The Red and Green Curve is a classic image in Theory of Constraints literature. Originally drawn by Dr. Goldratt to show two approaches to improving performance, the Green Curve starts out faster, but plateaus and declines, while the Red Curve starts slower, but is exponentially increasing. There have been several incarnations of the curves, with the latest having the Green Curve be the basis for even more rapid Red Curve pay off.
I believe that the Red and Green Curves show the same behavior as an S-Curve used to show the rise and fall of product life cycles and the transition from one technology to another. New technologies start out slowly and then become the dominant paradigm. This is the case of a TOC company on the Red Curve. But, as the company is more and more successful complacency sets in. They can miss the emergence of competition with products based on new technologies, or changes in customer value. They can easily ignore fledgling entries into the market as not being "real” competitors. But, the new entry may become the new dominant paradigm. If they miss this change, the company that had been on the Red Curve finds itself on the Green Curve and going down.
It’s tempting to say that this realization would be a "burning platform” moment and a call for action, but the reality is that at this point it’s way too late. A company that wants to sustain their leadership has to be the one innovating. Essentially they have to make their own successful products obsolete.
This goes against conventional wisdom. You don’t destroy your own products when times are good. And yet, that’s essentially what you have to do to continue sustained Red Curve performance. Companies must reinvent themselves and make the jump from one S-Curve to the next in order to maintain an overall Red Curve trajectory.
Although the need may show up in a Strategy and Tactics Tree, this is not something commonly discussed in the TOC body of knowledge. Critical Chain Project Management, for instance, is excellent for developing new products, but it won’t tell you which ones to develop or when. But I believe that TOC practice includes methods and tools to enable an evolving strategic approach.
There are at least two examples of related situations in the TOC literature. In "We All Fall Down” by Julie Wright, system performance improves as the system constraint moves from group to group when it is managed appropriately. In "Isn’t It Obvious?” by Eli Goldratt, expanding the scale of a concept improves increasingly larger parts of a company. But neither of these involves the types of large scale changes to technology, business models or products necessary to reinvent the company and stay on a long term Red Curve.
This presentation will cover the necessary conditions to enable a company to develop and deploy an evolving strategy that will enable it to reinvent itself and its offerings and stay on a Red Curve trajectory.
What to change:
The company’s strategic approach to new products and services.
What to change to:
An evolving strategic approach to appropriately change from a dominant paradigm to what may become the new paradigm. Why is there a need to change:
Companies that focus only on improving the efficiency of their current models run the high risk of finding themselves become obsolete and stagnant.
How to cause the change and how to measure, refocus, sustain and gain the change:
This is the primary focus of this presentation. Both general and specific means will be covered. Approaches and methods to be covered:
- Look to employees and customers to serve as a distributed network for detecting weak signals in the market, in technology, and in the competition. Create the means to share the information and insights internally.
- Watch for surprises, such as the loss of a long term client.
- Use the 6 Questions on New Technology as a way to look forward and not just backwards.
- Use the power of the TOC Thinking Process in multi-disciplinary Red Teams that are assigned the role of finding ways to invalidate the company and industry’s current assumptions. Red Team members are chosen for their cognitive diversity, observational skills, ability to see things others miss, their courage to bring up things others won’t talk about, and their tact at being able to do it in ways that are effective. These teams would combine various aspects of Critical Thinking within the TOC Thinking Process to explore far beyond the status quo. Interestingly, this goes back to the earliest days of TOC and the effort to invalidate assumptions and gets to the theory behind the Theory of Constraints.
Steve Holt has been in management and engineering with Boeing in Seattle for over 30 years. During that time he has had the opportunity to study and practice a number of continuous improvement disciplines such as Total Quality Management, Systems Thinking, TRIZ, Lean, and the Theory of Constraints. He received his initial TOC training through Washington State University in 1997 and holds a Constraints Management Certificate from WSU, He has been a member of TOCICO since 2003. Steve is TOCICO certified in Project Management and is on the TOCICO Board of Directors. His primary focus is the application of TOC and related studies in the management of complex product development programs.