Quick wins should only ever be the first steps of a longer-term strategy.
If they are not, you risk "local optimisation at the expense of the whole".
What is "local optimisation at the expense of the whole"?
Imagine you have a production line with 5 stations.
At each station, a worker performs the next step in a series of activities to make a finished product.
Now imagine that you spend money to train the worker in the middle. After the training, they can work twice as fast as they could before.
But they'd spend half their time waiting for the worker in the step before them.
The investment in training would have been wasted.
Now imagine, instead, that you provide the training to the first worker. After training, they too can work twice as fast. But now you get a build-up of products that have had step one completed, but that the worker at step isn't ready to work on.
Before you know it, your bill for raw materials has increased, your factory is overflowing with unfinished work, and your sales revenues have not increased at all.
The investment in training has made things worse!
These are both examples of local optimisation at the expense of the whole.
To prevent local optimisation at the expense of the whole, you must look at the whole production line together, and not just at the individual steps in isolation.
The same is true of business strategy. It must look at the whole organisation, and not just isolate parts of it.
The Theory of Constraints
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Identify the constraint: Determine what's impeding progress and how to correct it.
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Exploit the constraint: Use existing resources to quickly improve the constraint's throughput.
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Subordinate everything to the constraint: Ensure all activities support the constraint's needs.
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Elevate the constraint: Take actions to eliminate the constraint.
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Repeat: Repeat the cycle to improve new constraints that arise.
The theory of constraints was introduced by Eliyahu M. Goldratt in his 1984 book titled The Goal.
Most businesses are not as simple as this 5 step production line. But it is still important to know what the constraints to performance are, and to focus your efforts there and not elsewhere.
One of the challenges for business strategy is to identify the bottlenecks or barriers to your aspirations and to focus your attention there.
In this way, business strategy help you to identify the smallest amount of effort that will make the most difference to your business.
The Pareto Principle
We sometimes call this the Pareto Principle. The Pareto Principle is also known as the 80:20 rule.
It shows us that:
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80% of problems are caused by 20% of causesand similarly
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80% of the benefits derive from 20% of the effort.
The exact numbers are not important. You can consider 80% to mean "most" and 20% to mean "a few" or "a small amount".
It's been shown to be true in a wide variety of situations.
In Business Strategy
Two authors have more recently explored this idea in the field of business strategy.
- Peter Compo calls the constraint "the bottleneck" in his book The Emergent Approach to Strategy.
- Richard Rumelt calls it "the crux" in his book The Crux.