Eliyahu M. Goldratt is the author of the famous business novel entitled The Goal. This book is still relevant, although it was written more than 20 years ago. It is considered to be the brilliant resource for statistical fluctuations usage and increase of the organization’s revenues. This readable and intriguing novel explains sophisticated economic theory through easy examples and elaborates how American business operates. Moreover, it introduces the Theory of Constrains and teaches how to conquer the difficulties in making money. The author elucidates how to identify and solve various problems, which are created by constraints.
Eliyahu M Goldratt is an Israeli writer, inventor, physicist, and philosopher, who is famous for his unique approach to business. He became one of the most demanded and desired consultants in the world owing to his innovative and unconventional ideas and assumptions. His books, writings, and lectures are used in business schools, by CEOs, and managers of huge corporations, such as Proctor and Gamble, General Motors, and many others. Goldratt is the founder of the Theory of Constraints for education. His works are translated into twenty-seven languages with the number of sales approximating 6 million. The Goal is considered the most recognizable and readable business book ever.
The plot of the book is centered on the main hero, Alex Rogo. He works at a manufacturing plant, which brings a low profit and thus faces closing. The novel takes place at a fictional town Bearington, where the Uniware factory is situated. Alex Rogo receives an advice from his friend Jonah, who uses the Socratic methods for teaching him and his team how to formulate the goal, to identify the problems of the factory and find solutions to them. Later, these methods lay the foundation for the Theory of Constrains, which goes through the whole book. Owing to this theory, the plant becomes successful and Rogo is promoted to the divisional manager at the end of the story.
The primary aim of this fictional novel is to make the Theory of Constraints more widely understood and applied by the production industry. The author delicately transforms his theory into an intriguing novel, which keeps the reader interested and worried about the life and success of the main character and his plant.
The Goal explains the Theory of Constraints in an understandable and interesting way, supporting it with examples from everyday life. The main character considers: “So this is the goal: To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow” (Goldratt & Cox, 1992, p.55). It demonstrates explicitly what the goal of a business is and proposes a few practical and logical methods, which one can apply to different companies as the product of the Uniware factory was not mentioned in the book.
The author filled his novel with a number of issues related to management decisions and problems that needed to be considered. He suggests the idea that the whole society can be regarded as the source of information, in which relationships, experiences, and flows could be applied in business. Considering this, he inspires managers to turn to common sense and find alternative methods to solve different situations. The author states that managers have to know how to identify what has to be changed, into what it has to be altered, and the reason for it. Through this consideration, the author teaches how to determine and overcome barriers that interfere in the profit increase.
The main character, Alex Rogo, is a workaholic and a dedicated head of the old plant. He faces the problems with inefficient plant and experiences family issues. The greatest challenge for him is to prevent factory from closing and solve problems with his wife, who cannot understand the situation that Alex is involved in. The major conflict in the story is that Rogo is not able to identify the causes for the plant unproductiveness, high inventory, and low profitability. He is confused by the situation with robots, which are supposed to increase the productivity up to 36%, but it is still insufficient.
Professor Jonah is a physician, Alex’s friend and mentor. In the novel, he plays the role of a business consultant who inspires Alex and makes him realize what the main goal of the company is and how to increase the productivity. Jonah explains: “Productivity is the act of bringing a company closer to its goal. Every action that brings a company closer to its goal is productive. Every action that does not bring a company closer to its goal is not productive” (Goldratt & Cox, 1992, p.38). After this conversation, Alex realizes that the main goal of any company, including his factory, is to make money, and everything that moves it closer to this goal is considered productive.
After this realization, Alex consults with the factory accountants on how the factory can make money. Jonah explains him three main notions of the Theory of Constrains, which are the operational and inventory expenses and throughput:
Throughput is the money coming in. Inventory is the money currently inside the system. And operational expense is the money we have to pay out to make throughput happen. One measurement for the incoming money, one for the money still stuck inside, and one for the money going out. (Goldratt & Cox, 1992, p.79)
After that, Alex and his co-workers start to consider the robots and other machines that the factory uses as inventory and analyze their productivity. He also starts to analyze the plant’s capacity. Jonah also explains Alex such terms as statistical fluctuations and dependant events.
The author makes his novel comprehensive and easy to read because he uses simple situations to clarify sophisticated terms. For instance, he explains the application of the dependant events, when Alex goes hiking with his son. One may consider this part of the novel as the breakthrough of the main hero. Herbie is the slowest kid, who slows down the whole group because Rogo has to view the whole line. Having analyzed the cause for the group’s slowing down, the speed of the quickest hikers, and space between kids, Rogo decides to put the slowest kid in the front of the line. This decision solves his dilemma of holding the group together as everyone has to hike as slowly as the slowest kid. In order to increase the speed of the group, Alex decides to distribute the Herbie’s baggage between the quicker hikers. He has concluded that the system is holding the line together; a hikers’ speed depends on the speed of the hiker at the beginning of the line. The modifications in pace are statistical fluctuations, and the slowest kid is the constraint on this system. Thus, the quickest kids are not going as fast as they can; the line is going at its fastest collective rate as it is going at the fastest speed of the constraint. The conclusion is that, considering the fact that the quickest kids are not individually effective, the constraint of the whole system is effective, and thus the whole system is operating at its highest efficiency.
The next thing that Jonah explains to Alex is the theory of bottlenecks: “A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it. And a non-bottleneck is any resource whose capacity is greater than the demand placed on it” (Goldratt & Cox, 1992, p.145). Realizing this, Rogo with his co-workers identify the bottleneck of their factory and understand that the process of production has to be reorganized.
This business novel has a happy ending. Alex identifies the problems of the plant and finds the most expedient solutions. Finally, the plant’s production is improved, and Rogo is promoted to the divisional manager. He also reunites with his wife. The knowledge, which he has gained from Jonah, practice, and new experiences help him perform his duties properly and make the factory profitable. The Theory of Constrains is seen throughout the whole novel. The author explains it explicitly through simple examples in order to make it more widespread.
The assumptions suggested in The Goal can be regarded as anti-conventional. Considering them, one may conclude that money is more important than effectiveness. In addition, the usual way of inventory evaluation is harmful for the process of production as a number of cost sources are not taken into account completely. One may also declare that the workforce, where each person is working at full strength, is ineffectual because of the assumptions required from the interdependence of bottlenecks and non-bottlenecks. The author emphasizes the fact that the goal of any business has to be making money. It can be achieved by identifying the constrains which obstruct the company on its way to success and prosperity. This goal can also be reached by the proper usage of different practices that are capable of removing the constrains.
The fact that over 2 million copies of this book have been sold proves its efficiency and popularity all over the world. The Goal should be read by the companies managers, studied in business schools, and examined by everyone who wants to know how to overcome constrains and make money.