103 - The Truly Ambitious Hate False Progress

24-09-2023

entrepreneurship

If you have worked in operations (or taken an operations research course in business school), it is likely that you would’ve heard about the theory of constraints.

If you have paid attention in chemistry class in high school, it is likely that you already understand the same concept. You may know it by a different name—limiting reagents.

If you’re a technologist, you may have heard of reverse salients.

If nothing else, you would still know what a _bottleneck _is.

The core idea travels remarkably well across disciplines (supply chain, software testing, data analytics). The heart of it is about identifying what’s holding your project/reaction/operation back and then working to improve it so that it is no longer the factor limiting the throughput.

It is about unlocking suppressed value.

The dosa chef’s problem

In my neighborhood, there’s a man who makes dosas. Early evening, he comes with a handyman assistant and sets up a dosa station on a trolley. As part of his paraphernalia, he brings tangy sambhar and a pungent chutney. He also brings a bucket, literally, of dosa batter and an assortment of finely diced vegetables that he uses to make dosa fillings. He places a coal-stone stove on the trolley top and arranges all the other ingredients around it. The main thing left to do before he can serve his patrons, of whom there are many salivating kids and adults alike, is make the dosas. And dosas he makes as genre-busting as Schezwan and American Chopsuey dosas, cultural appropriation be damned.

During peak hours, the wait for a dosa can go up to twenty minutes, as a swelling pocket of hungry people spill onto the road. Twenty minutes when making a single dosa takes only a couple of minutes.

The bottleneck for our dosa chef is the coal-stone stove. Another stove would halve the wait time, two more even more so. But there’s nothing he should do—get another handyman, get people to self-serve, or fan the coals harder—that will improve this wait time, and by extension how much cash he takes home every night.

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Our dosa chef running his operations after learning about the theory of constraints

When doing things quickly can slow you down / When the fear of wasting limited resources can drive you to waste more resources

A leading jewelry chain is growing fast. They’re opening more stores year on year across the country. Supporting this scale of expansion is a Projects team that readies new rental properties as stores.

In the past, management nudged the Projects team to deliver stores quicker and the team responded by continually optimizing processes. Their efforts showed in a reduction of the wait time from around 50 days to 30 days or less. But that improvement didn’t translate into results. New stores didn’t open any sooner. In fact, the quicker the Projects teams worked, the fatter the sitting inventory of spanking new stores they contributed to. Just like our dosa chef, management at the jewelry firm had to wait before the stores could be operational. Why? Because they didn’t have enough trained staff to man the stores. They had run up against their constraint: hiring and training time.

It took HR 45 days to ready the staff. 30 days to hire, 15 more days to train. No matter how quickly the Projects team worked and readied the store (electricals, tiling, design, signage, etc.), the store couldn’t be opened because trained staff weren’t available. There wasn’t a way to work around this problem unless it became quicker to hire and train staff who could run a new store.

Until that happened, the jewelry chain folks had to wait patiently for the training to be complete. Just as the dosa chef chatted up the waiting customers while the batter crisped up.

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A representation of what to do when faced with a system constraint (Pic credit: XXX)

When the hardest part of the problem can break your future

The customers got restless waiting for the dosas. The newly done-up stores ate up rentals waiting for staff. In both cases, what was lost was time (and money with it). But the outcome was never in jeopardy. Making a dosa or opening a store is not a breakthrough achievement. The dosas would eventually be done, so would the stores. Only late, not never.

Constraints, when left unattended, lead to slower progress. But there’s another scenario where they not just stall a project but render it impossible. This happens with truly breakthrough ideas.

On May 30, Elisabeth Holmes, founder of blood-testing firm Theranos, checked into a federal prison to serve her 11 years.

Theranos was founded on a revolutionary premise—that it was possible to run more than 200 diagnostic tests from a finger prick of blood. Holmes even named their proprietary testing machine _Edison _after the luminary who said he did not not fail but found 10,000 ways that didn't work.

Theranos didn't work. They couldn’t solve the hardest part of the problem. They couldn’t train the monkey. But they stayed in business and our collective spotlight by showing false progress. They built pedestal after pedestal.

What’s this monkeys and pedestals?

‘Let’s say you’re trying to teach a monkey how to recite Shakespeare while on a pedestal,’ says Astro Teller who heads X, Alphabet’s moonshot factory. ‘How should you allocate your time and money between training the monkey and building the pedestal?’

‘The right answer,’ Teller continues, ‘of course, is to spend zero time thinking about the pedestal. But I bet at least a couple of people will rush off and start building a really great pedestal first. Why? Because at some point the boss is going to pop by and ask for a status update — and you want to be able to show off something other than a long list of reasons why teaching a monkey to talk is really, really hard.’

Not many businesses thankfully share Theranos’ at-all-costs philosophy to succeed, but very many fall prey to the everyday allure of quick wins. That allure is what Teller’s talking about.

Not many are adept at training monkeys. That adds up because training a monkey means doing something that has not been done before. But too many firms are great at building pedestals. Why don’t the rest cut their losses and save themselves a future?

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Pic credit: Astro Teller on Medium

Why do groups with smart members continue to build pedestals?

‘Low hanging fruit is,’ writes decision strategist Annie Duke, ‘by definition, pedestal building, offering the illusion of progress rather than any real ground gained toward reaching a goal. You _already _know you can build a pedestal, or buy one on Amazon, or turn a milk crate upside down. Building pedestals means you are spending time, money, and other resources on things that get you no closer to figuring out whether you can achieve what it is you are striving for.’

Once we signed off a week-long quarterly strategic meeting of our business unit by agreeing to tackle the quick wins first. Get the quick wins and build some momentum, some confidence in the team was the view.

Duke seems to spot this kind of behavior from a mile. And she reckons it is frighteningly common.

‘Making matters worse, if you tackle the low hanging fruit first, it takes you longer to figure out whether you can solve for the reverse salient, whether you can train the monkey. And the longer it takes you to figure that out, the longer you pursue a project that may not be worthwhile. Meanwhile, you’re pouring resources into the project, cementing a commitment that becomes harder to abandon and easier to justify continuing.’

Work on the fringes of the main problem, keep showing progress, while putting off a hard look at the core challenge until you’ve put too much on the line to walk away, and you have the cycle of doom.

‘That is why building pedestals before you tackle the monkey is so dangerous. Every dollar or minute that you spend addressing the low hanging fruit creates friction to quitting when you discover that you can’t actually resolve the bottlenecks.’

One way to look at low-hanging fruits is by measuring the return on the investment, or ROI. Because ROI is a ratio, you can strip down the denominator (smaller and smaller tasks) to show a healthy ROI. But a quick win, as Duke shows, is simply another pedestal.

The counter to quick-win thinking is opportunity-cost thinking. What’s the moonshot you’re giving up by eating up resources for pedestals for a losing cause? Time and resources are limited. Every extra minute wasted on pedestal-building is time snatched from the truly big endeavors, or from something else worthwhile.

This is what Teller warns his teams about.

Foghorn was an X project to take seawater and turn it into carbon-neutral liquid fuel. Building the core technology for the alchemy was simple enough compared to the challenge of making the alchemy cost-competitive. The innovation team that worked on it had a pre-commitment pact: ‘If they couldn’t prove it was possible within 5 years, we wouldn’t continue to invest in the project.’

In the end, like most projects at X, the team decided to kill their own project and free up resources for more likely moonshots. Acknowledging the nature of monkey-training is in many ways learning to embrace failure. Only the truly ambitious can afford it.

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