Jonah uses the Socratic method to help Alex think differently about the problems he is experiencing in the plant. Jonah is not always available when Alex would like to connect with him, and after providing a little bit of information -- pivotal though it may be -- Jonah often leaves Alex hanging, presumably because Jonah knows Alex will rise to the occasion and puzzle it out. At periodic intervals throughout the book, Jonah and Alex talk about key points. These discussions are represented in the paragraphs that follow.
One of the first challenges that Jonah addresses with Alex is getting him to begin to think about what productivity is and how it is measured. Because of their conversation, Alex is able to think about what the company is measuring -- what it considers efficiencies -- and how this information is or is not related to the company goal. In particular, Jonah conveys that Alex has not yet identified the real goal of the company.
During the interval between substantive conversations about the plant, Alex develops an answer to Jonah's question: What is the goal of the company? Alex now clearly understands that the goal of the company is to make money. Jonah and Alex agree that the conventions for measuring whether a company is making money (net profit, ROI, cash flow) don't represent the work that is done within Alex's department, making it difficult to know if...
Jonah offers three measures that Alex can use in his department to measure the contribution toward profit: throughput, inventory, and operational expense. Jonah then defines these terms for Alex: "Throughput is the rate at which the system generates money through sales." "Inventory is all the money that the system has invested in purchasing things it intends to sell." "Operational expense is all the money the system spends in order to turn inventory into throughput."
When Alex visits Johan in New York City -- a trip that devolves into a hike with a troop of Boy Scouts, Alex tends to argue in support of conventional wisdom about business. Jonah discusses the misconceptions business people have about the importance and value of running a balanced plant, where operations are fine-tuned to correspond to market conditions. Indeed, Jonah explains that when capacity is trimmed exactly to demands, throughput goes down and the cost of carrying excess inventory goes up. Jonah leaves Alex to contemplate these new terms: statistical fluctuations and dependent events.
After the Boy Scout hike, Alex understands that they need to look at the whole system that is the company, and that some of the system resources -- notably the resources at the end of the process -- need to have a lot more capacity…
