Kfc Global Industry

A CRITICAL REVIEW OF THE BOOK IT\'S NOT LUCK BY EM GOLDRATT.

An extensive use of Goldratt's thinking process is applied in the various businesses as part of the problem solving. "It's not luck" emphasizes the importance of using the thinking processes in business and in your personal life. The thinking processes refer to a logical, graphical, general and practical method of problem solving methodology and basically comprised of 3 steps. These steps as described by Goldratt are:

1. What to change?

2. To what to change?

3. How to cause the change?

It is very clear that the problems experienced in the companies are not lone standing but in most of the cases they are dependent on each other and there are strong bonds or relationships with regards to the cause and effects between them. It is therefore important to form or establish a strong cause and affect between them.

It is important to identify the unresolved conflict that exists. The process can be illustrated through a conflict resolution diagram or evaporating cloud, Goldratt (1994). As a first step a "current reality tree" is used extensively to portray and depict the cause and effect that join all the problems proceeding in a specific situation. After this, one will realize that you don't have to deal with multiple problems because normally there are only one or two reasons or causes. The thinking processes give you a step by step procedure how to do this. This is where the undesirable effects (UDE's) come in.

This brings us to what to change. If the undesirable effects lead to the root cause, then the root cause must lead to the undesirable effects, therefore "brought on by the root cause itself", Taylor (2003). The resultant current reality tree brings us to the process of determining what to change. Through this method of analysis a tool is established to understand the current state of the cause.

According to Goldratt the process starts by listing all the current undesirable effects that exists. Taylor (2003) states that the current reality tree "does not focus on the severity or the ranking but on the effect-cause-effect relationships of the list of UDE's". The next step is to find a cause and affect relationship between at least 2 of the undesirable effects that form part of the list. When the relationships are completely mapped, it is possible to identify the one core reason or problem that was under control of the facility.

It is clear from the current reality tree that the core problem reflected "managers are using local optima" Goldratt, (p.158). It is evident that managers are in a conflicting position that is preventing them from doing the things that is right for the business. In order to correct this, it is imperative to clarify what the right thing to do is and what prevent them to do the right thing. The answer to the 'breakthrough solution" must be strived for. One of the conflicts that stood out in the examples was "consider the clients' perception of value" versus "consider the suppliers' perception of value". In order for managers to conclude good decisions they must "consider the need to get enough sales". Goldratt (p.160). This must be the mindset of managers not only on top levels, but on all levels. Furthermore, managers must "make decisions and act upon the clients perception of value" before they can "consider the need to get enough sales" Goldratt (p.161). Goldratt further states that "in order for managers to arrive at good decisions they must consider the need to get reasonable product margins". He went further and argues that "in order to consider the need to get reasonable product margins managers must make decisions and act upon supplier's perception of value".

A dilemma, according to Goldratt, exists when the client's perception of value of a product is significantly less than that of the supplier. In order to correct that, managers are required to take actions that sufficiently increase the perception value the market has for the company's products. In the example of the printing company, the increase of sales potential will only be realized after the increase in the perception of value of the market for Pete's products. In that case, Pete realized that to drastically change the perception of the market, he only has to change the section of the offer that is not the product itself and not the physical product. Sometimes this is possible with almost zero additional investment and normally it is fairly instant and quick to change.

The future reality tree is a logical justification of how the proposed solution ideas will be effective in bringing about the desired effects and strategic objectives. Each reservation must be written as a logical negative branch. This will assist with the identification of possible areas where things can go wrong. The negative branch reservation therefore identifies, defines, and addresses the potential significant negative outcomes or side affects resulting from the proposed solution. All the branches that lead to real and identifiable hazards must be scaled down through the new offerings in order to not allow the negatives to realize.

In the case of Pete's printing business the new changes in the periphery and not on the physical product allowed them to look at it as a product. The expanded offer was more valuable and the market was willing to pay a higher price. The evaporating cloud is the tool to determine the cause of action required to resolve the conflict of alleviating the competitive edge or advantage. Through this the elimination of the undesirable effects will be made possible. Goldratt argues that compromising may sometimes lead to short term success but the core problem is not resolved. He further suggests that by using the evaporating cloud to search for the real solutions and that will ultimately create a win-win for everybody involved.

The third question in the thinking process as illustrated in the book, "It's not luck" relates to how to cause the change.

The problems addressed in the book are chiefly ones of customizing and adjusting the bundle of business products and services on offer for customers in such a way that it will create profit margins across and through the business. Another idea that clearly stood