This book's subtitle captured my attention because I was interested in finding out how Eliyahu Goldratt's Theory of Constraints (TOC) could possibly apply to a services enterprise. Having read Goldratt's business novel, The Goal, for a college assignment some years ago, I remembered it as a management method to improve profitable operations in a manufacturing enterprise by finding and resolving constraints that interfered with them. But I wondered how a service business such as IBM would apply TOC.
The first thing I learned was that just reading The Goal hadn't been enough for the IBM executives seeking to improve their services sector in the wake of 9/ll and the dot-com downfall. They actually hired Goldratt to consult with and train an IBM team in TOC. Goldratt served as a guide during IBM's business-improvement journey. This was the first hint that what looks good in print might not so easily convert to reality on the job. Foundations John Arthur Ricketts was a member of the IBM team and uses this book to share information gleaned from the team's work. He calls the book "essentially an interim progress report" with plenty of work yet to be done.
The Foreword, Preface, and Acknowledgments offer interesting background information about the motivation behind attempting to apply TOC to a services enterprise. The early chapters also provide good foundation information regarding services, services on demand, and TOC. Readers therefore don't need to start off reading background information to understand what TOC is about, the terms it uses, and how the manufacturing arena has successfully applied it.
The Industrial Revolution brought us a long way economically, but services are departing more and more from industry. This leaves us with the need for a Services Revolution. Ricketts describes the professional, scientific, and technical services (PSTS) sector as opposite to industry because services in the PSTS sector are highly customized. Other service sectors have varying degrees of commonality with industry. In general, he distinguishes TOC applications in manufacturing as TOC for goods to avoid confusion with TOC for services. Applications The book's second segment covers resource, project, and process management as well as finance/accounting and marketing/sales.
Services must manage resources to match market demand, regardless of whether the services market is rising. TOC's resource management method organizes resources into "skill groups" that are composed of essentially interchangeable members. The specific tasks in a project's scope determine the resource requirements; process resource requirements depend on "the volume of work flowing through the process."
Project management for services comes from the manufacturing's critical-chain method, which TOC considers more stable than the critical-path method. Some practitioners might challenge this idea, but the author states that sufficient applications demonstrate its truth.
Process management often relies on workforce-management tools to manage parallel processes, while it might use business-process-management tools for serial processes. Ricketts presents a variety of tables and graphs to compare and contrast the application of the traditional approach versus the TOC approach to managing processes for services.
In the finance/accounting discussions, Ricketts claims that throughput accounting was developed with TOC but that traditional cost accounting remains the dominant method. He compares throughput accounting for services to cost accounting. He also includes an appendix covering throughput accounting for software, which he divides into applications for software engineering and for software business. All these discussions show applicable financial measures and their respective calculation methods. Cost accounting is still required in some areas, such as GAAP (generally accepted account principles) financial reporting for publicly traded corporations related to Sarbanes-Oxley. However, for decision-making support in services applications, throughput accounting is a good alternative.
Finally, marketing and sales management are important business components that influence financial well-being. As such, managers must consider them in improvement efforts. The contract types used in services are one consideration; the sales-process stages are another. Implementation Ricketts ties the book together by discussing a TOC-for-services strategy for change management, sales, implementation, and technology. He sees the implementation and technology constraints and applications for services as different from what they are for TOC for goods. In services, opinion leaders are as important to successful implementation as decision makers. Opinion leaders promote the adoption process via positive communication and possibly acting as a change agent, while decision makers get the necessary approvals for adoption.
TOC for services is fully implemented when systems for managing resources, projects, processes, sales, and finances are in use. Once implementation is complete, continuous improvement to optimize the enterprise becomes an ongoing objective.
Ricketts addresses the limitations of TOC for services. At the same time, he highlights the great research opportunities these limitations offer the TOC community. The guiding premise here is that constraints identify what keeps an enterprise from reaching its goal, and TOC for services is an effort to find simple resolutions. This book doesn't write the final chapter in this methodology by a long shot, but I recommend it to practitioners interested in applying TOC in the services industry. It's not a cookbook for success, but it nevertheless offers a wealth of insight into applying available resources in a services enterprise. The author takes what Goldratt began and shows how to extend it into successful services implementations. Caroline Pepa is a senior software engineer at Tybrin Corp. Contact her at caroline.pepa@tybrin.com. | 
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