S&T Introduction to the Strategy and Tactic Tree

Transcription

1 S&T Introduction to the Strategy and Tactic Tree John Thompson Global Focus LLC Synopsis: The S&T, getting started. An introduction to constructing Strategy and Tactic Trees (S&T). Starting with the basics, a simplified approach demonstrating where to start, how to frame the subject and then generate the S&T. With acknowledgement to Dr Eli Goldratt - who had it right the first time, and the TOC community for stress testing the principles. 1

2 Index 1. Introduction: A brief history of the Thinking Process. 2. Rules for Astute Observation: Selecting the biggest contradiction or. Interrogation to reveal a set of assumptions. Reconstructing the Generic Cloud. Selecting Supporting Assumptions The Direction of A solution Strategy: What must be accomplished? How to accomplish the Strategy The Tactic. Acknowledging issues of Synchronization and Risk. 3. Building an S&T Start by Creating an S&T Framework - Example 2

3 PE PE Brief History of the TP: From complex to Inherent Simplicity Speculated Cause & Predicted Effect SC PE PE 1990s EC 3 Process D D B A C D D B D D A C 2000s x Biggest Contradiction and single Select the biggest * by far, pointing to the biggest Contradiction by far. Exposing the ACTION, that points to the most compromised NEED. 2010s Interrogating an Assumption x Select the biggest * by far pointing to the biggest Contradiction by far. Exposing the ACTION, that points out the most compromised NEED. Then:- PE PE SC PE SC PE SC Root Cause B C A Three Cloud Approach D D B C A Root Cause Neutralizing emotion & without bias: explore the contradiction. Challenge all conventional thinking. Pursue every revelation and insight. Neutralizing emotion & without bias: seek a major contradiction, interrogate or mine the first assumptions, expose successive layers of assumptions to the point where the intuitive direction of an obvious solution fulfills both B&C needs 100%, plus brings many more DE s. 3 days of CRT pain 1 day of CRT pain 3 hours of CRT pain 1 hour of contemplation 3

4 Recognizable Example: The Inventory Dilemma Financial Success Protect Sales SC A Forecast is equivalent to a Real Order? Increase Inventory High Inventory Levels Yet.. Out of Stock Conditions Exist Preserve Cash Decrease Inventory Result in.. Frequent Expediting Exists SC Speculated Cause Undesirable Effect 4

5 Inventory Dilemma (Observed) Effect Cause Effect (Predicted) Breaking away from Classification and Correlation (Thinking inside the box or Hypothesis: Danger of Confirmation bias selecting data that confirms the Hypothesis). Necessary Condition 1 3 Sufficient Causality High Inventory Levels Out of Stock Conditions Exist Frequent Expediting Exists Min/ Max System exists Order lead times are fixed Expect Bulk Purchase Policies PE PE PE 2 In order for to exist, then SC must exist Orders are placed to a Forecast SC If SC is real, then expect to see PE as a Consequence. By asking: WHY, Because..? Or What is the cause of the observed effect? 5

6 Contradictions / s: Some Examples For a Principle to be valid: it must remain valid at both the Micro and Macro Level. Micro Level Macro Level High Inventory Levels However. Modern Information Technology provides instant access and is available to all at any time. In a world of Connectivity, every access point is at the Center of the Universe. However.. **Global Supply Chain Lead Times are increasing relative to product Technical Obsolescence time lines. Out of Stock Conditions Exist Today,Technical Data Processing and Connectivity is instant, YET current Supply Chain Policies are not taking advantage of this capability. Globalization and 3rd Party Logistic companies have introduced further complexity, resulting in ever increasing Supply Chain delivery times. **Dr Eli Goldratt. 6

7 Competencies required to Move an Organization Raising Skills and Capability Astute Observation Comprehensive Analysis Communication, Synchronization, Risk Avoidance and Guidance Formal Method Contradiction Analysis Full Thinking Process Analysis Sell to Executives Sell to Managers Technical Selling Strategy & Tactics Execution and Activity Management Work Breakdown CCPM 7

8 Rules for Astute Observation: Exploiting an observed Central Contradiction Background: There is not always sufficient time for a full investigation of an important subject matter. However, exploring a contradiction central to the subject under investigation provides an opportunity to surface the right questions to raise assumptions. Astute Observation skills require some intuition and experience of the subject matter. Here are the steps: Step 1: Step 2: Step 3: Step 4: Step 5: Step 6: Step 7: Step 8: Clarify a verifiable contradiction observed in reality (conversation or written). Interrogate a series of verifiable assumptions under the exposed contradiction. Reconstruct the Conflict that supports the set of exposed assumptions. Conclusion: A concluding revelation that cannot be ignored. Strategy: What must be achieved in order to resolve the above Conclusion? Supporting Assumptions: List the Criteria to evaluate any acceptable Solution. Tactic: How to achieve the Strategy by meeting the Solution Criteria. Additional elements that cannot be ignored: Synchronization Issues = f(collaboration, Competence, Logistics). Potential Risk = f(unintended consequences, Potential side effects). 8

