Theory of Constraints

The Core Idea: Stop Trying to Fix Everything

The traditional approach to business improvement is based on a seemingly logical but flawed assumption: if you improve each part of a business, the whole business will improve. Dr. Barnard clarifies that this is incorrect. As he states, the “sum of all the local improvements doesn’t give you a system Improvement.” Trying to fix everything at once often leads to wasted effort and minimal overall progress.

The breakthrough concept, rooted in the Theory of Constraints developed by Dr. Barnard’s mentor, Dr. Eli Goldratt, is that you can analyze, manage, and improve an entire system by focusing on its single weakest link, also known as its constraint. This is the “hack” that makes a systems approach both practical and powerful. Instead of trying to manage 500 different steps or problems, you focus your energy on just one—the one that’s holding the entire system back.

This method isn’t about creating a long to-do list; it’s about finding the one thing you must do next. The following sections will break down the exact five-step process for identifying and acting on this single constraint.

Framework

• Goal: Constraint
  • Every system has a goal, whether it’s increasing income or impact. Identify what you’re trying to achieve clearly. The constraint is any resource you don’t have enough of to achieve the goal. Focus on this constraint, as it is the key leverage point.
• Constraint: Problem
  • Once you’ve identified your constraint, the next step is to find the specific problem causing this constraint. This problem is the main reason for the gap between where you have and what you need to achieve the goal.
• Problem: Conflict
  • Every problem exists because of an unresolved conflict. The Solution to the problem is one side. The other side is the Status Quo or Alternative Solution. The reason the conflict remains unresolved is because each option has unique Pros and Cons and we get stuck with indecision or compromise. Define this problem as a conflict and you are half-way to a breakthrough.
• Conflict: Innovation
  • Problem solving is finding a solution to a problem. Innovation is finding a solution without unacceptable trade-offs. Achieving all the Pros and without the Cons is the criteria for an innovation. Find it.
• Innovation: Experiment
  • Finally, we have to test our innovation with a Minimally Viable Experiment (MVE). This small-scale test to validate your assumptions that the innovation solves the problem to get more of what you need, to achieve more of the goal.

The 5-Step Process: A Chain of Focused Pairings

Dr. Barnard’s method is a series of five “pairings” that create a strict one-to-one relationship at each step. This structure ensures that focus is never lost, guiding you from a high-level goal all the way down to a specific experiment.

Pairing 1: The Goal and The Constraint

The process begins by establishing a clear one-to-one relationship between what you want to achieve (the Goal) and the single biggest thing stopping you (the Constraint).

Goal	Constraint
The target you are trying to continuously improve. This can be defined in terms of Impact (e.g., feeding more people) or Income (e.g., generating more revenue).	The single resource you don’t have enough of to achieve your goal. Common constraints include: - Demand - Capacity - Supply - Cash - Management Attention

Here are two examples of this pairing in action:

1. Microsoft: Their goal was a multi-billion dollar income target for their physical products. Their constraint was not having enough demand.
2. UN World Food Program: Their goal was to increase donations by 10% (impact). Their constraint was not having enough cash to provide emergency relief.

To identify your constraint without complex calculations, Dr. Barnard suggests a simple diagnostic: “check what are we waiting for. Where’s the backlog?” The flow of work will always pile up just before the weakest link.

Once you have clearly identified your single constraint, you can move on to defining the core problem that is causing it.

Pairing 2: The Constraint and The Problem

The gap between the resources you have and the resources you need is created by many underlying problems. However, you don’t need to solve all of them. Using the fractal nature of the 80/20 rule, you can identify the single problem that accounts for at least 50% of that gap. This is the only problem you need to solve right now.

For example, at Microsoft, their constraint was a lack of demand. While there were many reasons for this, the one core problem they needed to solve was the issue of frequent shortages and surpluses in their supply chain. These issues made them unreliable and unresponsive, directly hurting customer demand.

By isolating the single most impactful problem, you avoid distraction and can dedicate your resources to what truly matters. The next step is to define this problem not as a simple issue, but as a deeper conflict.

Pairing 3: The Problem and The Conflict

Dr. Barnard makes a crucial point that transforms problem-solving into a more insightful process:

“any problem can be defined as an unresolved conflict.”

