Friday, September 29, 2023

Using Goldratt’s Theory of Constraints for Digital Transformation: A Case Study

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Starting investor. Founder and CEO of Roonyx Inc. Latest product, Orchea, a way to manage team load, finances and results, will be available soon.

More than a decade ago, my company needed to digitize the entire sales process for a dealer network from scratch. This was our first large-scale project and it defined us as a company. Using this experience as a model, I want to show how you can tackle a new client’s problems using Eliyahu Goldratt’s theory of constraints.

Pain points

Initially, my company sold our customer relationship management (CRM) tools to one-time dealers. They soon wanted to implement the CRM in their dealer network. The pain points common to many companies included:

• No insight into the sales process.

• Prospects and customers who fall between two stools.

• High customer and sales talent turnover.

• Bad customer experience with sellers.

The search for the ideal solution

We had the CRM and were able to onboard hundreds of dealers with their managers and salespeople without any problem. The difficulty at that time was updating analog phone systems to digital. I think you will often find upgrading and updating systems a major hurdle. For our situation, there were two main options to solve this problem: Cisco and Asterisk. Both had their pros and cons, but in the end we needed something more innovative and ideal.

You don’t necessarily have to brainstorm to find this ideal solution. Why? Because brainstorms ask for ideas. In many cases, you don’t want ideas – you want instant, reality-influenced solutions. For this, using Goldratt’s theory of constraints can help you discover your ideal solution – one that doesn’t exist yet and will perform its function seamlessly.

Goldratt’s theory of constraints is a set of five repetitive steps. The idea is to identify a constraint (any blocks to a system’s success), exploit it, improve it, and force the rest of the system to adapt to the constraint. The increased restriction is your ideal solution. Below I hope to outline the steps you need to take using my experience with the dealers as an example.

1. Identify the limitation

Do your research. In our case, we spent whole days at multiple dealers watching the sales processes.

Here’s how it happened in our case. The prospect’s first call came in on the landline. Most salespeople would then use their personal cell phones to communicate with customers. By our estimate, salespeople made more than 80% of customer calls from personal cell phones.

We spoke to headquarters. They were aware. It was a problem in more ways than one. There was no way to track these calls. And salespeople left the company with customer blackbooks on their phones.

While the company spared no expense to combat the rampant use of personal cell phones in the workplace by enacting regulations, banning cell phones from being brought to work, fining vendors, and purchasing wireless phones for each vendor. In other words, they did everything except:

2. Make use of the limitation

How can you take advantage of the limitation? Think creatively about the constraint and how to restructure around it. In this example, we had to move the entire phone network from hundreds of car dealerships to a mobile operator to digitize the phone (solve the problem), keep salespeople happy (via toll-free phones), track all conversations, and contain customer data Company.

3. Subordinate everything to the limitation

First we needed an Application Program Interface (API) for a mobile operator. In 2010, they didn’t have open APIs yet. After some effort, I got in touch with someone from their IT department. We spent the next two weeks building out an integration between the mobile operator and our CRM.

4. Increase the limitation

We have presented the solution to the head office. What used to hurt them (personal cell phones) became the solution all other processes were built around.

All salespeople were given company phones. All calls were registered in the CRM and customers no longer slipped through the cracks. Your job does not stop here and you should always be looking to improve the systems. Later, for example, we added an AI component and used conversation intelligence to analyze conversations with prospects and identify growth areas. Here I hope you can see how to work with constraints instead of against them.

5. Identify additional restrictions

Part of continuing to improve your product or service is identifying additional limitations and working around them. In our case, these were the old processes at independent dealers. In general, we didn’t necessarily build a solution, but we used what was already there. It solved the problem and in turn did not create any new problems.

This is the approach we still take even today and I highly recommend your company adopt it. Look for the most ecological solution: the one with the most impact and the least disruption. I think you will learn to love the theory of constraints. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?


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