Exposing bottlenecks: the key to building a great strategy

Exposing bottlenecks: the key to building a great strategy

Finding the key bottleneck to achieving your aspiration brings focus to both strategy design and execution. Root cause analysis techniques can be powerful tools to expose the hidden bottleneck.

by Mark Blackwell, Arkaro (mark@arkaro.com)

Analysis Paralysis. One of the great risks in strategy development is an attempt to analyse everything to optimise everything in the organisation. Organisational memories of external consultants turning the organisation upside down in the hunt for “the magic elixir” may haunt old timers.  A variation is to focus on improving what can be measured easily, quickly leading to complex excel sheets trying to predict what could happen with each product at each customer. No wonder people complain about the process and dream about returning to execution and “getting things done”! 

Fortunately, Albert Einstein suggested a different approach.

“If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions”

Einstein believed the quality of the solution you generate is in direct proportion to your ability to identify the problem you hope to solve.

In the Emergent Approach bottlenecks link strategy and overall aspirations (bottlenecks also link tactics from lower level aspirations). The concept of identifying the bottleneck was first popularised in Goldratt’s “The Goal” leading to the development of the Theory of Constraints[1]

Another core idea from this work is the pointless activity of trying to maximise efficiency in all parts of the system, the “local optima”.  This approach can be taken to drive “quick wins” and motivate the team, but it can be counter-productive to improving the system (i.e. the business) as a whole. Benchmarking parts of a business should not therefore lead to trying to improve all functions and areas showing a gap to top quartile. Focus should be given to identifying the true bottleneck to your aspirations.

So how do you find the bottleneck?

The is no magic formula, but there are some tools to help. First recognise that the bottleneck exists and waits to be discovered. Also understand that it may be hidden and not immediately obvious. Start with the triad of aspiration, bottlenecks and strategies and write down thoughts for each of the three, working from right to left. Ask what is getting in the way of achieving the objective. Such a team brain-storming approach can reveal non-obvious ideas as each brings a different perspective.

bottlenecks and strategy development

If ideas for bottlenecks do not emerge, one technique is to ask each of the team to write down on post it notes their 3 most irritating problems. Once complete ask them to post on a board and try to group, or affinitise, common themes. External facilitation may help here to organise ideas visually.

What may appear to be differing frustrations may be different sides of the same coin. Operations may talk about frequent changes in customer orders, whilst sales may refer to products never being delivered on time. Driving a discussion on the root causes of these frustrations may reveal a common problem. Sakichi Toyoda’s 5 Whys Technique can be extremely useful in driving understanding of the root cause of a problem to expose the bottleneck.

5 Whys for Root Cause Analysis
5 Whys for Root Cause Analysis

Similarly, the Fishbone (or Ishikawa) diagram can be a great tool for a structured hunt for bottlenecks. The following fishbone diagram template below may be used to help expose bottlenecks in your business.

Fishbone diagram template - Ishikawa for exposing bottlenecks
Fishbone diagram template

The SWOT tool, exposing weaknesses and threats, can also help the diagnosis, as can Porter’s 5 Forces Analysis.

SWOT Analysis to identify potential bottlenecks
SWOT Analysis to identify potential bottlenecks
Porter’s 5 Force’s Analysis
Porter’s 5 Force’s Analysis

But take care! Such tools may make local inefficiencies more visible. Avoid the temptation to focus on “quick wins” to motivate the organisation, instead, keep focus on hunting down the real system bottleneck if you can.

… and to help avoid “analysis paralysis” start with a discussion on the “strategies < bottlenecks < aspirations”.

So how do you judge the real bottleneck?

3 Guidelines can help us. Just like the 5 Disqualifiers, the guidelines prevent the identification of the wrong bottleneck rather than secure the identification of the correct bottleneck. 

Guidelines for finding bottlenecks in strategy design

Let’s discuss each in a little more detail.

1. The bottleneck should not be extremely easy or impossibly hard to bust

This is the Goldilocks test.  If the bottleneck is too easy to bust, then likely it would have been resolved already and  the true bottleneck remains in hiding. Nevertheless, it must be possible to bust the bottleneck. If it is too hard, and by that no strategy can be identified to bust the bottleneck, then it is possible that the aspiration is not realistic. There are two approaches to resolve. One is to negotiate a more realistic aspiration, likely by breaking it down into smaller parts. The other, if possible is to breakdown the bottleneck to something that is possible, bust it, and thereby expose the next system constraint required a strategy to resolve.

Aspiration: Secure market leadership in markets with an addressable value of greater than USD 1 billion.

Bottleneck: Insufficient resources in key target markets as we are obliged to be present in North America, Latin America, Europe, and Asia Pacific

 If the bottleneck were judged to be impossible to bust the following approaches could be used;

  1. The bottleneck could be bust by removing the obligation to be present in all regions. If the policy is adequately relaxed, the bottleneck is bust exposing the next bottleneck to achieving the aspiration. If the policy cannot be changed the then regional presence obligation becomes an external constraint.
  2. In this case, the aspiration could be challenged. Might the bottleneck be breakable if the goal was to be number one or two in the target markets?

