S&T

Introduction to the
Strategy and Tactic Tree
John Thompson
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 demonstrating
where to start, how to frame the subject and then generate the S&T.

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

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 Index
1. 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

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 Brief History of the TP: From complex to Inherent Simplicity
Speculated Biggest
EC3 Interrogating an
Cause & 1990s 2000s Contradiction 2010s
Process Assumption
Predicted Effect and single UDE
UDE UDE UDE
UDE UDEx UDEx UDE
UDE UDE UDE
UDE UDE
UDE UDE
UDE UDE
UDE UDE UDE
UDE Select the “biggest” UDE*
by far pointing to the
PE Select the “biggest” UDE* biggest Contradiction by
D D’ D D’
PE by far, pointing to the far.
SC biggest Contradiction by far.
B C B C
Exposing the ACTION, that
UDE UDE A A Exposing the ACTION, that points out the most
points to the most compromised NEED.
PE PE compromised NEED. Then:-
D D’

B C
UDE SC Neutralizing emotion &
UDE A without bias: seek a major
PE Neutralizing emotion & contradiction , interrogate
PE Three Cloud Approach without bias: explore the or “mine the first
contradiction. assumptions, expose
SC
PE UDE successive layers of
D D’ Challenge all conventional assumptions to the point
PE
thinking. where the intuitive
B C ‘direction’ of an obvious
SC
A Pursue every revelation solution fulfills both B&C
and insight. needs 100%, plus brings
Root Cause Root Cause many more DE’s.

3 days of CRT pain 1 day of CRT pain 3 hours of CRT pain 1 hour of contemplation

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 Recognizable Example: The Inventory Dilemma

UDE
High
Inventory
Levels
Protect Increase
Sales Inventory Yet..
UDE
SC A Forecast is Out of Stock
Financial Conditions
equivalent to a Real
Success Exist
Order?

Preserve Decrease Result in..

UDE
Cash Inventory Frequent
Expediting
Exists
SC Speculated Cause
UDE Undesirable Effect

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 Inventory Dilemma
(Observed) Effect – Cause – Effect (Predicted)
1 2 3

Breaking away from Classification and Correlation

(Thinking inside the box or Hypothesis: Danger of Confirmation bias – selecting data that confirms the Hypothesis).

Necessary Condition 1 3 Sufficient Causality

High Out of Stock Frequent Min/ Max Order lead times Expect Bulk
Inventory Conditions Exist Expediting System exists are Purchase
Levels Exists fixed Policies
UDE UDE UDE PE PE PE

Orders are placed

In order for …… UDE If SC is real, then expect to see
to a Forecast
to exist ………, then SC must exist ………PE as a Consequence.
SC

By asking: WHY, Because…..?

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

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 Contradictions / UDEs: Some Examples
For a Principle to be valid: it must remain valid at both the Micro and Macro Level.

Micro Level Macro Level

Modern Information Technology provides instant access and is
UDE available to all at any time.
High
Inventory “In a world of Connectivity, every access
point is at the Center of the Universe”.
Levels
However……..

However……. **Global Supply Chain Lead Times are increasing

relative to product Technical Obsolescence time lines.
UDE
Out of Stock Today ,Technical Data Processing and Connectivity is “instant”,
YET current Supply Chain Policies are not taking advantage of
Conditions
this capability.
Exist
Globalization and 3rd Party Logistic companies have introduced
further complexity, resulting in ever increasing Supply Chain
delivery times.
**Dr Eli Goldratt.
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 Competencies required to Move an Organization

Raising Skills and Capability Formal Method

Contradiction
Astute Observation
Analysis

Full Thinking
Comprehensive Analysis
Process Analysis

Sell to Executives
Communication, Synchronization, Sell to Managers
Risk Avoidance and Guidance Technical Selling
Strategy & Tactics

Work Breakdown
Execution and Activity Management
CCPM

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 Rules for Astute Observation:
Background:
Exploiting an observed Central Contradiction
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).

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Rules for Astute Observation:
Exploiting an observed Contradiction
Step 1: Define a verifiable contradiction observed in reality (conversation or written).
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 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 and
resources for a significant portion of the order.

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

Assumption: Holding high inventory will cover potential missed sales.

Protect Sales Increase Inventory

Financial Success

Preserve
Reduce Inventory
Working Capital

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?

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 Generic Presentation Template ©Global Focus LLC

What conditions exist that intensify the need for a Solution:

Conclusion
• Description of the new cloud D – D’ conflict.
Necessary • Criteria of why a solution is inevitable.
Assumption(s) • 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
Strategy
Conflict Diagram, The Evaporating Cloud.

Those hidden or mostly unrecognized assumptions that give significant logical viability
Supporting of the Solution’s capability to fulfill the Strategy – these can include:
Assumptions
(That can make • A list of criteria for evaluating / measuring any acceptable solution.
the Strategy a • Key assumptions supporting any proposed Solution (Tactic) that fulfills the Strategy.
reality) • Primary assumption(s) behind A to B and A to C
(Those interchangeable assumptions with B and C).

How to accomplish the Strategy:

Tactic (s) The direction of an acceptable Solution that breaks the Evaporating Cloud

Synchronization What must also be addressed:

Considerations Synchronization issues = f(Collaboration, Competence, Logistics).
and Risk Potential emerging Risks = f(unintended consequences, potential side effects).
Aversion
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Example #1 Over / Under Inventory Dilemma ©Global Focus LLC

What conditions exist that intensify the need for a Solution:

Conclusion
Forecasting orders has shown to be the cause and even amplify the order over/under
Necessary estimate distortion. Holding sufficient inventory to cover for the fickle demand
Assumption(s) fluctuation has proven impossible. But knowing how much and where to hold inventory
at any moment, is key to increasing sales?
Strategy On-hand inventory gives 100% guaranteed Availability protection to Sales,
Objective even though demand has significant fluctuation.

