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|Submissions to Eli's 1st Riddle (with comments from Eli)|
Below we have Eli's 1st Riddle along with the top FOUR answers. The top answer was given by David Peterson so he is the winner of the 1st Riddle! Congratulations to David! The other answers are the next top three answers with comments given by Eli. The rest of the answers (without comments) are at the end.
Riddle: Lewis, the CEO and main
owner of Lewis Supermarkets, was very frustrated from the wave of over one
hundred and thirty complaints the chain received due to the shortage of Soup-97
at all seven branches of his supermarkets in the city. The point was, of
course, that the competition had the soup available on their shelves.
Question: What process would you recommend to Lewis?
1. David Peterson's Answer (Winner): "The injection... Products can be withdrawn without causing complaints and without compromising the chain's reputation for availability. How to do it... Clear labelling of "seasonal" and "limited stock" items on the shelves, so that customers' expectations are set correctly when they purchase such items."
Eli's Comments on Winning Answer: "I assume David believes that whatever item is on the shelf is a promise to the customer that the same item would be on shelf at any given time in the future – UNLESS the label says differently. This looks to me a valid direction for a process for Lewis to implement. A direction of solution is all I could expect from an answer. Eventually when developing the full strategy and tactic (S&T) tree some difficulties with the proposed direction might arise. I can argue that the labeling process is not easy to implement when many thousands of items are on the shelf. Still, it could be worthwhile as it establishes the decisive competitive edge and makes it harder for the competition to follow.
2. Oded Livneh's Answer (runner up): "The core problem is in the sentence: "the item was not a part of the items-to-be-constantly-replenished": there should be no such items. The mechanism of replenishment by demand is guaranteed to bring the target level to the correct level.However, new items should differ in some parameters to allow faster quantity tuning to meat initially unknown level of demand (possibly below the level of holding them).The adaptations for new products are:1. Matching quickly initial surprisingly high demand: When a new product reaches the black level (shortage), increase target level by 100% (rather then by 30%). This is in order to catch the hits that we miss-estimate their demand by a huge factor. By the way, this is not the case with Soup-97, both because "its initial commercial success in the country was good, though not exceptional", and because the shortages were not due to the demand level, but due to not replenishing it.2. Avoiding replenishment of products that should be excluded from inventory: if a new product is in the green area, for a single period only, reduce its target level by 30% (and therefore do not replenish).3. Exclusion level: if a the target level of a new product (and maybe other non-seasonal products as well) is below some threshold – exclude it from inventory.4. Early end to the "new product" status: once the product is in the yellow or red (but not out of stock = black) by the time the replenishment arrives, it is no longer a new product: it's stock level (optionally after adding 30%) is about the correct level.5. No deliberate effort to set different factors in the central warehouse: if not all branches holds the product, the levels of inventory should be slightly higher because of the higher fluctuations. Don't worry about it: the RBC will adjust the levels.So, will Lewis be satisfied?1. "Build a process for newly introduced items that would not invoke this kind of resentment from our customers and still be economical". Both are satisfied: the process is economical, since it holds sound initial inventory levels and quickly adjusts them to demand, and prevents shortage thanks to the RBC.2. "I allow my managers to test new products but the decision to hold them fully available is a decision of the management team as a whole": no need to hold these products fully available, but on the brunches that holds them, they should be managed in the RBC.3. "We are committed to perfect availability, but there are cases where it is not economical to do so." Do not commit – just use RBC. If the product is popular, the target levels will protect its availability even without commitment. If it is so unpopular that the level of inventory does not protect from occasional relatively high demand – it's both probably not interesting for too many people and a good candidate to remove from inventory (and first from commitment).4. "Should we hold all the items, we either test or happen to have for a certain period of time, available at all times?". No, only the ones enough popular or strategically decided. The RBC process will automatically find the popular products among the tested ones, and then a product can enter commitment list.5. " Does it mean we cannot tell the customers that our availability is superior to everybody else?": You can.6. "How can we have a decisive competitive edge if the customers do not know we have it?”: Well, advertising is one good solution – you have increased your sales by 22% due to advertising. If you decide you need something stronger, after a crisis or for any other reason, you can set a punishment on yourself for shortage – a kind of punishment that the competitors can not afford to match, since their much higher level of shortages will imply an unaffordable financial burden. Such a self-punishment can be: "this is my (pretty long) list of guaranteed products. If any of them is missing, pay for it, and within 2 working days I'll have it sent to your home with no extra charge for the delivery".
Eli's Comments: "Just to clarify the above I believe that RBC stands for replenishment-based-on-consumption, a process Oded describes in great detail. So, Oded offers maintaining a list of all the products the chain commits to availability and publish it. I assume that this list should be on the Internet for public access and additions and deletion should be introduced once a month. Oded also adds a factor of penalty (self-punishment), which is a good add-on to the promise of availability. I agree that this could be a good way to radiate being serious about maintaining the availability for every item appearing on the list."