Any potential solution creates a conflict. You are forced to choose between the pros and cons of implementing a change versus the pros and cons of maintaining the status quo. This framing is a powerful diagnostic tool for understanding organizational behavior. It reveals why people either get stuck and procrastinate or jump to conclusions and overreact.

• Getting Stuck is often caused by exaggerated fears—either the fear of losing a positive aspect of the status quo or the fear of the effort and risk required to make the change.
• Overreacting is driven by the opposite: exaggerated frustration with the downsides of the status quo or an exaggerated expectation of the benefits a new solution will bring.

Defining the conflict precisely is halfway to finding a real solution.

• Microsoft’s Conflict: The core conflict was choosing between two strategies:
  • Making products to stock to ensure high availability and quick response times, but risking massive losses from excess inventory.
  • Making products to order to reduce inventory risk, but being too slow and unresponsive to customer needs.
• UN’s Conflict: Regional managers faced the classic “Spend it or Lose it” dilemma:
  • They could spend their entire budget by year-end, even on non-essential items, to ensure they received the same budget the following year.
  • Or, they could return the unspent money, but risk having their future budget cut, potentially endangering lives if a crisis emerged.

Framing the problem as a conflict sets the stage for a truly innovative solution that doesn’t just compromise, but resolves the tension completely.

Pairing 4: The Conflict and The Innovation

True innovation isn’t about choosing the lesser of two evils or making a painful tradeoff. It’s about finding a new solution that captures all the positive outcomes of the conflicting choices with none of the negatives. The goal is to create a new option that gives you all the pros without the cons.

• Microsoft’s Innovation: Instead of a simple stock vs. order choice, they designed a new system by comparing customer tolerance time with the supply lead time. This dynamic comparison allowed them to decide how to fulfill each order: make-to-stock for immediate needs, assemble-to-order for slightly longer waits, or engineer-to-order for customers with high tolerance times. This gave them the benefits of both high responsiveness and inventory efficiency, resolving the conflict.
• UN’s Innovation: They replaced the “Spend it or Lose it” policy with a “Save it and Share it” policy. This new rule allowed departments to keep 50% of their saved budget and—critically—apply it to any line item or priority they wanted, something previously forbidden. The other 50% returned to the treasury. This incentivized frugal spending and gave managers the flexibility they needed, providing all the pros of the old system with none of the cons.

Once you have an innovative idea, the final step is to test it in a controlled way before a full-scale rollout.

Pairing 5: The Innovation and The Experiment

We don’t learn from experience alone; we learn from targeted experiments. The final pairing links your innovative idea to a Minimally Viable Experiment. This is a crucial step that comes before a Minimally Viable Product. It is not about building a full solution, but about designing the smallest, fastest test possible to validate the core assumption: does this idea actually give us more of the resource that was our constraint?

For instance, Microsoft didn’t immediately rebuild its global supply chain. Instead, they built a “digital twin”—a complete simulation of their system. This allowed them to test their new rules virtually, proving the innovation would reduce shortages and surpluses before committing billions of dollars. Highlighting the power of this approach, Dr. Barnard notes his lab has reduced the time it takes to build these complex digital twins from “3 to 24 months” down to “3 to 24 seconds.”

Once an experiment succeeds and the constraint is eased, the five-step process begins again. This creates a powerful cycle of continuous improvement, always focused on the next weakest link.

Conclusion: Your Simple Path Forward

Dr. Alan Barnard’s five-step method is a powerful, repeatable loop for achieving continuous improvement. Its secret lies in maintaining a strict one-to-one relationship between a “what” and a “how” at every single step. This discipline is what cuts through the noise and reveals the single most important action to take.

The path is a simple and clear chain of logic:

• WHAT do I want? More of the Goal. HOW? By getting more of the Constraint.
• WHAT do I want? More of the Constraint. HOW? By solving this one Problem.
• WHAT is the Problem? An unresolved Conflict. HOW do I solve it? With an Innovation.
• WHAT is the Innovation? An idea. HOW do I test it? With an Experiment.

By following these pairings, you can substitute visible complexity for invisible simplicity and find the one thing you must work on to move your business, project, or organization forward.