Critical Review of "it's Not Luck"

Write a critical review of the book "It's not Luck" by EM Goldratt from an operations

strategy perspective. The emphasis of your review should be on principles of good

operations strategy and should NOT just be a summary of the book.

Table of Contents

1. Preface 3

2. Introduction to Business Strategy and its Operations Strategy 3

3. Levels of Strategy 4

4. Executive Summary of It's Not Luck 6

5. Principles of Operations Strategy 7

6. Conclusion 9

7. References 10

1. Preface

The content of this assignment constitutes my understanding and interpretation of the book "It's Not Luck" authored by Dr. Eliyahu M. Goldratt. I have endeavoured to provide a critical review of the book and its application to the business environment. Throughout this assignment I refer to myself as "the student", whenever I offer my own opinion, presumptions and thoughts regarding the book. I am still very much a student in the art of the Theory of Constraints (TOC).

In a nutshell, the underlying concept the author presents to the readers is TOC which is a management philosophy that prescribes that most modern organisations operate on a systems philosophy. And the goal is to make more money, both now as well as in the future. TOC consists of two fundamental applications: 1) The Five Focusing steps and their application to operations; 2) The Thinking Processes (TP) and their application to project management and human behaviour. TOC considers a system as a chain, with the underlying premise that a chain is only as strong as its weakest link. This weakest link is most often the constraint of the system.

In this assignment I have opted to outline my understanding of a business strategy first, following with the operations strategy. Following this is a discussion on some principles of operations strategy. I have applied these very same concepts in my critical review of "It's Not Luck".

2. Introduction to Business Strategy and its Operations Strategy

The managerial process of crafting and executing strategy relates to a strategic vision as a road map in developing and strengthening an organisation. An organisations strategy consists of several sub-strategies that include marketing strategy, operations strategy, product strategy, and financial strategy. The strategic vision describes the destination and provides a rationale for going there. The vision refers to future business scope ("where we are going"). The mission refers to present business scope and purpose ("who we are, what we do, and why we are here"). The values guide the conduct of its business, pursuit of its strategic vision, behaviour of company personnel, etc. A well communicated vision is a most valuable tool for buy-in. Executive ability to paint a convincing and inspiring picture of a company's journey and destination is an important element of effective strategic leadership. The objectives of a vision are to determine performance targets namely desired results and outcomes that measure performance and progress.

Strategic intent relentlessly pursues an ambitious strategic objective and concentrates its full resources and competitive actions on achieving that objective. Every manager has a strategy-making-executing role. A company's strategic plan is an ongoing process.

An organisations operations strategy "consists of a sequence of decisions that, over time, enables a business unit to achieve a desired operations structure, infrastructure, and set of specific capabilities in support of the competitive priorities". This ultimately leads to the goal of a business namely to make more money now as well as in the future.

The operations part of a business is what the company "does". It is how the business delivers its "product" to its customers. It is the core of a company's business (whatever that is). Manufacturing companies make products, stockholders purchase, store and distribute materials, whilst retailers procure stock and supply the public with goods. This definition of operations can be applied to almost any organisation. Typically over 70% of a company's assets (and people) are the responsibility of the operations function.

An operations strategy is all about harmonising the features of the operations function with the requirements of the market in order to fulfil the needs of the business. A full appreciation of this process requires not merely an understanding of the ideas and methods used to develop an operations strategy but also knowledge of the techniques and principles involved in its implementation or execution thereof. Implementation requires knowledge of operations systems and polices including those that relate to resource planning and activity control, quality, plant management, motivation and organisation of people, performance metrics and continuous improvement.

3. Levels of Strategy

In an organisation, there are various levels of strategy as shown in the figure 1 below. At each level there is a specific strategy in support of the ultimate business objective be it to maximise profit or shareholder wealth or customer satisfaction or increase sales, etc.

Figure 1 Levels of Strategic planning

The operations strategy is one of the functional strategies. See Table 1 below: The components of the operations strategy typically consist of the following:

Components Dimensions

Structural decision categories: Capacity

Facilities

Vertical integration

Technology

Infrastructural decision categories: Workforce

Organization

Information/control systems

Capabilities: Unique to each firm

Competitive priorities namely order qualifiers and order winners: Cost