3. Orion Avidan's Answer (third place): "This seems to be the result of inertia, as in the past deciding on new products was impacted by the conflict of ordering more to ensure availability and ordering less to eliminate surplus. This conflict was carried through to the new process by inertia to become activate full availability (to ensure customer satisfaction and sales) vs. delay activation until management decision (to ensure managerial control). But this implys that management has to make the decision on a product basis. This process is relevant when there is missing data and so managerial consideration is important. In the new situation we have all the relevant data to create a new product introduction process. We know ahead of the introduction the entire product's data except the customers' reaction to the product. So we can decide ahead of time how to react to different levels of product acceptance, based on costs, delivery time and other details, using a logic tree construction. Remember to bring up reservations and use NBR to eliminate foreseeable problems.As for the situation at hand, the major problem is that the chain had made a promise to the customers and did not live up to it. To resolve this I would suggest an open letter of apology explaining what will be done in the future to avoid this situation. Basically this entails promising availability for a set period, after which the product may or may not be available, which is prominently communicated.It is important to fulfill promises to customers. If you are not sure you will, don't make the promise. The DCE will still be there and customers will notice it, noting they always find what they are looking for at those stores, without creating too high expectations that can easily lead to disappointment."
Eli's Comments: "Orion, like Oded started the answer by looking to solve the minor problem and then the solution has been expanded to the general case. I have to admit that this injection has surprised me. I had to read it again and then to think whether it could work after all. The direction itself was not sufficiently articulated by Orion. I assume Orion would give for each product on the shelf the promise of full availability until the next date which allows deletion from the shelf – like the first business day of next quarter. There are many difficulties going this way, but it could yet be valid."
4. Jimmy Conway's Answer: "Limit the guarantee of full availability to select lines (exclude trial products). My injection to your riddle is to limit the guarantee of full availability to specific select lines. The exclusion to the guarantee would be carried on promotions by stating that the guarantee excludes trial, one-off or end of line products. Negative branches to this injection include: 1. NB1: Customers don’t know about the exclusions and feel cheated when buying a product that is unavailable, but which is covered by the exclusion. This could lead to bad feelings, negative publicity and loss of sales. · Injections: Clear communication. Make clear on publicity the nature of the exclusion and also at the point of sale of the specific products not covered. 2. NB2: Staff don’t know which products are excluded, are confused about the guarantee and are unable to communicate clearly the policy of the business on specific items. This could lead to staff dissatisfaction, customer dissatisfaction and again, lost customer loyalty and sales. Injections: Staff education about the company policy, specific products excluded and training on how to deal with customers who claim the guarantee on products not covered by the guarantee policy."
Eli's Comments: "Jimmy Conway has also pointed to the direction of limiting the promise of availability and communicate it to the customers."
The rest of the answers do not include comments from Eli, but at the request of Eli he would like to have all answers available to read. Below are the rest of the answers in the order they were received.
1. Alta Vos: A suggested process for newly introduced items that will be ‘tested’ via promotions: 1. Establish replenishment time: Investigate best replenishment options for fast replenishment (and be prepared to spend more on faster replenishment should cost of overstock be considered less damaging than dent in reputation in the event of stock-outs during promotions)2. Let history or intuition guide you: Investigate % increase of sales volumes during previous promotions, and if possible, for similar types of items. Where these figures are not available draw on the intuition of the experienced staff3. Estimate reasonable range of consumption over replenishment time: Summarise best and worst historical promotional sales volumes per similar item, or use intuition where history is unavailable, to establish the reasonable (optimistic and pessimistic) range of sales for such item that can be expected over replenishment time in point 1 above4. Calculate stock target level based on time to replenish and reasonable quantity of expected item sales during replenishment period, and establish the safety factor by taking into account: a) the reasonable maximum demand, and b) the cost of having too much stock vs suffering stock-outs (loss of sales and loss of reputation). If the item is currently being sold then take on-hand stock as well as stock in the pipeline into account when establishing target level5. Branches report daily on item sales (consumption) to central warehouse 6. Buffer status as early warning system: With the TOC replenishment solution already implemented, keep an eye on the buffer status and order regularly and in time7. Dynamic buffer management keeps stock levels in line with sales trend: Adjust stock level as initial rush of sales starts to taper off or increases due to the nature of the promotion - or use software with dynamic buffer management to take care of this.
2. Victor Valchuk: The chain publically announced that their availability is the highest one. Company Constaint is at market now. If the company don’t follow the promise of availability, it mean we go back to 2 and 3 steps of focusing steps.We can’t allow it. We need to keep customers. We can’t lose customers. In this way we need transport new product be air. The target level is forecasting sales within replenishment time by air transportation. Then, when demand of new product estimated, we will increase the target level to sales level within replenishment time be sea shipment.
3. Pablo Alvarez Flores: You can have all the stock items in the regional warehouses and stock for display only in stores, and offer free delivery service where the customer wants (perfect availability). Something similar to catalog sales with display during the test period. High-demand products will be added to stock for replenishment in stores.
