It's Not Luck (13 page)

“Maybe,” Jim Doughty says.

“No, not maybe. Definitely. Have you ever been in a situation where you felt that you were in a swimming pool filled with ping-pong balls and your job was to hold all of them under water? The feeling that you are spending almost all your time fighting fires?”

“Have I?” he laughs. “That’s the story of my life, especially in the past five years.”

“You see, in such situations, the mere fact that you know how to fight the local fires clearly indicates that you have intuition. Nevertheless, you don’t have even the beginning of the thread to help untie the knot.”

“I agree,” says Brandon, “but in don’t have the beginning of the thread, how can I write the relevant cloud?”

“Oh, sorry. I gave you the wrong impression. The cloud is not always the first step. You are supposed to use the cloud only after the existing situation is well organized in your mind.”

“What do you mean?”

“If you are constantly fire-fighting, you have the impression that you are surrounded by many, many problems.”

“I am,” says Jim.

“The Thinking Processes claim that these problems are not independent of each other, but there are strong links of cause and effect between them.”

“Yeah, I believed so too, when I went to Sunday school. What life has taught me since then is that problems are linked by excuses.”

I ignore his joke. “Until these cause and effect connections are established, we don’t have a clear enough picture of the situation. The first step, then, is to use a very systematic way to build what is called a Current Reality Tree, diagramming the cause and effect relationships that connect all the problems prevailing in a situation. Once you do this, you realize that you don’t have to deal with many problems because at the core there are always only one or two causes.”

“What you are telling us is that underlying any given situation there are actually only one or two core problems?” Brandon finds it hard to believe.

“Precisely. Only one or two core problems that are the cause for all the others. That’s why I don’t call the symptoms problems, I call them undesirable effects. They are unavoidable derivatives of the core problem.”

“This is important,” Brandon says thoughtfully. “If what you say is possible, which I doubt, then we have the key to direct our efforts toward the core reason, not to the symptoms.”

“You got it!” I smile. “And the Thinking Processes give us a step-by-step recipe of how to do it. You start with a list of undesirable effects, between five and ten of them. Then you follow the recipe, and you end up with a clear identification of the core problems. Moreover, it intensifies your intuition, which is vital for the next step, which is directing your attention to finding a solution to the core problem.”

“It sounds much too simple,” Jim says.

Why do I do it to myself? I repeat Jonah’s claims as if they are mine, but if I truly believed in them I would use his methods more frequently. For example, since the last board meeting I have had the feeling that I’m floundering, that I’m clutching at straws, and God knows how much I need a solid solution. But the truth is that I don’t believe enough in Jonah’s theory to give it a try now.

“Have you ever tried it yourself?” Brandon asks me. “I mean in situations that looked hopeless?”

I think about it for a while. As a plant manager I didn’t use Jonah’s methods. I used his conclusions. No wonder, at that time I was not aware of the Thinking Processes, the hard core of Jonah’s Theory Of Constraints. When I became a divisional manager, Jonah insisted that I learn his methods so I’d stop being dependent on him, and be able to help myself. Since then I’ve used sections of them a lot, mostly to empower my people, to solve conflicts and to build team spirit. But in at least three situations I used the Thinking Processes in full.

“Yes, I did,” I must admit, “more than once.”

“And?”

“And it worked . . . . Surprisingly well.” To justify to myself I add, “What you need is intuition about the subject and the will power to do the meticulous work.”

“How much time does it take?” Jim asks.

“It depends. Five hours, or so.”

“Five hours?” Jim laughs. “That’s less than the sleep that I’m losing in one night over such problems.”

He doesn’t understand the difficulty. It’s not the time. It’s bringing yourself to do it.

“Let’s try it,” Brandon Trumann suggests. “Why don’t we pick a subject we all have intuition about, and then you demonstrate it to us.”

I glance at my watch. It’s almost eleven o’clock. “I don’t think it’s practical. It’s late, and we have two important meetings tomorrow. And besides, what subject can we pick? I don’t think there is one subject that each of us has enough intuition about.”

“Yes, there is,” Trumann says. “You have a lot of experience in running companies and turning them around. We have a lot of experience in controlling companies. And if there is one thing that drives us all nuts, it is the subject of how to increase sales.”

“Yes,” Jim Doughty agrees. “And we don’t have to do it all tonight. We’ll just do the first step; provide you with a list of problems—undesirable effects, to use your terminology. Later you can show us how to connect them to each other, if it is at all possible.”

What can I do? I’m trapped. Brandon Trumann takes out his pen, searches for another napkin, settles on the doily under the chocolates, and announces his undesirable effect.

“ ‘Competition is fiercer than ever.’ I am sick and tired of hearing about it from every company I’m involved with.”

“Yes,” says Jim, “and add to that, ‘There is increasing market pressure to reduce prices.’ ”

“That’s a good one,” Brandon agrees. “No matter how high the demand, you still hear the same excuse. It’s reached the point that we, as external directors, are afraid to ask for more sales. They usually achieve it, but by lowering the prices.”

It’s interesting to see how it looks from their side of the table. “Keep on,” I say. “We need between five and ten undesirable effects.”

“What other excuses do we hear all the time?” Brandon is really into the game. “Ah, I’ve got one, listen: ‘In more and more cases the price that the market is willing to pay doesn’t leave enough margin.’ ”

“You call that an excuse?” I cannot hide my surprise.

“Definitely. I think that the real problem, if you can call it a problem, is that more than ever the market punishes suppliers that don’t perform according to its expectations.”

“Fine,” I say desperately. “Add it to the list.”

