Theory of Constraints Handbook - James Cox Iii [635]
11. Marketing frequently feels compelled to make promises that the company cannot keep.
12. It is difficult to replicate what appear to have been random successes.
13. Our reputation is tarnished.
The Core Conflict for Complex Organizations
The underlying conflict with complex organizations is the need for both growth and stability. Figure 33-1 illustrates the goals of growth and stability drawn by Eliyahu M. Goldratt on many occasions and in many venues (Goldratt 1988b). These apparently conflicting needs lead to actions that force the organization in opposite directions.
Growth versus stability curves can be better communicated in an Evaporating Cloud (EC). Figure 33-2 shows the objective, needs (necessary conditions), and wants to meet the objective and highlights a few sample assumptions that block complex organizations from achieving both growth and stability.
In order to have [A] a successful company, the company needs to have [B] continuous growth. In order to have [B] continuous growth, the company must [D] continually acquire additional capability. On the other hand, in order to have [A] a successful company, the company needs to have [C] stable operations. In order to have [C] stable operations, the company must [D′] avoid disruptions to the current capability. On one hand, the company must [D] continually acquire additional capability, while on the other hand, the company must [D′] avoid disruptions to the current capability. The company cannot do both simultaneously.
FIGURE 33-1 Growth versus Stability Curves. (Previously referred to as Red Curve—Green Curve and carried a different meaning. © E. M. Goldratt (1999) used by permission, all rights reserved.)
FIGURE 33-2 Core conflict.
The Direction of the Solution
The solution to a core conflict comes from examining and invalidating the assumptions behind the necessary logic.
What the Market Expects (A←B)
A [A] successful company must have [B] continuous growth because the market expects it. Complex organizations have external and internal customers. Few people are interested in a company that has declining growth or unstable performance. Publicly traded companies must maintain continuous growth in value and profits to retain (avoid declining) stock prices. In addition, because the internal elements of the organization depend so much upon each other, the organization’s success in one department depends upon improvements in other departments. For both of these reasons, the direction of the solution must support the ability to [B] continuously grow.
Adding Capabilities (B←D)
Attaining [B] continuous growth over time necessitates [D] continually acquiring additional capabilities or resources because the existing resources cannot be expected to perform above maximum capacity for any length of time. Internally, continuous growth causes continuous problems. While some parts of the organization can grow rather quickly, other parts of the organization cannot. Improvements in one area may be cheap and easy (and seem obvious); others may be expensive and time consuming (and not so obvious). Trying to keep the organization in balance (with ample protective but not excess capacity) demands the ability to grow everything at a rate that synchronizes the required contribution of each organizational element. The direction of the solution must address where and when to add additional resources to support effective [D] continually acquiring additional capability.
Predictable Response to Customers (A←C)
A [A] successful company must have [C] stable operations because customers require predictable responses. Unpredictable delivery reduces the value of the product offering and lowers market share. If we do not provide the delivery performance expected by our customers, they tend to find someone else who can. However, what about internal customers? In complex organizations, other departments, offices, or functions also require predictability from each