4. Manoj Agarwal: A-Make money now & in the future, B-Satisfy customers, D’-Commit to 100% availability even for new products, C-Be economical, D-Do not commit to 100% availability for new products. Wrong assumption: There is no way to economically ensure 100% availability of new products OR the current replenishment process is not economical for new products.Direction towardsthe solution: Devise a process that ensures 100% availability of new products, while avoiding waste (just tweak the current replenishment process, if necessary)Details of the solution:1. Test and introduce new products in phases (area by area)2. Put new products on replenishment = Hold most inventory in the relevant regional warehouse (or central warehouse, if decide for a wider launch)3. Increase the frequency of management review (More frequent review = smaller initial stocks).
5. Charlene Budd: I suggest that Lewis Supermarkets make a big deal out of customers' ability to try and recommend new products for regular availability. A store display entitled something like, "What's New?" or "New product for our lineup?" A display (flexible/movable so it could show up in unexpected places ina store) could offer the product and provide some incentive (coupon?) to try the product and evaluate it either online (special web page that will show average responses once the evaluation is completed) or on a tear-off form asking the same questions about quality, price, desire/demand, etc. Accompanying this display could be advertising touting, "Your're the Boss!" or "You decide products that regularly should be available at Lewis!" and explaining how customers can decide if trial products should be continued.
6. Milan Zajc: One of possible direction of solution for this riddle:IF Company with TOC replenishment succeeded to reduce the total inventory at the chain by 42%, while keeping excellent availability AND chain publically announced that their availability is the highest one can hope for through a well-planned advertizing campaign AND result was an increase of 22% in sales, THAN (we assume) thet they have implemented TOC replenishment by the book AND (we assume) that they can follow and implement all necessary MTA S&T steps in their environment.But, internal Policy: »The idea was that the management would decide whether to keep the new product on the shelves in their monthly meeting on the morning of the first Monday in the month. However, the whole quantity, throughout the chain (the central warehouse and the seven branches), was sold within one week. No replenishment order to the importer was issued, because the item was not a part of the items-to-be-constantly-replenished.«..may block their improvements: • Because that they loose money and induce resentment from their customers So managemet team shell resolve their gaps between responsibility and authority, who and when can decide (not just for test it) wheter to keep the new product on their shelves. Mybe they need also to implement (if they did not yet) aThroughput Measurements, to be sure that injection for this Lieutenants Cloud will still be economical for them.
7. Louniel Blom: Firstly I would say that any new item should be monitored on a daily basis. The monthly meeting that they were going to review it add an additional month to your lead time.Secondly looking at your replenishment lead time from your supplier you should purchase initial stock to at least cover you for that period using an estimate for the maximum sales within that period. Then you need to get an estimate for the maximum daily sales for that product. Then by monitoring your buffer of that product and the sales of that product on a daily basis, you will immediately see if your estimated maximum daily sales are exceeded. As soon as that happens your forecasted sales needs to be adjusted accordingly and you need to order the number of products equal to the calculated requirement. Herewith an example:Replenishment lead time: 5 days Estimated daily consumption for the product: 10 unitsTherefore amount to buy initially to test product: 50 unitsThen by monitoring you find that on the first day you sell 20 units therefore the actual amount required within your replenishment period is 100 units, you then need to order enough to fill up your stock buffer to 100 units i.e. you need to order 70 units which together with the 30 units left in stock will fill your stock buffer to 100 units. You then keep monitoring the sales of this product on a daily basis. If the next day you sell all 30 units that is left. You need to again adjust your buffer again and order the difference which in this case would be 80 units which including the 70 units that you have ordered will replenish your stock buffer to the required level of 150 units.Therefore the key is to monitor the new products on a daily basis to reduce your decision lead time. This should enable you to react quickly to market demand and to ensure the highest possible availability of your product. Negotiating shorter lead times for new products with suppliers is also something that will help significantly.
8. Paulo Brosig: It looks like they are not doing Buffer Management. It happens sometimes...
9. Leo Lauramaa: New products testing procedure:The new product test for potential items-to-be- constantly-replenished is always done with TOC replenishment model (daily replenishment ).The new product testing is executed in 2-3 Supermarkets representing as well as possible the whole demand/customerbase of the 7 Lewis Supermarkets.The new potential products are tested while simultaniously removing the old to-be-potentially-replaced products from shelfs&labels for the test period. If the shelf life and storage requirements give the possibility, each testing Supermarket keeps a little inventory of these products during the test period and sell when asked specifically.After the management teams decision the selling out of the not-selected products will be done a) by non-testing-supermarkets if the new product was selected or b) by testing supermarkets if the new product was not selected.Happen to have products: Seasonal?1) Selection criteria, when possible: The distrbutors ability to replenish.2) When necessary - slightly higher price or to pay additional volume based payment to reward the distributor replenishing (which it does not have to do with other clients).3) The remaining little variety of seasonal products which the Supermarket chain cannot replenish is marked "Seasonal product, limited lot, availability not granted" - with better english than mine...
