s&t introduction to the strategy and tactic tree introduction using contradiction analysis...

S&TIntroduction to the

Strategy and Tactic TreeJohn ThompsonGlobal Focus LLC

With acknowledgement to Dr Eli Goldratt - who had it right the first time, and the TOC community for stress testing the principles.

v5/2010 1©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 demonstratingwhere to start, how to frame the subject and then generate the S&T.

Index1. Introduction: A brief history of the Thinking Process.

2. Rules for Astute Observation:

– Selecting the biggest contradiction or UDE.

– 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


Interrogating an Assumption

UDEx UDE UDE

UDE UDE

Select the “biggest” UDE* by far pointing to the biggest Contradiction by far.

Exposing the ACTION, that points out the most compromised NEED. Then:-

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.

1 hour of contemplation

Biggest Contradiction and single UDE

UDEx UDEUDE

UDEUDE

Select the “biggest” UDE* by far, pointing to the biggest Contradiction by far.

Exposing the ACTION, thatpoints to the most compromised NEED.

Neutralizing emotion & without bias: explore the contradiction.

Challenge all conventional thinking.

Pursue every revelation and insight.

3 hours of CRT pain

2010sEC3

Process

UDEUDE

UDE

UDEUDE

D D’

B C

A

D D’

B C

A

D D’

B C

A

D D’

B C

A

Root Cause

1 day of CRT pain

Three Cloud Approach

2000s1990s

UDEUDE

UDE

UDEUDE

SC

SC

SC

SC

PEPE

PEPE

PEPE

PEPE

Root Cause

UDEUDE

UDEUDE

UDE

3 days of CRT pain

Brief History of the TP: From complex to Inherent SimplicitySpeculated

Cause & Predicted Effect


Recognizable Example: The Inventory Dilemma

Protect Sales

Preserve Cash

Financial Success

Increase Inventory

Decrease Inventory


HighInventory

Levels

Out of Stock Conditions

Exist

Frequent Expediting

Exists

A Forecast is equivalent to a Real

Order?

Yet..

Result in..

SC

UDE

UDE

UDE

SC

UDE

Speculated Cause

Undesirable Effect

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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).

By asking: WHY, Because…..?Or

“What is the ‘cause’ of the observed effect?”

2 31

Out of StockConditions Exist

Order lead times are

fixed

Expect Bulk PurchasePolicies

UDE

Orders are placed to a Forecast

Frequent Expediting

Exists

Min/ Max System exists

1

2

3Necessary Condition Sufficient CausalityHigh

InventoryLevels

In order for …… UDEto exist ………, then SC must exist

If SC is real, then expect to see ………PE as a Consequence.

SC

PEUDE PE PEUDE

Contradictions / UDEs: Some Examples


HighInventory

Levels

Out of Stock Conditions

Exist

However…….

UDE

UDE

Micro Level Macro Level

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.

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.

For a Principle to be valid: it must remain valid at both the Micro and Macro Level.

Competencies required to Move an Organization

Astute Observation

Comprehensive Analysis

Communication, Synchronization, Risk Avoidance and Guidance

Execution and Activity Management

Contradiction Analysis

Full Thinking Process Analysis

Sell to Executives Sell to ManagersTechnical Selling

Strategy & Tactics

Work BreakdownCCPM

Raising Skills and Capability Formal Method


Rules for Astute Observation:Exploiting an observed Central ContradictionBackground:

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: Clarify a verifiable contradiction observed in reality (conversation or written).

Step 2: Interrogate a series of verifiable assumptions under the exposed contradiction.

Step 3: Reconstruct the Conflict that supports the set of exposed assumptions.

Step 4: Conclusion: A concluding revelation that cannot be ignored.

Step 5: Strategy: What must be achieved in order to resolve the above Conclusion?

Step 6: Supporting Assumptions: List the Criteria to evaluate any acceptable Solution.

Step 7: Tactic: How to achieve the Strategy by meeting the Solution Criteria.

Step 8: Additional elements that cannot be ignored:Synchronization Issues = f(Collaboration, Competence, Logistics).Potential Risk = f(unintended consequences, Potential side effects).

8©Global Focus LLCv5/2010

Rules for Astute Observation:Exploiting an observed Contradiction

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 1: Define a verifiable contradiction observed in reality (conversation or written).

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 andresources for a significant portion of the order.


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, overestimatingwastes our capacity on producing items not required within a practical replenishment lead time,

Financial Success

Reduce Inventory

Increase Inventory

Assumption: Holding high inventory will cover potential missed sales.

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?


Protect Sales

Preserve Working Capital

Generic Presentation Template

Conclusion

Necessary Assumption(s)

Strategy

Supporting Assumptions

(That can make the Strategy a

reality)

Tactic (s)

Synchronization Considerations

and Risk Aversion

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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).

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Example #1 Over / Under Inventory Dilemma

Conclusion


StrategyObjective


(That can make the Strategy a

reality)

Tactic (s)How


and Risk Aversion

©Global Focus LLC


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”.

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.

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.

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Create anS&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.


Capacity Investment

Dilemma

Establish Ambitious Objective

Avoid Functional Silo Effect

Right Measurements

Delivery Systems

Architecture

PoogiElevating the

Right Resource

Immediate Growth

Responsibility

Sales Personnel Development

Select the Right Offer

Future Growth

Selecting the Right Markets

Find Real Market Needs

Ensure Value “Real Mkts”

Needs

Preparation: Establish the S&T Framework

Step #1: PreparationEstablish 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.

Wait for Demand to increase before investing Vs. Invest ahead of demand?

Incremental small “wins”

Vs. Ambitious Goals

Be a Low Cost Vs.

Full Service Provider

Balance Capacity Vs. Balance Flow

Elevate everywhere Vs.

Elevate Critical Few

Selling Features Vs Selling Value

Present Offers Vs

Discover Need

Ready to go to New Mkts &

Products?

Maintain Margins Vs Transaction

Velocity

Shotgun Marketing Vs

Focus on a Sig. Few Markets

Discovery and Value Selling Vs Selling Features

and Function

Measurement & Motivation:

Local Vs. Global incentives

Exploit Existing Mkts Vs.

New Mkts.

Example

VP Ops VP Sales VP Marketing / R&D

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Recognizing the Dilemma at Each Level in the S&T

CEO

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1.1CEOs Investment

Dilemma

2.0.0Avoid the Functional Silo Effect

2.1Current Sales Responsibility

2.4Future Growth Responsibility

2.0Establish an Ambitious Objective

2.0.1Reward &

Measurement

2.0.2Delivery Systems

Architecture

2.0.3POOGI

Elevating Capacity

2.0.0.0Strategy Tactics




15

©Global Focus LLC



VP Ops VP Sales VP Marketing

v5/2010

CEOs Investment Dilemma 1.1


Strategic Direction


Tactic (s)

Synchronization Issues and Risk

Aversion

©Global Focus LLC


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.

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.

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.

Predicted blockers of continued growth can be within internal departmental functions or external (existing markets or proposed new products or proposed new markets).

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Establish an Ambitious Goal 2.0


Strategic Direction


Tactic (s)


and Risk Aversion

©Global Focus LLC


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.

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Avoid the Functional Silo Effect 2.0.0


Strategic Direction

Tactic (s)


and Risk Aversion

©Global Focus LLC



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.

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.

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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

s&t introduction to the strategy and tactic tree introduction using contradiction analysis...

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