Book Review: The Goal - A Process of Ongoing Improvement

Reading The Goal: A Process of Ongoing Improvement was a great pleasure.

I didn't thought I would enjoy it that much because this book is not about software development at all. After all, this book is about plant operations, which I know nothing about.

But pretty quickly, I knew I was wrong. Sometimes I couldn't put this book down because I wanted to know what happened next. That's how good this story is.

And most importantly, I learned three valuable things from this book:

1. This book deepened my understanding of Theory of Constraints.
2. This book made me think of the equivalent of throughput, inventory, and operational expense for both software and individuals.
3. This book gave an example of how to save a marriage from tons of work.

Theory of Constraints

The Phoenix Project introduced me to the Theory of Constraints. I was mind-blown to know we can think of software project management as plant operations management: identify your bottleneck first, any improvements made anywhere besides the bottleneck are an illusion, and so on. From then on, I'd always try to eliminate the bottleneck from a system when I identify one.

But after reading The Goal, I've realized we may not need to eliminate a bottleneck to improve the overall system. Let's see why.

Dependent Events and Statistical Fluctuations

First, we need to understand why bottleneck exists. A bottleneck in a system is the end result of combining two effects: Dependent Events and Statistical Fluctuations.

We can find the combination of these two effects (and thus bottlenecks) everywhere in our life:

• CI Pipeline

Most applications' CI pipeline is a series of jobs (Dependent Events). Compiling comes first, testing next, finally deploying to staging/production. And each jobs' finish time has Statistical Fluctuations.

So how fast a Pipeline runs mostly depends on the slowest job in this Pipeline.

• Traffic jam

Cars are running after each other, i.e. each car depends on the cars in front of it. Due to Statistical Fluctuations, how fast a group of cars can pass a green light depends on the slowest car among them. And how fast our car can move forward depends on the slowest car in front of us. Most importantly, since different cars move at various speed, it's extremely hard for us to predict how fast we can move if we are in a traffic jam.

On the other hand, subways also have this kind of Statistical Fluctuations and Dependent Events. But since they move at almost the same speed, and the buffer time between them are under control, their arrival times are much more predictable.

• Knowledge Passing

If the feature requirement needs to be passed from user, to customer service, to project manager, to designers, and finally to developers, we get a knowledge passing chain here.

Each person's understanding of this feature depends on the previous person's understanding and the communication between these two people. Thus these knowledge passes are Dependent Events.

Each person understand the same thing differently, and each communication introduces some noises or some information losses. So we have Statistical Fluctuations.

How correct a developer can understand a feature request depends on the worst communication in this chain and the worst understanding within this group of people.

How to deal with systems under these effects?

Understanding the effects above is the first step to leveraging the Theory of Constraints. Constraints or bottlenecks exist in every system that has Dependent Events and Statistical Fluctuations. As we can see from the examples above, the throughput of the system is restricted by the bottleneck's capacity.

So once we've identified the bottleneck of the system, we have two ways to improve the system's throughput:

1. Remove unnecessary dependency on the bottleneck

This improvement is to solve the Dependent Events effect around the bottleneck.

If the bottleneck is not necessary, we can rearrange the system to remove the bottleneck. For example, let developers talk to customers directly so there are no bottlenecks in between. But what if the bottleneck is necessary?

2. Increase the bottleneck's throughput

The Dependent Events is a system attribute and can be removed from the system. But Statistical Fluctuations is not a system attribute, but an attribute that associated to the event itself. So we cannot remove Statistical Fluctuations from the system as long as it still has events.

When it's not possible to remove the bottleneck from the system, the only thing we can do is to increase its throughput. So even if Statistical Fluctuations still exist, the worst throughput of the bottleneck increases, thus the whole system's throughput increases.

So here is the generalized 5 steps we can take to deal with systems with a bottleneck:

1. IDENTIFY the system’s constraint(s).
2. Decide how to EXPLOIT the system’s constraint(s).
3. SUBORDINATE everything else to the above decision.
4. ELEVATE the system’s constraint(s).
5. WARNING!!!! If in the previous steps a constraint has been broken, go back to step 1, but do not allow INERTIA to cause a system’s constraint.

