Show me the money!

I read this great book, called The Goal, by E.M.Goldratt. It’s a business book, but written like a novel, which makes it really easy to read…and learn! I totally recommend it. It opened my eyes to the fact that for most businesses, the goal itself is to make money (yes, besides making the world a better place). And to do that, they need to work with several constraints like equipment, people, policies.

show-me-the-money

The book introduces the TOC (Theory of Constraints), based on the saying “a chain is no stronger than its weakest link”. It states that organisations can be measured and controlled by variations on three measures: throughput, operational expense, and inventory.

  • Throughput is the rate at which the system generates money through sales.
  • Inventory is all the money that the system has invested in purchasing things which it intends to sell.
  • Operational expense is all the money the system spends in order to turn inventory into throughput.

1

I am still reading additional materials to figure out how I can apply this methodology to my work environment. This will be my next read: Critical Chain. Apparently critical chain project management (CCPM) is a method of planning and managing projects that puts the main emphasis on the resources required to execute project tasks. CCPM is based on the idea that all projects look like A-plants: all activities converge to a final deliverable. The primary problem in A-plants is in synchronising the converging lines so that each supplies the final assembly point at the right time. I’ll tell you more after I read the book.

What I did until now (since I found out about TOC, CCPM and The Goal) is to write down the process I use in a project, from the initial brief to the final invoice, and see where I could find bottlenecks. In my case, I decided that “bottlenecks” can be identified using those actions that resolve in time delays (moments in which we just sit & wait for something to come through) or increase the budget (extra hours spent working on a task). For example, I’ve identified problems like:

  • receiving content from the client (sometimes we get those 3 lines of texts in a week) – how to make them understand that we can’t build an icon if we don’t know what it should represent?
  • receiving feedback from the client – yes, we all are pretty busy, but you can’t ask for quick deliveries and then disappear for 1 week.
  • reviewing the HTML with the designer (call it the “pixel perfect mania”, but it’s important to see the front-end looking as nice as it did in the design)
  • undecided clients, who add features over night

…All these are problems that can be solved if you are aware they might occur, if you are prepared or you can prevent them.

dont-be-a-bottleneck-war-is-hell-store

Also, I came to realise the importance of my projects’ profitability for the overall goal of Okapi – that is, to make money, right? :). So it’s not just about managing the team, but also about balancing the right resources, being aware of the budget spent versus the client’s invoice, stoping unproductive work and much more. These are details that I always left out, thinking that our accountant and CEO will manage them…but they can only manage the final outcome, not everything in between. I need to figure out how can I help my company to increase the throughput (no. of hours billed to clients), while decreasing operational expense (salaries, freelancer hours, etc) and inventory (free hours in my team).

I am discovering things step by step, so if you know any other applications of TOC in web project management, please share! A friend of mine told me about Kanban, I’m still researching it. Cheers!

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