Constraints

All businesses are constrained by something. Profitability and growth are objectives of all businesses, and we all know how difficult it is to grow and to be profitable. It's constraints that explain why.

Even the simplest business has to operate within an envelope defined by hundreds of different constraints. Constraints might fit in to a number of different categories, like budget, manpower, expertise, customers, technology, schedule, regulations. There may be several constraints in each category. Think of just about any dimension of the business, and the chances are, there are constraints limiting what you can accomplish.

The Theory of Constraints (TOC) argues that at any given time there is a single constraint that is actually holding back the business. Everything else is a non-constraint. Identifying and addressing this critical constraint, will have a direct impact on the profitability and growth of the business.

Once you have identified the constraint, it is important to make sure that you get the absolute maximum out of it. For example, all of the companies I worked with prior to Cyan invested a lot of money and time in system testing and design verification. For these companies, system testing was a constraint on product development. From the get-go at Cyan we focused on addressing the testing and verification bottleneck. We use advanced software development methods, tools and automation. The result is dramatic improvements in productivity and capital efficiency. Improving the effectiveness of lab resources has had multiple benefits. Most important - it accelerates our ability to provide features and capacity that relieve constraints in our customer's networks.

Constraints change appearance as they ripple through the different parts of the organization. A tower of Babel situation can develop. The test-manager might considered the testing bottle-neck to be a resource constraint resulting from the budget. The bottleneck may manifest as a feature delay or a quality problem that constrains the total addressable market for the company's products. The constraint may be viewed as a process limitation by management, and as a management limitation by the board of directors. The CFO may view the constraints on the business as being a revenue problem, with budget implications. Untying this type of Gordian knot is a real challenge. Missing or misunderstanding the critical constraint can be an expensive or potentially even a fatal error.

Resolving constraints was difficult in those earlier companies because there was a tendency to see constraints where none exist.  Human nature may prevent us from even trying something new, because it was not possible in the past.  The 4 minute mile, the sound barrier, and the iPhone are good examples. I get a real kick out of products, designers and companies that surprise me by doing things that are generally thought to be impossible.  Each case is evidence of the other side of human nature - to relentlessly work to resolve problems. This is what startups like Cyan do. By adopting new software development methods and technologies we dramatically improve both productivity and quality.

It's certainly important that we understand and resolve our own constraints. But it's even more important that we understand and help resolve our customer's and our business partner's constraints too. Components, hardware, software, network operators, service providers, content providers and applications form a value chain. This whole value chain is also subject to constraints. The development of the web-browser combined with the decision by Microsoft to include a TCP stack in Windows 95 are examples of innovations that resolved value-chain bottlenecks and unleashed tremendous economic power.

Constraints limit profitability and growth. Identifying and addressing constraints can enable growth and can be enormously profitable for all of the players on the value chain.

What constraints can we help you with? Please reply to this blog or e-mail me at steve [at] cyanoptics [dot] com.