10. Christophe Lambert: As Mark Twain allegedly wrote, "I apologize for the length of this letter, but I didn't have time to make it shorter.” The short answer to Eli Schragenheim’s riddle is the process that I would recommend for Lewis to follow (with guidance) is the Theory of Constraints (TOC) five focusing steps, paying particular attention to step 1 – IDENTIFY the system’s constraint(s) – which requires that one understands the boundaries of the system. The long answer requires that I actually follow the process. The attempt to do so has been productive for me and still represents a work in process, but perhaps you will find it useful.
There is significant information in the narrative to corroborate the hypothesis that the system Lewis is ultimately trying to improve is not his business; but rather he is subordinating the needs of his business to his personal need to feel acceptance or be loved. In particular, Lewis appears to be running Lewis Supermarkets as an extension of his identity and not as a professional CEO (a phenomenon common to business owners – we’ll define a professional CEO later). We will shortly examine the specific actions Lewis has been taking and his reactions to circumstance that provided the data to construct this hypothesis. A predicted effect of this hypothesis is that even if the current undesirable effects in his business related to product shortages are addressed, subsequent obstacles in the implementation of the TOC solution will repeatedly arise from Lewis’ actions and block the company from achieving continuous rapid and stable growth. This has a high likelihood of escalating to the point where the TOC consultant, focusing on the business as the system he is trying to improve (Lewis’ espoused but not actual or at least primary goal), will throw up his hands and conclude that the owner is given to self-sabotage. In fact self-sabotage appears to be happening already. What if apparent self-sabotage is actually a psychologically normal and reasonable response? What if from the point of view of the larger system of the owner’s happiness, taking actions that damage the success of the company is not self-sabotage at all? Before we examine the narrative to see the apparent inconsistencies between the owner’s espoused goal (even to himself) of making the company successful and his actions, a short introduction to some non-TOC literature will be helpful in mapping the owner’s actions into a causal conceptual model.
A shortcut to understanding core conflicts of an individual is to understand what the core human values or desires are and given that values drive behavior, observe the goal-seeking behavior of an individual and derive what his values must be based on his actions. Or to use TOC terminology let us construct an evaporating cloud where for convenience we will put happiness or self-actualization as the goal (A) and place two individual core values as (B) and (C). If we had a short list of values or basic desires that motivated people we could more quickly narrow down hypothesized causes for their actions and understand their conflicted behavior.
There are many ways of delineating what people value, and many labels and categorizations. A useful albeit imperfect one is the Reiss profile (Reiss, 2002) (Reiss, 2008), a validated psychological testing instrument that reasonably gauges what people value and take action towards, and is generally consistent and stable over time. Reiss derived his test by first enumerating several hundred things that people said they valued, and he performed factor analysis to boil them down to 16 reasonably orthogonal values that explain most of the variability in human desires. Because he started with espoused values, some of the things people claim they value are actually means to ends, and some are ends in and of themselves – perhaps differently for different people. All 16 values can be found in one form or another in the animal kingdom where there is a survival advantage to pursuing those values (for instance Order relates to cleanliness – animals groom themselves and avoid disease; Romance relates to procreation). To cut to the chase, the hypothesis is that Lewis is driven strongly by the need for Acceptance, and two means he uses for achieving that end are the success of his company (corresponding to the Reiss values of Power and/or Status), and putting his attention on food (corresponding to the Eating value). Let us examine the narrative to see if this hypothesis is reasonable, and along the way suggest some predicted effects that could falsify this compound hypothesis. If my hypotheses turn out to be way off base, then I have provided in Appendix A proposed actions to address obstacles to the decisive competitive edge – that is, just fixing the business.
Let us consider Eating first. What industry does Lewis work in? He works in the food industry, owning a chain of 7 supermarkets. His supermarkets carry ~4000 SKUs. His monthly meetings with his top managers involve getting consensus on whether to carry a particular item of food or not (probably there are many such decisions given so many SKUs). We’ll talk about the problem with managing by consensus later in the context of avoiding disagreement to serve an Acceptance need, but let us say that consensus-based meetings involve a great deal of time and discussion to come to conclusions – and people with a high Eating value love to spend their time contemplating and discussing food (as well as eating it). Lewis also gives special dispensation for his individual store managers to decide on whether to introduce a new food item or not. He says that he allows his individual store managers to introduce new foods, but somehow Soup-97 was introduced into all seven stores ("the chain decided to check it”) – the introduction of this food was decided in one of his monthly management meetings. There are therefore at least two processes for introducing new foods into the chain – the individual store manager, and clearly some consensus meeting of all of the managers and the CEO (as happened for Soup-97). Can you imagine that the monthly meetings of the top management of a chain involve decisions over what brand of coffee bean to carry, or whether to introduce a new imported brand of soup? Is this where the time of the CEO’s top managers should be spent, let alone the CEO? Not if the system the CEO is trying to improve is the company. But if the business owner is seeking his own happiness and intrinsically he has a high Eating value or Eating is a means for feeling Acceptance, it is a perfectly rational use of his time. One little problem is that the CEO’s minority shareholders and his employees buy in to his espoused goal of making a successful company – and their financial fortunes and job security are dependent on him being a professional CEO and doing just that. As a quick check, ask how many of his meetings with subordinates and clients involve meals, and good ones at that.