Global Connectivity and information processing capability supports real time Dynamic
Supporting Inventory Buffering – current technology is able to track and supply to the real Rate of
Assumptions Consumption, by SKU.
(That can make
the Strategy a Increased Inventory turns, result in releasing valuable Cash as a result of not over or
reality) under inventorying.
Aggregated demand variation into a Central warehouse, results in reduced central
variation “a sea of calm in a surrounding storm”.

Centralized Inventory combined with IT automating real time Rates of

Tactic (s)
Consumption, Dynamic Buffer Management, replenishes Inventory
How
according to the simple *TOC-VMI rules. *Vendor Managed Inventory.
Synchronization Newer Global players are at a logistical and technology advantage – they have a clean
Considerations sheet from the outset, therefore newer policies, not a legacy of outdated policies or
and Risk old software models. They are not yet fully aware of this advantage.
Aversion
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 Create an
S&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.

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 Preparation: Establish the S&T Framework
Recognizing the Dilemma at Each Level in the S&T
Step #1: Preparation
Example
Establish a framework for your S&T. CEO
Each level is a recognizable dilemma. The level below
Capacity Wait for Demand to increase before
deals with the predicted dilemma as a consequence of Investment investing Vs. Invest ahead of demand?
the Tactic above. Each consecutive level repeats this Dilemma
sequence to complete the framework in preparation to
construct the S&T.

VP Ops VP Sales VP Marketing / R&D

Establish Immediate
Ready to go to
Incremental Exploit Existing Future
Ambitious Growth New Mkts & Growth
small “wins” Objective Mkts Vs.
Responsibility Products?
Vs. Ambitious New Mkts.
Goals
Maintain Margins
Vs Transaction Selecting the
Selling Features Sales Personnel Select the
Velocity Right Markets
Vs Selling Value Development Right Offer

Present Offers
Vs Ensure Value
Find Real
Discover Need Market Needs
“Real Mkts”
Avoid Delivery Poogi Needs
Right
Functional Systems Elevating the
Measurements
Silo Effect Architecture Right Resource
Shotgun Discovery and
Be a Low Cost Measurement & Marketing Vs Value Selling Vs
Balance Capacity Elevate everywhere Focus on a Sig. Selling Features
Vs. Motivation: Vs.
Vs. Balance Flow Few Markets and Function
Full Service Local Vs. Global Elevate Critical Few
Provider incentives

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 1.1 ©Global Focus LLC
CEOs Investment
Dilemma

VP Ops VP Sales VP Marketing

2.0
2.1 2.4
Establish an
Current Sales Future Growth
Ambitious
Responsibility Responsibility
Objective

2.0.0 2.0.2 2.0.3

2.0.1
Avoid the Delivery POOGI
Reward &
Functional Systems Elevating
Measurement
Silo Effect Architecture Capacity

2.0.0.0 2.0.0.1 2.0.0.2 2.0.0.3 2.0.0.4 2.0.0.5

Strategy Strategy Strategy Strategy Strategy Strategy
Tactics Tactics Tactics Tactics Tactics Tactics

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 CEOs Investment Dilemma 1.1 ©Global Focus LLC

When undertaking major capital investments, committing significant capital too soon can
Necessary increase financial risk by depleting cash flows in even the slightest market down turn.
Assumption(s) On the other hand, delaying an investment can mean the Company is unprepared for the
inevitable market up turn.

Strategic Investments always establish and support continued growth.

Direction

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
Supporting significantly less riskier than relying on guessing the timing of the next market upturn, logically an
Assumptions 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
Tactic (s) sequence of functions predicted to be the next “blocker” to continued growth.

Synchronization Predicted blockers of continued growth can be within internal departmental functions or
Issues and Risk external (existing markets or proposed new products or proposed new markets).
Aversion
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 Establish an Ambitious Goal 2.0 ©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
Necessary present system in fear of damaging the very system that built the organization to-date.
Assumption(s)
Significant change will challenge the status quo, conversely undertaking small incremental
improvements runs the risk of becoming a dinosaur in a rapidly evolving world.

Strategic Leadership engages Pragmatics and Visionaries in an exercise to bridge the chasm
Direction 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
Supporting under scrutiny, challenging the way current business is conducted.
Assumptions
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
Tactic (s) 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.

Synchronization There are many with vested interest in maintaining the current reward and measurement
Considerations system.
and Messages are easily distorted between the Executive Vision to the Final Supervisors Execution.
Risk Aversion
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 Avoid the Functional Silo Effect 2.0.0 ©Global Focus LLC

VP’s must ensure functional Success, they must provide Full Service, and also be the Lowest Cost
Producer.
Necessary
Assumption(s) 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.

Strategic The Company capitalizes on a market reputation offering

Direction 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
Supporting (a fictitious order).
Assumptions
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

Tactic (s) demand fluctuation and only run real orders against a disciplined
schedule matched to real due dates.
Synchronization Number of Set ups will increase?
Considerations Resources will pace themselves to fill unused time.
and Orders will still be pulled ahead.
Risk Aversion
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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

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