Critical Chain - Eliyahu M. Goldratt [1]
"I'm Mark Kowalski. I'm with engineering."
Mark is thirty-two years old. A big man, with a voice to match. He has been with the company for eight years and recently was promoted to project leader of the A226 model. He is not the rebellious type that Pullman wanted, and Levy is not happy about risking the development of the A226, but they need a good group leader.
"Mark will be your group leader," Levy adds. "We think he is open enough to handle constructive criticism, knowledgeable and sensible enough to reject impractical criticism, and pleasant enough to ensure harmony. And if he is not, you tell me."
They are too nervous to laugh. This is the first time any of them has ever been invited to an Executive VP's office. Levy gestures to the woman to speak up.
She follows the pattern Mark used: "I'm Ruth Emerson. And I'm from marketing."
"And your job there?" Levy encourages her to elaborate.
"I'm a brand manager. I was on the team that planned the introduction of the A106."
The other two are impressed. The A106 is the current big success.
"Ruth was chosen," Levy explains, "because of her exceptional integrity. You are going to find out to what extent she is not afraid to ask questions."
"I'm Fred Romero." The last member of the group responds to Levy's look: "I'm a bean counter."
"Not exactly a bean counter," Levy laughs. "Fred is the rebel of finance. And at the same time the most respected project auditor that we have. You are all probably wondering why you are here?"
Mark and Ruth nod. Fred maintains his poker face. "From now on, you are a think tank. Your mission is to find a solution to the biggest threat endangering the future of this company."
He pauses to look directly into the eyes of each one. "Let me start by explaining the problem." Standing up, he grabs a marker and plots a curve on the white board. "Do you recognize this curve?"
"You'll find it in every textbook. It's supposed to describe the lifetime of a product. First, sales are picking up as the product is introduced into the market, then they stabilize—it becomes a mature product, and finally, it fades out. Does it fit what we know about our products?"
They believe this is a rhetorical question until he says, "Well?"
"In our case, it looks more like a triangle," Mark volunteers. "Before we finish introducing a new modem into the market, we obsolete it by launching an even newer one."
"Which doesn't make sense?" Levy questions.
"I didn't say that," Mark hurries to clarify.
"If we don't launch the new modem," Ruth comes to his aid, "our competitors will. In any event, the current modem will be obsolete. The only difference is that we'll also lose market share."
"Correct. The frantic race in the market forces us to launch a new generation of modems every six months or so."
They all nod.
"Now let me explain something that you might be less familiar with. Our company's shares trade on Wall Street for sixtytwo dollars and forty-eight cents, according to yesterday's paper. This high price is not justified by the company's assets, or even the company's profit. It is mainly based on the shareholders' expectations of future growth and future profits. Wellfounded expectations based on our impressive track record. But do you realize how fragile that is?"
When no one answers, Levy continues. "To miss once, to launch an inferior product, or even to launch a good product three months after the competition, what will the impact be? Ruth?"
"It would be a disaster. We would lose significant market share."
"Where is good old-fashioned customer loyalty?" Levy sighs. "Gone." And then, in a more serious tone, "If we miss once, our per share value will plummet. The damage to the shareholders will be mammoth. If we miss twice in a row, maybe there won't be a company for us to work at."
He pauses. The three young managers look at each other.
"Our products have a very short life-span. Right now it's about six months, and all indications are that it will continue to shrink. At the