Dr Eli Goldratt on the 3 Levels of a Core Problem and finding someone to blame is never a good idea

What is a “Problem,” and what are the 3 levels of a Core Problem?
 
How do we know there is a “problem”?
 
We have set a goal for our organization or ourselves. We have an expectation to meet this goal.
 
When there is a gap between our goal and current level of performance, it will (or at least should) trigger us to say, “We have a problem …”.
 
A performance or expectation gap answers the question, “Why change?”
 
The Theory of Constraints (TOC) teaches us that if an organization (or person) is not achieving their goal, there must be at least one constraint - one resource it does not have enough of.
 
But why don’t they have enough of this resource?
 
In TOC, the answer is called the “Core Problem”.
 
In this video, Dr. Eli Goldratt reminds us that there are three levels of a Core Problem or, put differently, three answers to the question “What to Change”.
 
Level 1: The Core Problem could be a policy, measurement, process, or behavior limiting better exploitation or elevation of a constraint.
For example, in the Steel Industry, the Core Problem is often the Efficiency measurement of Tons/hour that incentivizes the plant to produce products that are not needed now or ever. This “bad” measurement results in behavior that wastes constraint capacity (that can cause a capacity constraint), wastes raw materials and resources (that can cause a  supply or cash constraint), and causes long lead times and poor due date performance (that can cause a market constraint).
 
Level 2: The Core Problem puts management in a Change vs. No Change conflict. Unless the conflict is resolved with a win:win, the performance gap will not close.
In the Steel Industry, the realization that Tons/hour can cause a capacity, supply, cash, or market constraint and many other undesirable effects puts management in a conflict. On the one side, there is pressure to stop using tons/hr. At the same time, there is pressure to keep using tons/hr. Why?
Because both options have unique pros and unique cons.
 
Level 3: The Conflict is caused by at least one erroneous assumption about a pro or con that is not true.
Finding and challenging this assumption will be key to deciding “What to Change to”.
In the Steel Industry, Management used Tons/hour because they assumed that “an idle resource is a major waste”. But getting a resource, especially a capacity constraint resource, to produce something that is not needed or not needed now, will not increase Profits, ROI, and Cash Flow. It will reduce these.
 
A simple simulation model can prove this and can also be used to show how Net Profit, ROI, and Cash Flow will go up if production is producing only what is actually needed by the market.
 
So, remember, the next time there is a performance gap and you’ve identified the constraint behind it, don’t be tempted to look for someone to blame. Ask WHY this constraint exists three times. Find the Core Problem, the Core Conflict, and the Erroneous Assumption.