32nd International Conference of the

TOC Practitioners Alliance - TOCPA

www.tocpractice.com 23 March, 2017 Milan, Italy

Antifragility and Theory of Constraints

How to live (and prosper) in a world we do not understand

Dr. Andrea Zattoni, Italy

23 March, 2017
 Dr. Andrea Zattoni

Business Consultant, TOC Expert

Professional background as manager and
Board Member in a big production company
and Contract Professor at the University of
Bologna.
Speaker at conferences, lecturer in courses
and seminars on the applications of Theory of
Constraints.
Certified by TOCICO and Goldratt Schools.
Focused on helping business owners and
managers to transform their enterprises into
Ever-Flourishing Companies and spreading the
antifragility concepts and practical
www.antifragility.it
applications among companies of the private
sector. info@antifragility.it

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 Presentation Topics

Part 1 The Problem

Why robustness (or resilience) and a correct application of Risk
Management are not sufficient to assure the long term survival and
prosperity of a company?
Why it is important today to reverse the traditional approach to Risk
Management?

Part 2 The Direction of the Solution

What is antifragility and what are its principles?
Why Theory of Constraints can provide a company with the mindset, the
tools and the processes to become more and more antifragile?

Part 3 Case study

A practical application of the antifragilitys principles.

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 What have they in
common?

1920 - 2001 1950 - 2008 1888 - 2012

1937 - 2001
1857 - 2001 1913 - 2002

1931 - 2002
1727 - 2008 1930 - 2001

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 The Challenge

Managers and business owners are expected to keep alive their

companies and to deliver predictable, better and better results, in
spite of complexity, variability, uncertainty and the availability of
limited resources.

The common reaction is:

Trying to improve what they know how to improve (instead

what must be improved);

Forcing simplicity into a complex environment (by dissecting

a system into subsystems);

Getting the illusion of certainty on uncertain situations (by

detailed forecasting, planning and budgeting);

Implementing sophisticated Risk Management methodologies.

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 The main questions of Risk
Management methodology

1. What can go wrong and what are the possible

causes and consequences?

2. What are the chances of occurrence (of the

causes, the events and the consequences)?

3. What can be done to detect, control and

manage what can go wrong, its causes and
its consequences?

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 The main faults of Risk
Management methodology

It is a reactive approach
Effect Effect

It assumes linearity Cause Cause

Linear Non linear

It assumes (some sort of) stability

It assumes no Black Swans

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 The main faults of Risk
Management methodology
Event with three characteristics:
1. Highly unpredictable
2. Major impact
3. Rationalized by hindsight

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nd Swan
International Conference of the TOC Practitioners Alliance - TOCPA
 Reversing the approach to
Risk Management

Instead of

performing calculations and predictions about what can

go wrong (and cause a damage),

switch to

focusing on how systems (organizations, people) are

impacted by stressors and how to improve this response.

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 How systems are impacted
by volatility
FRAGILE ROBUST (or RESILIENT) ANTIFRAGILE

Myth: The Sword of Damocles Myth: The Phoenix Myth: The Hydra
Negatively impacted by Not impacted by volatility (up to Positively impacted by volatility
volatility a limit) More upside than downside
More downside than upside Able to resist (or to adapt) to from volatility
from volatility stressors
f(x) f(x) f(x)
Gain
Gain
Gain
Pain x
Pain x
Pain x

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 Why is Antifragility
important today?
The average lifespan of the companies is decreasing.

Risk Management is not the solution.

Robustness (or Resilience) is not enough.

The increasing search for local optimization leads to increasing fragility.

Growing interdependencies (globalization, Internet of Things, Industry 4.0, etc.)
make the Black Swans more and more frequent and significant.

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 What are the basic principles of
Antifragility
and
how can we translate them into
practical applications?

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 Antifragility Principles

1. Stressors Acceptance
Essence: Uncertainty, unpredictability, interdependencies, variability and mistakes are
facts of life. Dont try to eliminate them (fragilista behaviour), but learn how to benefit
from them.
2. Asymmetric Optionality (+ Rationality)
Essence: Create conditions where you have more to gain than to lose from volatility, so
that you are not obliged to be right all the times (you can lose something, sometimes).
3. Redundancy
Essence: You must have more than what you strictly need to respond to predictable
stress factors.
4. Via Negativa
Essence: Stop doing bad things (bad behaviours, bad initiatives, bad metrics, etc.), say
no very often
5. Skin in the Game
Essence: Create conditions where every interested parts have something to lose as a
consequence of their decisions or actions.

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 Antifragility Principles vs.
Practical Applications

ANTIFRAGILITY PRACTICAL
PRINCIPLES APPLICATIONS

1. Stressors Acceptance TOC logistic solutions (DBR,

CCPM, Pull Replenishment)
Learning From Experience
Process (LFE)
Build, Capitalize and Sustain a
Decisive Competitive Edge
Strategy & Tactic
Implementation Audit Process
Decision Making under
Uncertainty (Eli Schragenheim)
..

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 Antifragility Principles vs.
Practical Applications

ANTIFRAGILITY PRACTICAL
PRINCIPLES APPLICATIONS

Capacity Buffer
TOC Thinking Processes
2. Asymmetric Optionality Throughput Accounting
(+ Rationality) Decision Making under
Uncertainty
..

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 Antifragility Principles vs.
Practical Applications

ANTIFRAGILITY PRACTICAL
PRINCIPLES APPLICATIONS

Buffer
Buffer Management
Learning from Emergencies
(Isnt it obvious?)
..
3. Redundancy

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 Antifragility Principles vs.
Practical Applications

ANTIFRAGILITY PRACTICAL
PRINCIPLES APPLICATIONS

Stop doing what should not be

done (bad behaviours, bad
initiatives, Golden Traps)
5 Focusing Steps
..

4. Via Negativa

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 Antifragility Principles vs.
Practical Applications

ANTIFRAGILITY PRACTICAL
PRINCIPLES APPLICATIONS

Win-win solutions
UnRefusable Offers
Buy-in process
..

5. Skin in the Game

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 Case study

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 Case Study

Small Italian company, providing surface treatment service of

mechanical parts.
Main market sectors: energy, automotive, aeronautic industries.

Start of the TOC project: end of 2014.

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 Case Study

Challenge: a big, high uncertain opportunity

Expected start of the project: second quarter of 2015
Not enough capacity, big investments required
Time to install new plants: 6 months
Time to hire and train new people: 6 months
No guarantee to get the project

Antifragility Principles Tactics

Asymmetric optionality Focusing on the extreme scenarios

Postpone the decision to hire people
Redundancy training time reduction
Increase the protective capacity
Via Negativa Build and capitalize a decisive competitive
edge
Stop any other improvement initiative

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 Case Study

Results
The big opportunity did not materialize in 2015.
Reduction of training time from 6 months to less than 1 month.
Expansion of the customer portfolio.

Big gain
(positive conditions)

Limited pain
(negative conditions)

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 Conclusions

Set your goal: becoming Antifragile (more and

more).

Go beyond the progressive equilibrium with

your environment.

The practical ways to undertake the journey

towards an Antifragile state do exist.

Do not wait for the impact of the next Black

Swan: it may be too late!

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 Conclusions

"When strong winds blow, don't build walls, but

rather windmills; there is a way to turn every bit of
adversity into fuel for improvement".
Chinese proverb

THANK YOU

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