The Goal

1. “Measurements which express the goal of making money perfectly well, but which also permit you to develop operational rules for running your plant,” he says. “There are three of them. Their names are throughput, inventory and operational expense.”

2. “In summary, both Ford and Ohno followed four concepts (from now on we’ll refer to them as the concepts of flow): Improving flow (or equivalently lead time) is a primary objective of operations. This primary objective should be translated into a practical mechanism that guides the operation when not to produce (prevents overproduction). Ford used space; Ohno used inventory. Local efficiencies must be abolished. A focusing process to balance flow must be in place. Ford used direct observation. Ohno used the gradual reduction of the number of containers and then gradual reduction of parts per container.”

3. “The daring nature of Ford’s method is revealed when one realizes that a direct consequence of limiting the space is that when the allotted space is full, the workers feeding it must stop producing. Therefore, in order to achieve flow, Ford had to abolish local efficiencies. In other words, flow lines are flying in the face of conventional wisdom; the convention that, to be effective, every worker and every work center have to be busy 100% of the time.”

4. “First, make sure the bottlenecks’ time is not wasted,” he says. “How is the time of a bottleneck wasted? One way is for it to be sitting idle during a lunch break. Another is for it to be processing parts which are already defective—or which will become defective through a careless worker or poor process control. A third way to waste a bottleneck’s time is to make it work on parts you don’t need.”

5. “Putting it precisely, activating a resource and utilizing a resource are not synonymous.” He explains that in both rules, “utilizing” a resource means making use of the resource in a way that moves the system toward the goal. “Activating” a resource is like pressing the ON switch of a machine; it runs whether or not there is any benefit to be derived from the work it’s doing. So, really, activating a non-bottleneck to its maximum is an act of maximum stupidity.”

6. “If synchronized efforts are required and the contribution of one link is strongly dependent on the performance of the other links, we cannot ignore the fact that organizations are not just a pile of different links, they should be regarded as chains.”

1. The Goal of Any Business is to Make Money

Despite various mission statements and objectives, every for-profit organization ultimately exists to generate profit. All other activities—improving quality, increasing efficiency, enhancing employee satisfaction—are valuable only insofar as they contribute to this fundamental goal of making money now and in the future.

2. Identify and Manage the Constraint

Every system has exactly one constraint that limits overall performance. The Theory of Constraints teaches that you must identify this bottleneck, exploit it fully, subordinate everything else to support it, and then elevate its capacity. Improving non-constraints doesn't improve overall system performance.

3. Local Optimization Can Hurt Global Performance

Optimizing individual departments or processes without considering the whole system often reduces overall performance. A machine running at 100% efficiency might create excess inventory if it's not the constraint, which actually hurts cash flow and increases costs rather than improving profitability.

4. Focus on Throughput, Not Just Efficiency

Traditional cost accounting focuses on keeping workers and machines busy, but the real measure should be throughput—how fast you convert inventory into sales. An idle worker at a non-constraint doesn't hurt you, but forcing them to work can create harmful excess inventory.

5. Question Everything with the Socratic Method

Challenge assumptions by asking "why" repeatedly until you reach root causes. Most business problems stem from following outdated rules or unexamined assumptions. The Socratic method of questioning helps uncover the real issues behind surface symptoms and leads to breakthrough insights.