“I think that the real problem,” Jim says, “is lack of an overall vision. What I see is ad hoc solutions, fire-fighting, but not a sound overall strategy backed up by a reasonable, detailed, tactical plan.”

“Can I write a whole speech as an undesirable effect?” Brandon asks.

“Okay,” says Jim. “I’ll give it to you as concisely as possible. I think that the real problem is that managers are trying to run their companies by striving to achieve local optima.”

“Yes, that’s a good one.” Brandon is busy writing. “That’s what they are trying to do, and as a result, what we see as outside observers is that the various functions inside the companies are blaming each other for lack of performance. It is always the other departments’ fault.”

“Write that down as well,” I say. “This behavior is definitely a problem.”

“I’m writing,” says Brandon. “Alex, do you want to donate a problem from your perspective?”

“Okay. I’ll give you one, and you know the source of this problem very well. There is unprecedented pressure to take actions to increase sales.”

They laugh, and Jim says, “And judging from the results, not enough pressure.”

“But seriously,” Brandon continues, “we have neglected something that is really troubling. I’m talking about the need to launch new products at an unprecedented rate. Remember the time when products had life spans of more than ten years? Those days are gone. In more and more industries that I am involved in the lifetime of a product in the market is not more than three years, and in some it is already less than one year.”

Remembering what Bob Donovan said about his cosmetics products, I agree completely. “There is another problem because of it. This constant introduction of new products confuses and spoils the markets.”

When Brandon finishes writing he asks, “Jim, do you have anything to add on this topic?”

“You know I have,” Jim says. “You’ve heard my skepticism regarding the positive impact of new products. Many of them fail. Most don’t justify the investment in their development, but even when the new or improved product is successful, it almost always eats into the sales of the existing products. In fact, it’s not just with new products; the same holds true for new outlets.”

I wonder if I should tell him my opinion on what he just said when Brandon backs him up. “Just last week I heard a story you won’t believe. Unfortunately it was in a company we are heavily invested in. Six months ago they reported on a big success—they had signed a very large deal with a club chain. Last week I found out that the drop in sales we saw in the last quarter is due to the fact that the club sales substantially ate into the sales of the shops.”

Since exactly the same thing happened to us in UniCo recently, I prefer to close this issue as fast as possible. I say, “Why don’t you write ‘Most new outlets and most new or improved products eat into the sales of existing outlets or products.’ ”

“Good.”

I do a quick count of Brandon’s list. “Okay, we have ten. That will be enough.”

“No, no,” says Jim. “You are not going to get away with this list. This list puts too much blame on the market and too little on the companies. Let me add some more.”

Turning to Brandon he says, “Write that ‘a large percent of the existing sales force lacks sufficient sales skills.’ ”

Before he continues I interrupt, trying to somewhat balance the picture. “Salespeople are overloaded.” I make sure it gets listed.

Jim continues, “ ‘Production and distribution do not improve fast enough or significantly enough.’ ”

“Wait, wait,” says Brandon. “Let me catch up . . . . Okay, continue.”

“Engineering,” says Jim.

“What about them?” I ask, as if I don’t know.

They both smile at me and Brandon writes, “ ‘Engineering is unable to deliver new products fast enough.’ ”

“And reliably enough,” adds Jim.

“Okay, I have enough,” I say. “There’s really no need to go on.”

Jim smiles at me. “Let me close the list with one last problem that will remind you what we are talking about. Write it carefully,” he says to Brandon. “Companies don’t come up with sufficient innovative ideas in marketing.”

Jim Doughty waits for the reminder to sink in, and then says, “Alex, do you really believe you will be able to connect all the entries on this list with rigorous cause and effect relationships?”

“And remember,” Brandon Trumann says, “according to what you said, this recipe of yours is supposed to lead us to the identification of only one or two core problems that cause this list. It looks hopeless. Alex, maybe we should just drop the idea and forget about it? You have a lot of things to concentrate on this week.”

“No,” my pride forces me to refuse. “Let me have it.”

“Okay,” says Doughty, all business. “But before we return to the States we’d like to see what you’ve done with it.”

“Sure,” I say, feeling that I am once again facing an important test. Why didn’t I drop the whole thing when I had the chance?

13

We are in a meeting discussing the sale of Pressure-Steam. It’s a strange meeting. It’s not with a company (like the meeting yesterday), or with investors (like the meeting this morning). I have the distinct impression that we are talking with a wheeler-dealer. It makes me nervous.

“Okay,” Mr. Smooth-Talker says after a while, “let’s discuss the real issue, the assets of the company.” He opens the balance sheet.

“The real assets of the company are its people,” I can’t help myself from reminding this person of the obvious.

He looks at my card and then smiles at me. “Are you in charge of this company?”

“Yes, I am,” I firmly say.

“And your company is doing less than a quarter of a million dollars net profit on sales of, let’s see . . . ” He looks at his notes, “of 91.6 million dollars? Not too good. What I’m trying to figure out now is how much profit you do on net assets.”

Mr. Snake-Oil smiles at me, “If you can put a dollar value on your people, I’m afraid that it will reduce your return on net assets. Shall we proceed to determine the realistic value of the company’s assets?”

I like it less and less.

Mr. Snake looks again at my card. “Mister Rogo, on your balance sheet the company equipment is reported at a value of 7.21 million dollars. What is the real value?”

“What do you mean?” I’m puzzled and irritated. “At UniCo, we don’t play games with our books.”

“I know.” He gives me another look at his teeth. “I’m sure that your books are kept according to all the accounting regulations. But that is exactly the reason for my question. On your books,” he patiently explains, “the equipment is recorded at its purchase value minus the depreciation since the time of purchase.”