Don't remove the bottleneck, exploit it

One biggest lesson I learned from this book is that we don't always need to remove a bottleneck from a system. Because no matter what, the system would always have a bottleneck. Having a stable bottleneck means we can fully exploit this bottleneck and use it to control our system. A few examples from the book:

• Make sure the bottleneck is working all the time. (An hour lost at a bottleneck is an hour lost for the entire system.)
• Make sure the bottleneck only works on good parts so its working time won't be wasted.
• Reuse the old, less efficient machines to increase the bottleneck's capacity, and the whole system's throughput gets increased.
• Set priorities based on if a product goes through the bottleneck or not.
• Predict the product ship time based on the bottleneck's throughput.
• Cut batch sizes in half on non-bottlenecks.

Breaking the bottleneck all the time means we need to spend most of our time identifying the next bottleneck rather than improving the system's throughput.

Measuring Productivity Against the Goal

"Throughput" is a word we mentioned a lot above. Throughput is important because it's one of the 3 key metrics to measure our productivity.

Productivity is meaningless unless you know what your goal is.

So what's the goal for our business?

For most business, the goal is to make money. And we can use different metrics to measure if a business is making money:

• At marketing level, we have Net Profit, Return on Investment, and Cash Flow.

To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.

net profit
an absolute measurement
return on investment (ROI)
a relative measurement
cash flow
It’s a measure of survival: stay above the line and you’re okay; go below and you’re dead.
• At production level, we have Throughput, Inventory, and Operational Expense.

Increase throughput while simultaneously reducing both inventory and operating expense

throughput
the rate at which the system generates money through sales. (the money coming in)
inventory
all the money that the system has invested in purchasing things which it intends to sell. (the money currently inside the system)
operational expense
all the money the system spends in order to turn inventory into throughput. (the money we have to pay out to make throughput happen)

How to making more money with software?

So what metrics can we use to measure the productivity of software development? Again: Throughput, Inventory, and Operational Expense. Because software development is production as well. (See also The Phoenix Project) So what exactly does these three metrics mean in software development?

throughput
This one is easy. If you are a SaaS company with a subscription model, your throughput is how much subscription fee you get from your users.
inventory

This one is tricky.

I think inventory in software development as the features that are under development and are still not shipped to users. And you can see inventory at every step of software development:

1. Feature requirements / specifications that are not runnable code yet.
2. Design mockups / wireframes that are not usable at all.
3. Code that are not merged nor deployed to production.

As the book explains, when inventory goes up, the carrying costs goes up. The more feature branches you have, the more integration costs you need to pay. The more features you are working on, the more possible to ship something that is not working as expected. This is why we need to limit WIP. Because it helps reduce our inventory.

But the question then becomes how to measure the value of these WIP features? It's a hard question and the answer varies from product to product. (We may use how much a user want to pay for it and how many users may pay for it to estimate the value of a WIP feature.)

operational expense
Everything else is operational expense.
• Labor costs.
• Tools we are using (Laptops, editors, IDEs, software licenses, etc).
• The server that our code runs on.

Only by understanding these 3 key metrics, can we start identifying the bottleneck in our feature development pipeline.

How to making more money as an individual?

We can apply the same thinking to an individual as well: If our goal as an individual is to make money, then what's our throughput, inventory, and operational expense?

throughput
If you are like me, having a stable work and income, our throughput is very stable and predictable: salary, compensations, etc.
inventory

Then, what is our inventory? What's the money currently inside us?

If we think at a higher level, our inventory is the knowledge we have. Every piece of knowledge we have is value and can be transformed into throughput.

Coming down to a lower level, our inventory is the projects we are building. This blog you're reading now is one of my inventory. My GitHub account and the various projects hosted on it are my inventories. These are the outcome of my knowledge and can be turned into throughput.

operational expense

For a human being, the operational expense is the cost that keep us alive. Expense spent on food, house, clothes, etc.

And for us to be able to transform our inventories into throughput, our operational expense might include money we spent on our tools.

So, to make more money as an individual, the main focus is to turn as many inventories into throughput.

• Increase salary by delivering more values with your knowledge.
• Transform more knowledge into purchasable products.

And think about your bottleneck in this process. (My guess is that for most of us, the bottleneck is marketing/sales, i.e. let potential buyers know that you have the knowledge they need.)

Balancing Work and Marriage

Finally, the main character also showed us how to balance work life and family life, especially, how to let your spouse understand your work.

Two major tips I learned:

1. Share what you are working on with your spouse. Communication is the key.
2. Think about the purpose of your marriage. (What's your goal? And what's your spouse' goal?)

I'm no expert to marriage, so I'll stop here. ;)