It Is Never Too Early to Use the Theory of Constraints at Your Benefit
A few weeks ago, I published an article about when to start using the theory of constraints when you are launching a new project (you can find this article on medium or Linkedin). I was explaining why it is important to choose your strategic constraint as early as possible. It should be part of your design process of your business.
Some comments from friends and colleagues made me think that the article was missing something. This article is about this missing part: the growth period.
A Strategic Constraint Is Your Safety Belt
Choosing a strategic constraint has long-term consequences. It decides how you manage your business in the long run. It is useful to select it from the beginning as you are setting up your constraint when you invest and design your process.
Actually, you design your process around the strategic constraint.
If you don’t choose your strategic constraint and subordinate your investment to this decision, someone or something shall decide for you and it shall be much more difficult to manage your operations.
This constraint drives your business after the initial growth period. It means that unless you choose to elevate that strategic constraint, this is the limit that you fix yourself on the size of your business.
Of course, it is not a definite limitation, it is your next landing. It is a good choice to design high enough to allow for sufficient growth before to stabilize, but it is also good not to plan it too high and take the risk of exhaustion before you can reach that level of activity.
You should see each level as a stage of consolidation. If you selected the strategic constraint during the design of your endeavor, then you already know how you shall manage this consolidation and you can really benefit of the stabilization to plan for the next growth.
Tactical Restraints
But the strategic constraint is not the only constraint that you will face. It is even doubtful that the strategic constraint will be the first constraint you face. Your initial constraint probably will be different from your strategic constraints.
- If you are beginning an operation from scratch, then your initial constraint most probably is your sales.
- If you are lucky and already have secured sales before to start, then it may be your staff capacity.
Anyway, as the strategic constraints is something difficult to elevate, any other constraint should be easier to manage and elevate. Let’s call them tactical restraints, as they have a much shorter impact on your business.
Your tactical restraints will probably cycle between sales, capital requirement and staff capacity. During a phase of growth, you are not looking at exploiting the constraint, you are directly looking at elevating it, in a fast succession of leap forward.
There is no stability in this succession of leaps, you are only trying to overcome quickly and successively every obstacle that is between you and the level of operations that you designed at the origin, the one determined by your strategic constraint.
Your capability to reach the level of operation that you designed at the origin fast enough is critical for the survival of your business. There are only two states of equilibrium: the starting point and, the designed operation. You cannot stop in the middle of the way. If you do, your situation should become unstable, and you may spiral down back to step one, the starting point.
Develop Your Viable Vision
Very few companies can sustain a long period of high growth. High and quick growth puts a toll on the organization and is exhausting.
- Fast growth is a succession of leaps from one level of activity to the next one, cycling through the tactical restraints.
- Steady growth needs to be slow and is a succession of stabilized states.
Each period spent at a stable level of operation must be a period of consolidation of the business to start the next period of growth confidently.
The term “Viable Vision” appeared some time ago in the theory of constraints as a way of visualizing the path for an existing company to reach in four years a profit equal to their present sales.
The term Viable Vision is usually not used for a business inception, but the concept applies wonderfully to this situation.
You should develop your own viable vision for your business from the beginning during the planning time before to start to work on growing it. It doesn’t need to cover four years, it needs to cover whatever the necessary time to go from the inception of activity to the desired state determined by the strategic constraint is. You must have the vision of this journey, like an athlete visualizes his performance before starting.
That viable vision shall encompass
- The ultimate goal: define your ultimate goal whatever it may be, and realize if you need to elevate your strategic constraint a few times to reach it, or if your initial design is enough.
- The strategic constraint: that constraint which is difficult to elevate and that is too expensive to acquire extra capacity at the beginning. This constraint defines the maximum level of operation of your business at a given moment;
- The tactical restraints: the constraints that are cycling while your business is growing and your tactics to overcome them during this growth period. The tactical constraints define the level of operation of your business at a given moment;
- The intermediary steps: choose the levels where you shall consolidate your business, elevate your strategic constraint and prepare the next growth leap, but also choose the intermediary steps that you intend to take while cycling through the tactical constraints. This allows you to measure your progress toward your ultimate goal.
If you have enough knowledge of the Logical Thinking Process, you may even build a Strategy and Tactics Tree and a Prerequisite Tree with this information to help communicate this viable vision to your teams.
Conclusion
The life of a growing business is a succession of growth period (unstable and riskier period) and consolidation periods. The definition of these periods are tightly linked with the choice of your strategic constraint.
During the growth period, the strategic constraint is not playing its role of drum because it has extra capacity at that time, but you face a continuous cycle through a set of tactical restraints. You manage these tactical restraints by elevating them, not by exploiting them to keep the momentum of your growth intact.
Your compass shall be the Viable Vision that you build when you design the operations of your business. It gives you the way forward and allows you never losing the ultimate goal from sight.
Applying all those provisions are not a guarantee of success, but they give you more chances and control. They allow a less stressful management of your startup and give you the necessary focus.
Didier Varlot is a project manager with 35 years experience in project recovery and 25 years of application of the Theory of Constraints. He uses a mix of Theory of Constraints, Agile and Open organization (the TAO Way) to improve operations in every industry. He is one of the authors in the Virtuous Circle: Thinking logical and has his own publication on medium.
You can follow him also on Twitter.