Let us examine the Acceptance value next. The text contains information to suggest that Lewis’ actions may be driven by a need for Acceptance:
• That he felt "very frustrated from the wave of over one hundred and thirty complaints”. People with high Acceptance are very sensitive to criticism – it often makes them feel bad rather than it being taken as an opportunity to learn. When expectations are not met, they are interpreted as failure, a form of non-acceptance that is demoralizing to them. If the feelings are bad enough, they will displace these feelings onto others in the form of blame – to point to a cause outside themselves – for example, the competition.
• There are two statements apparently coming from Lewis about the competition that suggest he is very worried about how he appears in the eyes of others. These statements together imply that the competition are actively moving against him, and yet no data is given about what their actual actions were: "The point was, of course, that the competition had the soup available on their shelves” and "The competitors definitely did not like it, so they just waited from an opportunity.” Is he saying that the competition monitored his shops to discover that there was a shortage of Soup-97 and then made sure they had the soup and then publicized his shortage so that he could be publicly embarrassed? This data suggests blaming as a way to mitigate his feeling of lost Status and/or Acceptance – certainly his emotions are related to concern for what others think of him.
• When Lewis first "tries to verbalize the situation”, it is not about him damaging his decisive competitive edge, rather he cites concerns of customer resentment and ill-founded statements about cost (see Appendix A for some comments on the cost calculations).
• Lewis runs his management team meetings by consensus. Further, he does not appear to take accountability for those decisions, making it some kind of group accountability. There is no such thing as group accountability in a hierarchical management structure, only individual accountability. Acting under the myth that accountability can be shared is a means for avoiding criticism or blame for decisions that "fail” – decisions that lead to mismatched expectations.
Now let us address the values around Lewis desiring to have his company be successful. The Reiss profile bundles a lot into the Power value including the desire to direct the actions of others and have achievement – more broadly, to have the influence of will. The Status value is the need for social standing and importance. If tested with the Reiss profile, Lewis would likely measure above average on these two dimensions, but not have them at the highest levels. That they are not low is evidenced by his achievement of a chain of 7 supermarkets, and his attempts to improve his business and his naming of the business after himself. However, the subordination of his business to his needs for Acceptance and Eating suggest that company success falls lower in his needs hierarchy. These actions call into question whether Power and Status are means and not valued ends.
To sum up, the data suggests that Lewis has a very strong desire for Acceptance. Whereas Eating, Status, and Power – or more concretely, focusing on food and making his company successful are most likely means he is attempting to use to feel Acceptance. One way to check if something is a means and not an end is to ask, "when you had the putative end, did you find the putative means subside in importance?” We could ask Lewis for example, if he can think to a time when he felt deeply accepted and loved for an extended period of time did his thinking about eating drop over that same time period – did he basically eat what was needed and not seek to feast or spend much time contemplating food?
For Lewis, and many successful people, a belief is most likely established early in life that achievement is a means to receive love and acceptance. Also, eating is a primary connection between parent and child from the earliest age – easily confounded with love and acceptance. Here are some key questions to ask Lewis, a man who is by most worldly standards successful, having built a chain of 7 supermarkets: "deep down do you really feel successful? Further, once the initial excitement wore off from experiencing a 22% growth in sales, did you really feel more loved and accepted? Did you feel secure about your company’s new level of performance?” If the above hypotheses hold, the predicted effect of these questions is he would say no to all of them, or hedge and waffle in answering them. That is, although he has absorbed deeply into his identity the assumption that success leads to acceptance, reality is showing him otherwise. To challenge this assumption is to challenge a pillar of his identity.
Alternatively it might be the case that another more powerful assumption is the progenitor of the assumption that success → Acceptance. That is he would probably have no doubt in saying that failure makes him feel non-Acceptance. Mustn’t it then be the case that success would make him feel Acceptance – doesn’t it logically follow? Not at all! It is actually a common logical fallacy of denying the antecedent, see http://en.wikipedia.org/wiki/Denying_the_antecedent, which takes the form: If P, then Q. Not P. Therefore, not Q. Lewis’ fallacy is: if failure then non-acceptance; success therefore acceptance. If this assumption (success → Acceptance) is deeply integrated into his identity (and doesn’t actually hold for him), one can predict that rapid success will create anxiety – being too successful in his business too fast is a threat to an important part of his identity. The wider the gulf between his outer success and his feeling of Acceptance, the more extreme becomes the disconnect between his assumption and reality. Absent a way to modify this assumption, it is better for his happiness to choke back the company success to average levels of growth and stability, and blame the results on the competition. Having too wide of a gulf might even lead to mental illness. It is not self-sabotage, it is self-preservation. Look at how many celebrities have gone down in flames after meteoric rises. And if Lewis’ story is a familiar one, and TOC consultants are used to identifying this behavior in others as self-sabotage, are we not also engaging in blame so as to avoid the disconnect between our espoused goal and reality? That is, does the TOC consultant not espouse that dramatic improvements will occur for the business owner in terms of revenue growth and stability, and if the results do not come, is it the client’s fault – is he a self-saboteur, thus absolving the consultant of responsibility? Or perhaps do we need to face ourselves squarely and ask if we’ve truly followed our own method.
