The Goal by Eliyahu Goldratt and Jeff Cox

The Goal by Eliyahu Goldratt and Jeff Cox

The Big Idea: identify the bottleneck.  Relieve the bottleneck.  Repeat.

  • The Goal is one of Jeff Bezos’ three required books for his senior team. (Also, Effective Executive and Innovator’s Dilemma)
  • Cost accounting conventions lead businesses to focus on the wrong things.
  • The goal of a business is to make money. Therefore, every operational metric should link back to profit.
  • There are only three operational metrics that matter: 1) throughput, 2) inventory, 3) operational expense.
  • Throughput is money generated when products go out the door.
  • Inventory is money locked up in work in process until products go out the door.
  • Operational expense is money required to generate throughput.
  • Of these, throughput is by far the most important.
  • The most important objective is to increase throughput.
  • How do you increase throughput?  Identify the bottleneck (ignore everything else), relieve the bottleneck, repeat.