• Choose a category
• All
• Classic-Fiction

By Root 2536 0

of time for an organization. What is the real difference between the green and red curves? In a green curve, the increment in improvement each year is less than the increment the year before. The increment in absolute terms continues to increase on a red curve. Have you ever seen a company grow 5 percent (or more) year after year? This level of growth is not uncommon. Which curve demonstrates 5 percent growth per year? A red curve; the absolute growth is higher each year than the year before—5 percent of $2 million is smaller than 5 percent of $10 million. If you plot the performance of the U.S. economy over time, you will see that it is also a red curve. Companies traded on Wall Street must grow faster than the economy—this means that they must grow faster than a red curve, regardless of the size of the company.

FIGURE 34-1 Process of ongoing improvement. (© E. M. Goldratt used by permission, all rights reserved. Source: Modified from E. M. Goldratt, 1999)

Why does the majority of top management surveyed think that a green curve is more realistic? This is an example of an inconsistency. The red curve represents growth. The green curve has something important for people as well—stability. People do not want the company to grow so quickly that they are spending more than 50 percent of their time putting out fires. We cannot achieve collaboration of our people without giving them what they want. People resist change only if they perceive that the change will not be beneficial. In order to not only survive as an organization, but also, more importantly, to flourish, we must achieve growth and stability at the same time.

The best proof of the need for growth and stability was written in the book Built to Last (Collins and Porras, 1994). Collins and Porras studied 18 highly visionary companies, also referred to as gold medalists. Some of the criteria for selecting the companies to research included being the premier institution in its industry, being widely admired by peers, having a long history of significantly affecting the world, and being founded before 1950. They plotted the performance of those companies over time. Was it a red or green curve? It was perfectly a red curve. They discovered that the industry type does not determine whether a red curve can be achieved. Collins and Porras also compared the visionary companies to the bronze or silver medalists in their industry. Their level of growth was significantly lower than that of the visionary companies. The authors point out that two of the common factors (among others) of these visionary companies was culture and clock. A unique culture was evident in each case; after working in one of these companies for a few months, people would not consider leaving the company. Clock building is about creating a company that will continue to flourish regardless of who is leading it or the product life cycles. For each organization, you can hear the clock ticking no matter where you are in the organization—it is not about promotions or what will happen next quarter. The clock is different; the mere fact that there is a clock is obvious.

Can we ensure that our organizations are “built to last”? Ways for achieving the objectives of both red and green curves (growth and stability) at the same time were developed by Dr. Goldratt. Five different alternatives are in the public domain for achieving this objective; five generic cases of VV S&T trees cover more than 70 percent of industries that involve physical products in some form. This chapter explains the logic of the solution for each—a practical solution. The starting point is to achieve growth and stability at the same time—to build an ever-flourishing organization, not just to have a good next quarter or next year, but also to build an organization that will outlast the lifetime of a person. The top strategy of the VV S&T trees is: The company is solidly on a POOGI. “Solidly” means that we have achieved both the red and green curves together. The deeper meaning of POOGI is that the goal and necessary conditions are achieved.