Dynamic Strategy & Tactics
|John Ricketts - Distinguished Engineer & Venture Capitalist, IBM Corporate Technical Strategy|
| Theory of Constraints (TOC) has long relied on the Thinking Process, and more recently on Strategy & Tactics Trees, to create and drive strategy. Documenting cause and effect this way reveals hidden conflicts, unwarranted assumptions, and unintended consequences that should be resolved for a given strategy to be most effective. |
The TOC approach to strategy and tactics has proven effective in capital intensive industries, especially where capacity changes happen in relatively large increments and competitors’ relatively slow reaction-time opens a sustainable first mover competitive advantage. Building another factory or opening another store are not small decisions. Even adding one large machine to a factory or one major department to a store can require significant investment and planning.
A hallmark of the TOC approach to strategy and tactics is to use TOC solutions to present an "unrefusable offer” to customers – and "unfathomable strategy” to competitors. For example, by implementing the TOC production solution (Drum-Buffer- Rope), the TOC distribution solution (Replenishment), or the TOC project management solution (Critical Chain), an organization can promise much faster, more reliable delivery – and earn a premium price for it. An unfathomable strategy happens when competitors remain convinced that nobody else can really deliver faster or more reliably than they already do, never mind get a higher price.
In contrast, the TOC approach to strategy and tactics is harder to apply in organizations that are knowledge-based, information technology-enabled, or innovation driven because competitors react rapidly. Capacity changes can happen in modest increments and fast-follower responses make first-mover advantage hard to sustain. For example, mobile phone applications are readily matched by competitors. Consequently, an unrefusable offer and unfathomable strategy won’t fly when customers already have fast, reliable delivery and competitors are quick to catch on to innovations.
As typically presented, the TOC approach to strategy and tactics lays out a logical series of steps that ultimately lead to dramatic process improvement that in turn fundamentally changes how the organization reaches its goal. There are several issues:
Dynamic strategy and tactics address these issues by taking a more experimental approach. The annual plan still includes strategy and tactics, but proof-of-concept (POC) projects serve as a living laboratory. For example, in the information technology field, a POC reveals within a few days to months whether a technology works, whether it solves a business problem, and whether customers will buy it. TOC applies to POC projects in several ways:
- The strategy and tactics can take years to complete.
- Many strategic decisions do not depend on dramatic process improvement (for example, launching new products, entering new markets, acquiring companies).
- Uncertainty is not allowed: There are no alternatives or decisions.
- A strategy that’s not flexible is vulnerable to unforeseen events.
POC projects change strategy and tactics. If the chosen tactic doesn’t work, the POC can rapidly pivot to other tactics. And if none of the tactics work, perhaps the strategy itself isn’t sound. Dynamic strategy and tactics are thus less vulnerable to unforeseen events. Said another way, no plan survives first contact with reality, so pivoting matters. Dynamic strategy and tactics can be reflected in TOC diagrams that are annotated with key decision points and alternative tactics. Strategic plans are still vital, but using POCs to detect ineffective tactics and misguided strategies enables the organization to make corrections well before the next formal planning cycle.
- Resolving the core conflict that impedes/blocks a POC from success. For example, a software team wants to sell their product as quickly as possible while a services team wants to bill as many hours as possible, yet the solution requires both software and services.
- Managing the constraint that regulates goal attainment. For example, if a critical skill is hard to find, avoiding bad multi-tasking makes the most of that skill.
- Establishing buffer management where applicable. For example, when usage of an essential commodity is unpredictable, a POC can implement Replenishment.
John Ricketts is an IBM Distinguished Engineer. He presently serves as Venture Capitalist in IBM Corporate Strategy where he provides seed funding and oversight for proof-of-concept projects. His prior experience includes Consulting Partner in IBM Global Business Services, Chief Technology Officer in IBM Global Technology Services, Business Process Owner in IBM Chief Information Office, and Chief Technology Officer in IBM Software Group. Dr. Ricketts is the author of Reaching the Goal: How Managers Improve a Services Business Using Goldratt’s Theory of Constraints and "Theory of Constraints in Professional, Scientific, and Technical Services,” chapter 29 in the Theory of Constraints Handbook.