Comments on _The Choice_ by Goldratt, chapter 17

I read and took notes on chapter 17 of _The Choice (Revised Edition)_ by Goldratt.

CHAPTER 17: Comfort Zones (Continued)

So this chapter's purpose was about figuring out why the company didn't implement the Goldratt's ideas to the last link in the supply chain, retail. Goldratt explains that we shouldn't blame the failure on psycho babble nonsense (my paraphrase) and that instead we should blame it on a failure to create mutual understanding on the question of the efficacy of the proposed solution. 

This is similar to something I recall about TCS: when a child doesn't act in ways his parent expects, the parent should not just assume that the child is acting out of malice or whatever and instead the parent should recognize that there is a disagreement between parent and child (a mismatch in understanding) that should be addressed instead of ignored -- success is not going to be had while those mismatches in understanding are ignored.

Our company's management gained their experience in a very different environment in which the following conditions exist: Two percent profit on sales is considered a disaster. All sales are derived from mainly two product lines. A gross margin of 30 percent is regarded as a lousy margin. The constraint is never display space (and rarely is it cash). But the biggest difference, a difference that makes extrapolation from one environment to the other almost irrelevant, is that our company's management never developed the intuition of working under the whip of the sales/shelf measurement.

I like the idea of creating an intuition for a performance metric (sales/shelf). I recall something similar from a video where Richard Feynman suggests to his friend that they spend time thinking about a particular physics concept in order to create an intuition about it.

Let's first start with what should not be done. Do not compromise. Unfortunately, when facing strong resistance—resistance that translates into active paralysis—the natural reaction of the people who push for the change is to compromise. This is a grave mistake. Since the tendency to compromise is so strong, and since people tend to confuse compromising with taking prudent actions to convey a message, let's elaborate on this.

A compromise would be to sweeten the offer to the retailers by augmenting the offer with some rebates or gifts. It is a compromise because it accepts the erroneous starting point that the replenishment offer, on its own merit, is not attractive enough to retail.

A compromise would be to employ the same system used for implementing the replenishment offer in the previous links rather than putting in the time, analysis and efforts necessary to tailor the procedures to the specifics of the retail environment. It is a compromise because it accepts the erroneous starting point that the replenishment offer will not yield big enough benefits, big enough to dwarf the efforts needed for modifying the procedures. *

A compromise would be to stay with the existing frequency of delivery to retail. It is a compromise because it accepts the erroneous starting point that the retailer will not see the replenishment offer as attractive enough to make some additional efforts from his side. It is a compromise because it accepts the erroneous starting point that the replenishment offer will not yield big enough benefits to justify increasing transportation costs. It is a particularly bad compromise because it compromises on the very essence of the solution; it squashes the resulting large increase in sales.

Now I hope what should not be done is somewhat clearer. Never compromise on the starting point. Never accept the erroneous cause and effect as a basis for modifications or lack thereof.

So the above paragraphs are about what not to do. The below is about what to do instead. 

I tried. For close to two hours I gave the explanation of the reality of retail. I explained the governing cause and effect, the role of sales/shelf. At the end, I even gave one reference from a similar environment. I suggested a test, laid out its details, and highlighted what results should trigger which conclusions and actions.

And it worked. Within two weeks, and without any further encouragement from our side, the company had already launched a wide—much too wide—test.

I learned a lot from this case; I learned in what situations it is imperative to insist on tests. To my delight, I didn't have to change my opinion about people. People's behavior is not arbitrary. Open-minded people will not necessarily agree with me, not when my arguments don't make sense to them. But open-minded people do listen, and if I explain (and when it is important), they are willing to invest in reevaluating their cause-and-effect connections.