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Theory Of Constraints And Software ROI

The real world is ridden with constraints of various degrees. The constraints curb our options and sometimes close doors on various opportunities. Let us look at some examples where value was provided by breaking these very constraints. The postal letters allowed geographically distributed people to communicate without having to physically meet. But one could not have conversations using those, they were lagged. The telephone broke this constraint and one could converse with someone in a remote place. However, it could only relay voice. So came the video phone where even pictures could be transmitted. Pretty effective, but it put a burden of huge investment which was then broken by the Web. Each of these instances kept enhancing communication and provided additional value by breaking constraints. So much so that the world seems impossible without them today. Such is the conviction of their values that many do not have to think twice to realise their Return On Investment (ROI).

ROI Through Constraints

As a software professional I have found presenting this value or convincing the customer of the ROI a difficult task, sometimes futile too. This was the first thing I realised can be resolved when I was introduced to Theory Of Constraints (TOC). If a software can be shown to break a constraint for a user, or rather a business constraint assuming that you would want to treat every user as business, then its ROI could be made apparent and convincing, as in the cases mentioned earlier.

Software As A Solution

Breaking a constraint should be used to solve the underlying problem. To be able to take a constraints approach, software has to be viewed as a solution rather than a product. The difference between a solution and a product is that solutions are customized and also include the usage. One of my friends always says this – software itself does not provide value, its right usage does.

The example mentioned in the book Necessary But Not Sufficient is apt. A company took half a month to do certain calculation manually and hence was restricted to doing it only once a month. Once they bought a software which automated it, the constraint was broken. However it still did not benefit a lot because they still kept on calculating once a month. Benefit for the business would have been if they had used the faster calculation time to calculate the data more frequently. Here the problem was less frequent calculation of the data caused by the constraint of doing it manually. The ROI of the software was in using the software the right way.

I have witnessed two approaches. The first one is where a business buys a popular software because it is known to solve problems of their likes. Then try make optimum use of the software. The second is where initially the constraints and problems are identified. As a solution a software is selected. This approach has a way of identifying ROI before buying the software, and this requires identifying software as a solution.

The benefit of treating software as a solution is that it eliminates the

The simplest example I can cite right now is my own. Before I started blogging, my circle for discussion on software development was physically limited. Blogging has broken that constraint and now I can reach anyone in the world and find people having common interests. My blog is not just a piece of software, it is a solution for me which includes WordPress, my writings and contributions from my readers.

Identifying Constraints for ROI

What this means is that ROI of the software can be easily shown if it can prove that it breaks some constraint and solves problems for a business. Sometimes this ROI can be in terms of finance, sometimes in productivity or sometimes in terms of saved time and effort. In whatever form, the ROI should speak for the bottomline justification.

While dealing with a customer, identifying the constraints can help in convincing the ROI of the software. For this, the focus should be exclusively on the business and business processes. Sometimes the problems can be tied down within the processes and breaking the constraint might involve re-engineering of the process. A discussion and study of the customer’s existing system is required to identify these constraints.

Epilogue

To come to think of it coming with ROI and then convincing the customer about it is not easy. The best way is to express in business terms. Every business knows its constraints, or if it does not, identifying them will help. If any software can break the constraint then it can definitely make an impact on the bottomline justification and provide the ROI.

Discussion [Participate or Link]

  1. David Kreth Allen said:

    I have customers who make the same mistake. When faced with problems,
    they seem to conclude immediately that some software is the “solution” without a convincing argument as to how the technology will solve the problem.
    They forget the explanation you offer above, where it is the “right usage” of the technology that solves problems, not a mere technology alone.

    Why do you think they fall prey to this illusion?

    I think one reason is that they lack the patience and committment to analyze the problem in proper depth. They are eager for a quick fix, and so the go for the “diet pill”” option instead of “exercise and healthy foods”. So they are easily deluded by the pressure on their time and budget. They believe what they want to believe.

    Can you think of other reasons they resist? Or do you find that once you share your “Theory of Constraints” that they eagerly embrace it.

  2. Abhijit Nadgouda said:

    David, I agree with you that lack of patience is one of the most common causes. I have also seen that sometimes the customers get insecure when they feel that they are not taking the technology decisions. To overcome this they simply jump and try to dictate the technology.

    Another common reason has been lack of respect for requirements. There is tendency to avoid the “why” questions. Why to use the software is one of the root questions that should be answered, however it is rarely considered by the customers.

    The TOC argument has not been easily accepted, not only the customers but even by some of peers. However, in cases they have agreed when they have given time to listening to it. At times I have do it without charging, because at the end of the day it will help the project.

    That is why I think a more efficient way of looking at it is through TOC, because it can be specified in their terms.

  3. Trying Something And Using Something on iface thoughts said:

    […] I am trying to follow the Theory Of Constraints to look at ROI in software. Breaking a constraint can provide the maximum ROI. Not only for the sellers, but even the buyers can use this to identify which constraints should be broken and buy software with an expection of ROI. […]

  4. Reverse Salients And Innovation on iface thoughts said:

    […] It is a different approach for studying how innovation progresses. In fact I think this is close to the way Theory Of Constraints can be applied for maximum ROI. Innovation stems from the need for solving constraints. The thing to note here is that, the reverse salients will move on to something else, requiring more innovation. […]

  5. Don’t Mock Process on iface thoughts said:

    […] that it has to first get the processes right to really earn the ROI. I sincerely believe that identifying constraints in a process can reveal a lot of information that can boost […]

  6. Software As A Solution | iface thoughts said:

    […] course, it is not easy to do this. That is where I sense Theory Of Constraints can help. Again, even this is not easier. I have experienced that it requires some amount of […]

  7. Mark Proffitt said:

    Back when “The Goal” was popular I developed a very focused method for maximizing the benefits of technology that I called Quantum Improvement Method.

    I found that there are 5 levels of technology, each producing exponentially better results than the last. Unfortunately, as constraint theory shows, you are only as productive as your weakest link.

    Companies would implement some Level 4 or 5 technology and get small or no benefits at all. The reason was some part of their process was at Level 1 or 2. It was like they had a kink in their hose.

    Using Quantum Improvement Method I was able to get huge improvements with very little cost or effort.

  8. Abhijit Nadgouda said:

    That is quite interesting Mark. Will check out the Quantum Improvement Method. Thanks for your comment.

  9. Why Should Your Web Design Support All | iface thoughts said:

    […] of digital media, is to remove these restrictions by giving a lot of freedom to the user. Going by Theory Of Constraints, it broke the constraint of inaccessibility for me, and helped me more than any other software […]

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Abhijit Nadgouda
iface Consulting
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