2. The bottleneck must be what is in the way of achieving aspirations, not just a different expression of the aspiration

A bottleneck that repeats the aspiration in different words adds no new information and therefore cannot give a target for the strategy. Here are a few examples:

Aspiration: Upgrade the capability of the sales force.

Likely incorrect bottleneck: Salespeople are not meeting their yearly objectives.

Not meeting yearly objectives is just another symptom of poor sales force capability, but it does not tell us why they are not meeting objects.

Some possible bottlenecks could be;

  • Sales training programmes are not suitable for current market conditions
  • The process to target key accounts is flawed.
  • The incentive programme generates the wrong types of behaviours.
  • Recruiting has brought in the wrong people.
  • Leadership is demoralising the sales team

All these bottlenecks provide additional information, and therefore potential strategies. Clearly, further diagnosis is required to select the primary bottleneck.

3. The bottleneck must address the full aspiration

This has a strong parallel with the strategy disqualifier on “Is Anything Excluded?”

Aspiration: Grow sales in Europe by 15%

Likely incorrect bottleneck:  Insufficient sales representation in Portugal

Whilst it is possible that this is the primary bottleneck, it is not probable as it does not impact most of the region. Yes it may be true that there is inadequate sales coverage in Portugal, but by busting this bottleneck the impact may not be sufficient to achieve the aspiration. It also has elements of guideline 1. Relative to the aspiration is an easy bottleneck to bust.

In truth this example is deceptive by its simplicity. In practice the third guideline can be the hardest to satisfy given the challenge of understanding the whole system.

Imagine a team working through a strategy activity. Each shall have his or her own perspective of the system which is likely to be incomplete…. And with the passage of time opinions may become deeply entrenched limiting openness. Bias may not be limited to the parts of the system where individuals have most understanding. Ever heard a comment like “You guys should worry about fixing the local warehouse stocking policy – it worked wonders for us”?. In these situations, expert facilitation may help direct the team to the system bottleneck where possible directing opinion to data analysis with tools such as Pareto if required. 

Of course, politics and self-interest may occasionally call for bringing in a high-level management perspective.  And sometimes things just need to be tried out with experiments.

Another thought. Those familiar with Pete Senge’s “Beer Game” from the Fifth Discipline will know how a time-lag creates human misunderstanding on where the bottleneck may lie.

Recalling Einstein, neither rush this phase nor jump to conclusions too quickly. Understanding the problem by identifying the bottleneck goes a long way to solving the problem of building the right strategy

…. And do not worry if you still cannot choose the right bottleneck. In the next article we will describe how working the Strategy Attractiveness Matrix (SAM) will get you there.

The Strategy Alternative Matrix (SAM) template in the Emergent Approach to Strategy
The Strategy Alternative Matrix (SAM) template in the Emergent Approach to Strategy

By working with your team in Agile-like sprints Mark Blackwell helps your team create strategy alternatives, choose the best strategy and establish a dashboard of metrics and triggers to drive execution.

Instead of the “do it for you” approach, Arkaro takes the “do it with you” method ensuring the team has ownership of the strategy but guided by experienced expertise and external objectivity to secure a quality outcome.

The efficient agile methodology allows Arkaro to support as a trusted partner while the strategy evolves and is implemented. Please contact Mark to learn more, meanwhile follow Strategy Insights blog posts on Arkaro’s LinkedIn page for regular updates on The Emergent Approach to Strategy™

[1] As described in “What is the Definition of Strategy” article definitions are often confusing and contradictory. Goldratt’s definitions of Strategy as the answer for “What for?” and Tactic as the answer for “How?” are not consistent with the same terms in the Emergent Approach to Strategy™

Dr. Peter Compo author of The Emergent Approach to Strategy
Dr. Peter Compo

Dr. Peter Compo, author of the Emergent Approach to Strategy™ —scientist, engineer, and corporate veteran—spent twenty-five years at E.I. DuPont in a wide range of positions in R&D, product management, supply chain leadership, and business management—including director of DuPont Display Materials and Director of Corporate Integrated Business Management. Coupled with a background in music, Dr. Compo began to see the same adaptive patterns of innovation and successful change in all these areas. He also saw the need for a new approach to strategy and spent seven years integrating the science of complex adaptive systems with strategy theory and practice. The Emergent Approach to Strategy™ is the book he wished he had had at the start of his career.

Mark Blackwell - independent consultant Arkaro
Mark Blackwell

Mark Blackwell founded Arkaro in 2016 following a career in organisations both large and small, covering a wide range of industries including animal health, specialty chemicals, advanced materials, food and feed ingredients.  13 years at DuPont included 8 years of consulting  roles across multiple businesses.  Expertise included Six Sigma, Integrated Business Planning, Product Line Management and Business Productivity. At this time Mark worked with Pete as the ideas forming Emergent Approach to Strategy™ were developed.  More recently Mark has provided feedback on the book prior to publication and is the first affiliated partner to deliver the Emergent Approach to  Strategy™