It's Not Luck - Eliyahu M. Goldratt [9]
“Of course we can. Get me such a buyer and I have two Brooklyn bridges for him as well.”
“I’m stuck,” he admits.
“Go over the arrows again. There is usually more than one assumption for each arrow. Concentrate on the arrow that irritates you the most.”
“In order to increase profits we must close the wrapper department. This is definitely the one that irritates me the most. Why do we have to close it? Because it is losing money. Why is it losing money? Because we cannot get the big volume business. Wait a minute, Alex. If in the large volumes Pete can’t compete against the fast machines, how come he can compete for the small quantities? Something doesn’t make sense.”
“It’s not that something doesn’t make sense,” I reply. “There must be something we’re not aware of. Why don’t you call Pete and find out?”
Don places the call. After some “uh-huhs” and “I see’s,” he disconnects. “The mystery is solved,” he says. “Pete’s offset presses do have one advantage: they require much less set-up time. This allows him to compete for the small quantities, but in larger quantities, this advantage is wiped out by the speed of the competitors’ presses.”
We drive the rest of the way in silence. I don’t see how to break Pete’s cloud. Actually, I do. There is another way to increase the profits of Pete’s company. We can rewrite the forecast, ignoring our fear that prices will be reduced. This would probably double the profits. Yuck! No way am I going to use these dirty tricks.
I don’t see how to break Pete’s cloud. I don’t see how to break my cloud. I see only one thing: the need to break them. But how?
4
“Can you come up for a minute?” Granby asks.
“Yes, of course,” I answer, and rush up to his office. At last I will find out what he is planning to do about the board’s resolution. I knew that the final word was not yet said; I knew that he wasn’t just going to lie down and take the punches.
“Hi, Alex,” he stands up behind his desk and gestures to the other side of the room. Even better, I think to myself, it’s not going to be a formal discussion. I sink into one of the deep couches.
“Coffee, tea?” he asks.
“Coffee will be fine,” I respond, guaranteeing that the discussion will last more than five minutes.
“Well, Alex, I have to congratulate you on what you’ve done with your group. I never thought such big losses could be overcome in just one year. But as a matter of fact, I shouldn’t be surprised. You pulled a miracle as a plant manager and even a bigger one as a division manager.”
Yes, I think to myself, I pulled miracles, but Hilton Smyth, who didn’t pull any miracle, just some strings, became an Executive VP two years before me.
To Granby I say, “That’s what we’re here to do.”
“Tell me, Alex, what can we expect from you this year? With what miraculous improvements are you going to surprise us this time?”
“I have some plans,” I say. “Bob is working on a very interesting distribution system that, if successful, will really change things around.”
“Fine, fine,” he says, “so what is the actual bottom line forecast that you have. Tell me.”
“Here I have to disappoint you. As a matter of fact, I doubt if this year we will even make the forecast.”
“What?” he asks, but doesn’t seem surprised.
“The market pressure to reduce prices is immense. I’ve never seen anything like it. Yes, we factored it into the forecast, but it looks like reality will be even worse. Competition is so fierce that we need to run as fast as we can just to stay in the same place.”
If it weren’t for the coffee that Granby’s secretary is now serving, I’m sure the discussion would end here and now. I wait until the secretary leaves and then say, “Can I ask, what are your plans regarding the board’s resolution?”
“What do you mean?”
“Aren’t you going to do anything about selling the companies