And an even harder question to ask is whether it is possible that our deeply cherished method might not be effective – despite that we have espoused for years that is the greatest thing in the world that everyone should adopt – after all, look how successful we are, right? That is, is there a mismatch between reality and what we are espousing? If we explored that mismatch does it feel threatening to our identity? Let us continue with the five focusing steps for Lewis.
Having developed clarity, that the system is not Lewis’ business but rather his happiness or self-actualization or having a full life, what is/are the system constraint(s) for Lewis? What are they for any of us, assuming we are not impoverished and dealing with basic survival needs or deprived of basic freedoms? If we turn to Goldratt’s revised edition of The Choice (Goldratt, et al., 2010), in chapter 18, he describes a virtuous cycle for having a full life (p. 167):
"Now suppose that we use the intuition that we have in these areas [meaningful to us] to fuel logic. The more we succeed in thinking clearly the deeper our emotions in those areas become. The deeper the emotions, the stronger is the resulting intuition. The stronger the intuition, the higher the chances to successfully apply logic – the higher the chances to achieve good results. And since these results were achieved in our areas of interest, they are meaningful in our eyes. The more meaningful the results, the deeper are the emotions , and so on and on."
Goldratt speaks of a full life as having enough meaningful successes. Throughput in this system could be measured as meaningful goals (or increments thereof) reached per unit of time. But what makes a goal meaningful? It must either be a valued end in itself or truly be the means to a valued end. Thus if the achievement of espoused goals (like having a successful company) do not lead to the valued end (say of Acceptance) we can predict that the virtuous loop Goldratt describes will stall.
A key gap we should acknowledge is best exposed by asking the question: how many of us who have read The Choice (even several times) believe that they we are truly on a road to a full life? Didn’t Goldratt give us the understanding? Was it sufficient? What are we missing if we are not on a road to a full life? A constraint is defined in the TOCICO dictionary as "The factor which, if the organization had more of, could more fully exploit, or could more effectively subordinate to, would result in achieving more of the goal.” The focus of Goldratt’s life was understanding as the constraint to a full life – he set as his life’s goal to teach the world to think. However, imagine someone with plenty of understanding being afraid to act, for example, because there is still some uncertainty that acting will lead to the desired results, that he might fail and thus be not loved or accepted. Would adding more understanding break the stalemate and lead to more goal units? How many times have we known better but not done better? Frequently. In these cases it appears that understanding was not the system constraint. What then can be the candidate system constraint(s)?
Because a virtuous cycle is just that – a circle – a constraint can lie anywhere along that circle. Intuition is listed, but seems to be an amalgamation of understanding and emotion – it is the understanding that has dropped below conscious awareness, having been cemented as valid through enough instances of reality showing that the understanding lead to the expected actions. It can be a constraint if the environment changes and the counterintuitive is actually the right understanding of reality. Goldratt spoke of having enough stamina to overcome failure but did not give the procedure for that. Stamina is will or strength. What if there is not enough Will (stamina) and especially for Lewis, Love/Acceptance (emotion) to continue the virtuous cycle? Goldratt seems to be saying we just need to prime the pump and the continuous focus on Understanding will give you all the rest. He spent a great deal of time on the correct and incorrect assumptions related to understanding, but not much on addressing the problem of insufficient Will (stamina) or Love (emotion). If we take him at his word that he was not a genius (with the IQ tests from his youth to prove it), and having interacted with him it is clear he has a powerful will and deeply cared and loved those around him – what if Understanding for him was his personal constraint? He didn’t normally have a problem with Will/acting, and loved himself enough – so devoting the lion’s share of his attention to Understanding was the best use of his time. A person of sufficient Will/action and Love will need to focus on Understanding as his constraint. A person of sufficient Love and Understanding will have to focus on Will/action as his constraint. A person of sufficient Will/action and Understanding will have to focus on Love as his constraint. Lewis appears to be the latter.
Further to have a virtuous loop that is creating more and more of itself, energy/resources must be coming in from outside the system, and so there is a limited amount of energy to apply one’s will through action onto reality. Is energy/resources possibly the constraint?
There is a real danger, as in the case of Goldratt regretting introducing the term policy constraint, that we are using abstract or even abstract conceptual terms for our system constraints that are not clearly defined in terms of tangible objective reality. What is Understanding tangibly and concretely? Love? Will? Happiness? They are configurations of matter/energy inside of an individual (atoms, molecules, neural circuits, etc.). An individual is therefore reconfiguring matter/energy (mental models, emotions, will) inside himself in a feedback loop through applying Will/action on the outside world to affect matter/energy of both animate and inanimate objects outside of him. So there is a feedback loop between acting on reality outside, and the forming of models of action inside. The better our mental models reflect reality, the more effective we are in action – that is, at an ever increasing rate, matter/energy outside of oneself is working towards the goals of the matter/energy inside of oneself – whether it be through other people, processes, corporations, etc. The faster we can replace incorrect assumptions that cause mismatched expectations when we take actions in reality, the more we can exert our will on reality and make progress towards meaningful outer goals, and correct the internal conflicts that lead to negative emotions and make progress towards meaningful inner goals (like love, joy, peace, happiness).