9 Rules for Astute Observation: Exploiting an observed Contradiction Step 1: Define a verifiable contradiction observed in reality (conversation or written). Contradiction: Even though we are holding mountains of inventory, yet our business is still missing orders due to out-of-stock situations. We cover for this by frequently expediting materials from suppliers, cross-shipping from our distribution centers. Predicting the correct level of stock to hold on any one item is a moving target. Step 2: Interrogate a series of verifiable assumptions under the exposed contradiction. Assumption #1: Our customers place firm orders and they claim to know their markets. Assumption #2: If customers know their markets then how come they place frequent urgent orders? Assumption #3: If customers frequently place urgent orders, are they really able to predict their future demand? Assumption #4: Customers must be placing orders based on some estimate, so they never had a fixed order for a large portion of the order they placed on to our system. This estimate, is essentially a guess - formally known as a Forecasting system. Assumption #5: Essentially for a large portion of the customers order, they guessed and as a result wasting our capacity and their own time and resources for a significant portion of the order. 9

10 Step 3: Reconstruct the Conflict that supports the set of exposed assumptions. EC Background: Any customers guess on their future demand has a direct impact on our capacity, under guessing causes expediting, overestimating wastes our capacity on producing items not required within a practical replenishment lead time, Assumption: Holding high inventory will cover potential missed sales. Protect Sales Increase Inventory Financial Success Preserve Working Capital Reduce Inventory Assumption: Lowering inventory will result in lost sales. Step 4: Conclusion: The issue that must be addressed. The cloud has exposed a deep seated dilemma: Guessing future demand is our only solution we need better forecasting capability? Yet communication technology is capable of providing instant consumption information from anywhere on the planet. Is inventory the only way to protect sales? Forecasting appears to be a practical impossibility, is there an alternative method? In a world of instant connectivity and processing capability why is it not possible to connect our supply to actual demand - rather than relying on an inventory placement method proven to distort the order quantity? 10

11 Conclusion Necessary Assumption(s) Strategy Supporting Assumptions (That can make the Strategy a reality) Tactic (s) Synchronization Considerations and Risk Aversion Generic Presentation Template What conditions exist that intensify the need for a Solution: Description of the new cloud D D conflict. Criteria of why a solution is inevitable. A reasoned, logical explanation behind A s right/need to exist at all. (A is the Common Objective in the anatomy of a Conflict) What is to be achieved: Describe A: the Common Objective in a Conflict Diagram, The Evaporating Cloud. Those hidden or mostly unrecognized assumptions that give significant logical viability of the Solution s capability to fulfill the Strategy these can include: A list of criteria for evaluating / measuring any acceptable solution. Key assumptions supporting any proposed Solution (Tactic) that fulfills the Strategy. Primary assumption(s) behind A to B and A to C (Those interchangeable assumptions with B and C). How to accomplish the Strategy: The direction of an acceptable Solution that breaks the Evaporating Cloud What must also be addressed: Synchronization issues = f(collaboration, Competence, Logistics). Potential emerging Risks = f(unintended consequences, potential side effects). Pg 11

12 Example #1 Conclusion Necessary Assumption(s) Strategy Objective Supporting Assumptions (That can make the Strategy a reality) Tactic (s) How Synchronization Considerations and Risk Aversion Over / Under Inventory Dilemma What conditions exist that intensify the need for a Solution: Forecasting orders has shown to be the cause and even amplify the order over/under estimate distortion. Holding sufficient inventory to cover for the fickle demand fluctuation has proven impossible. But knowing how much and where to hold inventory at any moment, is key to increasing sales? On-hand inventory gives 100% guaranteed Availability protection to Sales, even though demand has significant fluctuation. Global Connectivity and information processing capability supports real time Dynamic Inventory Buffering current technology is able to track and supply to the real Rate of Consumption, by SKU. Increased Inventory turns, result in releasing valuable Cash as a result of not over or under inventorying. Aggregated demand variation into a Central warehouse, results in reduced central variation a sea of calm in a surrounding storm. Centralized Inventory combined with IT automating real time Rates of Consumption, Dynamic Buffer Management, replenishes Inventory according to the simple *TOC-VMI rules. *Vendor Managed Inventory. Newer Global players are at a logistical and technology advantage they have a clean sheet from the outset, therefore newer policies, not a legacy of outdated policies or old software models. They are not yet fully aware of this advantage. Pg 12

13 Create an S&T Framework Each S&T level is a recognizable dilemma. The S&T level below deals with the predicted dilemma as a consequence of the Tactic above. 13

