Golden rules for long term success

Companies need to start using common sense to survive, says business thinker Dr Eli Goldratt. Rebecca Ellinor distils his words of wisdom.

Are we really in troubled times? No, we're just panicking, says Dr Eliyahu Goldratt. The world-renowned business management consultant and author of The Goal, which was recently included in The 100 Best Business Books of All Time, has always challenged people to think differently.

In The Goal, written 25 years ago when he was a physicist, Dr Goldratt outlined his 'theory of constraints', with the premise that the rate of goal achievement is limited by at least one constraining process. He argued that only by increasing flow through the constraint can overall throughput be improved.

Originally directed at the manufacturing industry, its central messages hold true today. He now helps organisations to apply his advice, considered so broadly applicable that when he visited the UK this spring the 130-strong audience at his seminar included child psychologists, buyers and senior managers from the public and private sectors.

SM went along to 'Securing the Future', held at the Institute of Directors in London, to see what messages Dr Goldratt had for procurement and supply chain professionals.

"I don't agree that times are challenging," he says. "I agree there is a tremendous amount of panic. I agree also that many of the patterns that existed previously have broken, so people have to rethink and use known cause and effects in order to drive new patterns to guide them."

One of Goldratt's central tenets is that too often organisations rely on false assumptions. What they should be doing, he says, is applying common sense and thinking through cause and effect by questioning and challenging things - like children do.

"Organisations that are not doing it - and unfortunately, most are not - are facing bad times, troubled times. Those that are doing it are facing the exact opposite - they are finding these are the easiest times to expand and to make money.

"Due to the scare they have reduced their inventories and changed the way they operate, so now they are ordering much smaller quantities more frequently. A manufacturer that will not change their way in order to respond to these smaller, quicker quantities will go out of business. Those that do respond will take the market."

He urges firms to consider long-term strategy and stop blaming the economy for their woes.

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