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@danieroux Throughput Accounting Agile Africa 2013 Tuesday 17 September 13

Throughput Accounting - Optimise Globally

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Delivered at Agile Africa 2013 - edited for online viewing. Abstract: The phrase "optimise globally, not locally" is used often. So is the phrase "sleeping like a baby". As with the second phrase, the first one isn't appreciated fully. "Sleeping like a baby" means to wake up screaming every hour requiring a nappy change. Coincidentally, a local optimisation in spite of the global need has exactly the same effect.

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Page 1: Throughput Accounting - Optimise Globally

@danierouxThroughput AccountingAgile Africa 2013

Tuesday 17 September 13

Page 2: Throughput Accounting - Optimise Globally

THIS PRESENTATION WAS EDITED TO BE MORE “ONLINE FRIENDLY”.

i.e. it has many, many more words on many more slides.

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MISSION: MAKE THE BEST COFFEE I CAN AT HOME

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FIRST: EQUIPMENT

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CAN I MAKE COFFEE?

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NO

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AWESOME MACHINE AND BEANS YIELDS ...

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WHICH IS NOT ...

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OPTIMISED FOR THE WRONG THING!

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OPTIMISED FOR THE BEST MACHINE

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WHICH DOES NOT AFFECT THE OUTPUT

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WHAT MATTERS IS WHAT YOU START WITH

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WHAT MATTERS IS WHAT FLOWS THROUGH

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WHAT MATTERS IS THE GLOBAL OPTIMISATION

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THE COFFEE GRINDER MATTERS MORE

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CAN I MAKE COFFEE?

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THE BEST COFFEE I POSSIBLY CAN?

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YES, MAYBE

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AT THE BEST POSSIBLE PRICE?

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NO

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OPTIMISING GLOBALLY GOT US FROM:

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TO

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AND ULTIMATELY TO

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TELL ME HOW YOU MEASURE ME, AND I WILL

TELL YOU HOW I WILL BEHAVE.

Dr Eliyahu Goldratt -The Haystack Syndrome (1990)

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THROUGHPUT ACCOUNTING

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Return on Investment

Net Profit=

Investment

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= Throughput - Operating Expense

Net Profit

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= Revenue - Totally Variable Costs

Throughput

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= Revenue - Totally Variable Costs

Throughput

= Rate the system makes money

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= Revenue - Totally Variable Costs

Throughput

= Rate the system makes money= WTF

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= Revenue - Totally Variable Costs

Throughput

= Rate the system makes money= WTF (Working Tested Features)

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ROI = NP / I

NP = T - OE

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ROI =T - OE

I

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WHAT DOES THIS MEAN?

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Increase in Throughput

Decrease in Investment

Decrease in Operating Expenses

In Order, Optimise For

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WHEN NEXT YOU SEE INSIPID COFFEE ...

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ASK: HOW CAN WE OPTIMISE GLOBALLY?

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@[email protected]

The Principles of Product Development Flow: Second Generation Lean Product Development

- Donald G. Reinertsen

The Goal- Eliyahu M. Goldratt

Tuesday 17 September 13