to happen. Most of these companies didn’t get the magical results. By 1984, this turned into a scream. 90% of companies that used MRP software were not getting the benefits. In some cases, companies were worst off.

No one at the time knew why. The going theory at the time was that in order to get the benefits, your inventory needed to be 97% or higher in accuracy. No ones inventory is that accurate. Then you were not trained correctly on how to use the software. So, vendors started selling training. An industry of certified implementers was developed. Still, many businesses were not seeing the benefits. It became so bad, that the cost of the implementation wiped out any savings. If there were any.

Since then, we have moved on to MRP2 (Which is where I started my career in the mid to late 90’s) and now ERP systems.

So, why did the early pioneers succeed where the later adopters didn’t.

Eliyahu has a theory, which he admits, he didn’t think of at the time all this was happening.

What is the most important part of the data? Its the orders. The new recipients of MRP software forgot about this. What they did was run their MRP system overnight – once a month. So the customer orders were still fulfilled a month or 2 later.  It was if the limitation of the calculation time was still there. The procedures and processes were not changed. So no net benefit. That is not to say that there wasn’t benefit, they no longer had 20 people taking a month to do the calculations, it could now be done overnight. But this benefit does not lead to the magical profits the early adopters were getting. So why did the early adopters get the benefits? These were the more forward thinking companies. They ran their systems more frequently. Fortnightly, weekly or every few days. They were able to get their orders in sooner. Get their products made sooner and get the end result into the customers hands sooner.

Eliyahu has come up with 4 questions to ask when looking into new technology.

  • What is the power of the technology?
    This is an easy question to answer. Just speak to the Vendors. They will talk all day about the power.
  • What technology does this technology diminish for us?
    This gets harder. Trying to identify what limitation is diminished. Remember that some are seen and obvious, some, not so obvious. You need to identify precisely what is affected.
  • What rules, policies, procedures, measurements etc helped us accommodate the limitation?
    It gets harder and harder. Here you have to identify what you do to accommodate the limitation.If you do not identify the rules, procedures, processes etc you run the risk of leaving them in place. Then you will find yourself still in the same position.
    In MRP’s case above, it was processing orders monthly.
  • Finally, What rules, policies, procedures measurements etc should we be doing now?
    Now that the limitation has been removed, how far can we go before we hit the next limitation?

So, how does this affect Agile. Well, I see Agile as another technology. It may not be a new piece of software, but it is a new way of doing things. If you are not careful and identify what needs to be changed from a traditional Waterfall implementation. If you just focus on the superficial such as stand-ups and Kanban boards, and not focus on the planning, or retrospectives (At least in Scrum’s case) where you try to continuously improve, then you are still working under the limitation or Waterfall. Yes, there are some benefits. Just like the late adopters of MRP software saved some money by not having 20 people doing the calculations (It really sucked for those 20 people being laid off) but the massive benefits were not realized.


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