14 Preparation: Establish the S&T Framework Recognizing the Dilemma at Each Level in the S&T Step #1: Preparation Establish a framework for your S&T. Each level is a recognizable dilemma. The level below deals with the predicted dilemma as a consequence of the Tactic above. Each consecutive level repeats this sequence to complete the framework in preparation to construct the S&T. CEO Capacity Investment Dilemma Example Wait for Demand to increase before investing Vs. Invest ahead of demand? Incremental small wins Vs. Ambitious Goals VP Ops VP Sales VP Marketing / R&D Establish Ambitious Objective Selling Features Vs Selling Value Exploit Existing Mkts Vs. New Mkts. Sales Personnel Development Immediate Growth Responsibility Select the Right Offer Ready to go to New Mkts & Products? Maintain Margins Vs Transaction Velocity Future Growth Selecting the Right Markets Avoid Functional Silo Effect Be a Low Cost Vs. Full Service Provider Delivery Systems Architecture Balance Capacity Vs. Balance Flow Right Measurements Measurement & Motivation: Local Vs. Global incentives Poogi Elevating the Right Resource Elevate everywhere Vs. Elevate Critical Few Present Offers Vs Discover Need Find Real Market Needs Shotgun Marketing Vs Focus on a Sig. Few Markets Ensure Value Real Mkts Needs Discovery and Value Selling Vs Selling Features and Function 14

15 1.1 CEOs Investment Dilemma VP Ops VP Sales VP Marketing 2.0 Establish an Ambitious Objective 2.1 Current Sales Responsibility 2.4 Future Growth Responsibility Avoid the Functional Silo Effect Delivery Systems Architecture Reward & Measurement POOGI Elevating Capacity Strategy Tactics Strategy Tactics Strategy Tactics Strategy Tactics Strategy Tactics Strategy Tactics 15

16 CEOs Investment Dilemma 1.1 Necessary Assumption(s) Strategic Direction When undertaking major capital investments, committing significant capital too soon can increase financial risk by depleting cash flows in even the slightest market down turn. On the other hand, delaying an investment can mean the Company is unprepared for the inevitable market up turn. Investments always establish and support continued growth. Waiting for a market upturn before investing in capacity will ensure that competitors are in lock step with your strategic investment strategy. Supporting Assumptions A true DCE transcends a downturn. Ensuring the company has a *Decisive Competitive Edge (DCE) is significantly less riskier than relying on guessing the timing of the next market upturn, logically an upturn implies an inevitable future down turn. If your company has a relatively small share of a potential market, suffering during a down turn, is sufficient proof that creating a Decisive Competitive Edge is a necessity. Tactic (s) Proactive investments are timed ahead of the DCE* Sales Growth, and focus on the sequence of functions predicted to be the next blocker to continued growth. Synchronization Issues and Risk Aversion Predicted blockers of continued growth can be within internal departmental functions or external (existing markets or proposed new products or proposed new markets). Pg 16

17 Establish an Ambitious Goal 2.0 Necessary Assumption(s) Strategic Direction Supporting Assumptions Tactic (s) Synchronization Considerations and Risk Aversion Visionaries are willing to destabilize, and maybe even destroy the present to achieve a desired future state. On the other hand, Pragmatics prefer incremental change, and avoid tampering with the present system in fear of damaging the very system that built the organization to-date. Significant change will challenge the status quo, conversely undertaking small incremental improvements runs the risk of becoming a dinosaur in a rapidly evolving world. Leadership engages Pragmatics and Visionaries in an exercise to bridge the chasm between the Present Status and an Ambitious Future. Realistic Ambitious Goals force a revision of all current Practices. Existing standard operating procedures and sales tactics and marketing initiatives are placed under scrutiny, challenging the way current business is conducted. Carefully peeling the Layers of Security / Resistance ensures the group creates solid stepping stones across an otherwise very dangerous swamp. Using the Layers of Resistance: Company Executives engage in exercises to identify realistic sizable markets, determine the Value / ROI and neutralize potential Risks. The Management Team engages in exercises to Raise and Neutralize Implementation Obstacles and Execute plans to exploit those chosen Markets. Any hint of significant change means interdepartmental Collaboration is an immediate need. There are many with vested interest in maintaining the current reward and measurement system. Messages are easily distorted between the Executive Vision to the Final Supervisors Execution. Pg 17

18 Avoid the Functional Silo Effect Necessary Assumption(s) Strategic Direction VP s must ensure functional Success, they must provide Full Service, and also be the Lowest Cost Producer. Ensuring fully active resources will meet the Lowest Cost Producer requirement. However, in order to Maximize Flow and therefore Full Service, using resources only on direct orders, is regarded as costly underutilization. The Company capitalizes on a market reputation offering 100% Guaranteed Reliability and/or Availability. Only real Orders are run through production those having a true customer PO. Supporting Assumptions Tactic (s) Synchronization Considerations and Risk Aversion Resources are prohibited from running capacity on a Batched or Forecast order portion (a fictitious order). Costs other than to Vendors, are essentially all fixed. Running PO orders only will create spare capacity to be used on gaining market share and maintaining Reliability and Availability. Guaranteed Offers. All functions always ensure available capacity exceeds the average demand fluctuation and only run real orders against a disciplined schedule matched to real due dates. Number of Set ups will increase? Resources will pace themselves to fill unused time. Orders will still be pulled ahead. Pg 18

19 Security and Growth Tactically : Ensure Company Stability All capacities must be greater than the Fluctuation in Demand placed on them. Sales & Marketing is the Locomotive pulling the Company into the Future 19