Goldratt's "The Goal" Also Nails the Small Details

I’ve read Eli Goldratt’s The Goal at least 20 times.

Surprisingly, I don’t get bored re-reading it. (However, I do skip the personal story now.)

I read it yearly to prepare for the enjoyable three-hour lecture in my Operations Excellence class. The engineering students like the book and often say something like: “I don’t read novels and was skeptical. But I loved this book!”

There are two reasons I don’t get bored re-reading.

First, the main story moves quickly and covers all the big and timeless themes you remember from the book: bottlenecks (Herbie and the hike), throughput, making the factory productive, the theory of constraints, the problems with cost accounting, and making money.

Second, the book nails so many of the small details. This gives me much more to talk about in the lecture.

Here are six of my favorite small details:

One, cash flow is important. In a short discussion about cash flow, the accountant explains that it's not a concern when it's above a certain level, but once it drops below this level, it becomes the only thing you worry about. That line helped me when I was running a bootstrapped startup.

Two, revenue management can be a part of operations. Towards the end of the book, they realize they have unused capacity. To fill this, they drastically reduce the price to get a large order. But I like how they are careful about this. This special price is carefully segmented so it doesn’t impact other customers— it is in Europe and was a large order.

Three, let people know how important they are. At some point, they dedicate a supervisor and team to each of the two bottlenecks. To the reader, this is obvious. However, the main character, Alex, realizes the supervisors will see this as a demotion. So, Alex goes out of his way to talk to the supervisors on each shift. He wants them to hear from him that this is an important job.

Four, it is easy to lose sales momentum. Towards the end of the book, they experience a hiccup and have to claw back a promise of short lead times. The accountant doesn’t think it is a big deal— tell the sales team, fix the problem, and re-implement. But Alex knows convincing the sales team took a lot of work. When they take back the promise, this will stop the sales momentum. More importantly, the momentum will be hard to get back. This is a great insight. I’ve seen first-hand that minor glitches can kill your sales momentum.

Five, another cost of inventory is slowing new products. We all know the typical cost of inventory: the cost of capital, tied-up cash, the cost of protecting and insuring it, and the cost of storage. At the end of the book, Alex realizes that the system-wide inventory is slowing the introduction of new products. Management wants to sell what is currently in inventory. Slowing new products reduces competitiveness.

Six, capture the good moments. When a customer paid a surprise visit to his plant to thank the workers, Alex quickly summoned the photographer to capture the moment. Alex was about 40 years ahead of social media.

I’m sure I’ll find others, or you’ll have your own. I love teaching the book to each new generation of engineers.

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