An analysis of throughput and constraints for the individual in the microcosm of biochemistry, memory processes, nerve mylenation and the like may be a productive avenue for system improvement. However, the takeaway I’d like to propose is that the locus of focus for the reconfiguration of matter/energy needs to be either updating the mental, comforting the emotional, or acting to change the external physical reality. So Goldratt’s concept of management attention as the system constraint for businesses can be mapped into the personal realm by observing that individual attention is wasted or can even be damaging by focusing on the wrong thing. An intellectual has a danger of putting too much of his attention on understanding, a physical active person with large willpower will put inordinate attention on doing, and a compassionate giving person will put inordinate attention on feeling. In each case that place of strength is not their system constraint – one of the other two is. However, this general classification would suggest that the system constraint is fixed, when in reality we can observe that there are times when each of us has been blocked by insufficient Will, Love, or Understanding. That is, the system constraint may continually oscillate between these three and they interact with one another. It is possible for a system to have more than one constraint if there is more than one independent flow. It is not hard to conceive of the mental, emotional and physical aspects of ourselves having a certain level of independent function – as subsystems with potentially different goals.
So to wrap up step 1, let us say that individual attention is the system constraint for the individual. Let us continue to step 2: decide how to exploit the system’s constraint(s). Individual attention is wasted by focusing on thinking, feeling, or doing when one of the other two is more appropriate for advancing one’s goals. How can we pay more attention to the right one and less attention on the other two at the right time? First, we can use the rule of thumb of spending every otherwise idle moment focusing our attention where we have the least competence: Will, Love, or Understanding. Further we need a way of detecting when we need to shift our focus to another. That is, Step 5 can occur at any time (If in the previous steps a constraint has been broken Go back to step 1, but do not allow inertia to cause a system constraint.) Fortunately the signals are clear. If we are currently engaging our Will through action, and we are losing steam we need to switch focus to Understanding if we don’t know what to do next or are observing a mismatch between our expectations of the outcomes of actions and reality. If we are just spent and tired, then rest – but beware of switching to doing something else as a way to avoid confusion or threats to identity of examining our mental models – it leads to a cycle of bad multitasking and ineffective doing. If we are feeling a negative emotion, we need to first Love ourselves (or have someone love us) until the feeling subsides, and then seek Understanding, as bad feelings imply conflicts. If we have Understanding and are having trouble acting – if we have no other way of checking the outcome than acting, act – if you still have too much fear to act, Love yourself enough first. If you find yourself swamped by emotions, continually awash in the feelings and moods of others, you need a way of booting up your frontal lobes. If you can’t go directly to Understanding, exercise Will and do some physical exercise first.
Step 3: subordinate everything else to the above decisions, means that you must follow the rules for switching focus only when appropriate. Procedures need to be codified and practiced. Given habit patterns have to be learned and unlearned, we need to look creating physical cues in our environment to reinforce the desired behavior. Inertia can be our friend and our enemy. We need to overcome the inertia of focusing on our dominant mode, and develop inertia around switching to the appropriate mode for the circumstance. An open question is how to actively measure the right use of individual attention so that gaps in the effectiveness of our procedures can be detected and corrected.
Step 4: elevate the system’s constraint(s). We can have more individual attention where it matters by sleeping less, or modifying our careers to ones that require us to exercise more Will, Understanding, or Love as the case may require (taking a pay cut if necessary). We can consider spending on interventions to assist us to increase our Will, Understanding, or Love. Often we cannot see our own weaknesses when they are obvious to others.
Step 5: If in the previous steps a constraint has been broken Go back to step 1, but do not allow inertia to cause a system constraint. As an individual broadens his influence to reconfiguring matter/energy in larger and larger systems the usual constraints we are used to addressing – say in companies, and with other people come into play. That is, with multiple goal systems additional constraints might surface. Still addressing them comes down to focusing attention on one of the three for the individual. Certainly it is easy for inertia to set in if we get used to focusing on a particular modality and not switching.
Finally let us broach the question of how one is to run a business as professional CEO. In short, as a philosopher, a physician, a scientist, an engineer, and an actor. A philosopher: man know thyself. The physician: heal thyself, and first do no harm. The scientist: there are no failed experiments – only mismatched expectations between hypotheses and reality that goad us to updating our hypothesis with ever truer ones in the quest for understanding. An engineer: turn the scientists understanding into action to meet tangible goals (for shareholders, employees and customers). An actor: the show must go on (despite how you feel) – and the CEO role is a role you play – not your core identity. You must work on the system and not in the system and not be identified with it. As soon as you have identified with the system, and repeated success has you say, "I know”, you have allowed your mental models, your assumptions about reality to become fixed into your identity and examining them becomes a threat to that identity and to growth in Understanding, Will and Love.
Most importantly the CEO must not subordinate the needs of the business to his personal values or desires. It is obvious that a CEO is misusing company funds by paying for a corporate jet to fulfill his Romance value and fly off to see his mistress. Less obvious but potentially more destructive is the CEO who has a high Curiosity value who continually charters new projects for his business beyond available capacity and multi-tasks to avoid boredom at the expense of his company.
Is Lewis up to the challenge? Are any of us? Shall we try?
Appendix A takes a stab at addressing the shortage issue, sustaining the decisive competitive edge, and some other organizational issues.
In July 2011, I spent 8 days at the TOC Odyssey course run by Alan Barnard in San Jose, CA, and would not have had the insights in this case without having had similar breakthroughs in my own understanding of my personal happiness. I would like to particularly acknowledge Mario Gil Medrano, who attended the course and applied the Shoulders of Giants process with his teammates to the problem of why if TOC is so great hasn’t it produced greater results and experienced broader adoption. The insights he brought forth profoundly affected my thinking on this topic.
Goldratt, Eliyahu M. and Goldratt-Ashlag, Efrat. 2010. The Choice (revised edition). Great Barrington, MA : The North River Press Publishing Corporation, 2010.
Reiss, Steven. 2008. The Normal Personality: A New Way of Thinking About People. New York : Cambridge University Press, 2008.
—. 2002. Who am I? The 16 Basic Desires That Motivate Our Actions and Define Our Personalities. New York : Tarcher/Putnam, 2002.
Appendix A – improving the Lewis Foods subsystem.
The decisive competitive edge is being jeopardized by the shortage of a single SKU out of 4000 items on the supermarket shelves. Lewis cannot both be committed to perfect availability and not committed to perfect availability. Even if they had to FedEx Soup-97 from France before it ran out, or buy it at full retail from the shelves of their competitors, there is no way that the cost of that would have exceeded the 22% growth in sales for the chain. No mention was made of other shortages, so I’m assuming there weren’t any. This system, of having some items in a category of items-to-be-constantly-replenished and others not, seems inconsistent with a commitment to perfect availability. That there were no shortages from the not-constantly-replenished category other than Soup-97 suggests that they are carrying excess inventory of those items. I recommend all items be put on full replenishment. I may be missing some need of the system satisfied by having these two categories, but I would check the assumptions around that very carefully – whether it be warehouse space or supplier batch sizes.
The constraint of a supermarket is physical space – one can measure the throughput in $/cubic foot/day. There is a conflict inherent in having perfect availability of all things for all time with a limited shelf space. Can the supermarket that holds 4,000 items hold 20,000 items by having less shelf space per item and TOC replenishment? Is 20,000 items all any shopper would ever expect? If so, consider that as a direction to a solution.
If there are more possible items than can be held on the shelves, there needs to be a way to phase out low runners and phase in high runners to not waste the system constraint. How can this be done without damaging the decisive competitive edge? Further, the consumer goods strategy & tactics tree devotes considerable effort to delineate mechanisms for finding alternate suppliers for items lest there be shortages. If the guarantee of availability is made at a per-brand level, it is not possible to have alternate suppliers for the same brand. Suppliers can go out of business, and they can have production problems that are out of our control. The good news is that these events appear to be rare. If Lewis foods can pay an acceptable penalty to the customer for shortages, and keep these a rarity, a near-perfect availability can be promised with generous recompense that would satisfy the shoppers who had their hearts set on Soup-97 and other such products.
In considering elevating the system constraint, this might be done by expanding store sizes or adding a mail-order component to the business to handle the long-tail of low runners, with short turnaround times.
What is put on the shelves does matter, so Lewis should assign his central warehouse manager the task of defining a process (getting help from TOC consultants if necessary) for selecting and testing items for their throughput ($/cubic foot/day) and for abandoning or rolling out new foods to the chain. Lewis should be working on the business and not in it. He should be assuring his decisive competitive edge is running smoothly and preparing for subsequent ones.
The smooth functioning of Lewis Foods chain of command could be improved by investigating the Requisite Organization body of knowledge and creating a good Organizational S&T tree. In particular Lewis Foods should have stratum 3 store managers capable of defining and improving store processes and managing stratum 2 food section supervisors who in turn manage stratum 1 stock boys, assistants, tellers, baggers, etc. The role of central warehouse manager and COO should be stratum 4 – dealing with competing resources across stratum 3 systems, managing the stratum 3 store managers. The CEO should be functioning at stratum 5 augmenting as necessary his C-suite with stratum 4 Finance, IT, HR, and other roles required for his future expansion plans. If he cannot function at stratum 5, working on the system instead of in it, he should know his limitations and hire a professional CEO to take his business to the next level – for the good of himself as a shareholder and his employees and customers.