Hanging Fire

HANGING FIRE

Achieving Predictable Results in an Uncertain World

A Business Novel

Jeff Cox, Dale Houle, and Hugh Cole

HANGING FIRE

Copyright © 2014 The Avraham Y. Goldratt Institute, A Limited Partnership; and Jeff Cox

All Rights Reserved

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The Authors very much appreciate your honesty. Thank you.

Introduction

Some 30 years ago, Dr. Eli Goldratt and Jeff Cox teamed together to write a business novel. Entitled The Goal, the book became a breakthrough success and continues to be a bestseller in both the world of business and as a textbook in universities around the globe. The book was set in a manufacturing environment and it introduced to its readers the application of something called the Theory of Constraints (TOC).

The intent of The Goal was to show the approach of scientific thinking when applied to the world of organizations. However, many interpreted the book to be only applicable to manufacturing. Some even interpreted it to apply only in the realm of repetitive manufacturing.

Now, with Hanging Fire, Jeff Cox has once again teamed with the Goldratt Institute to show how the Theory of Constraints has evolved and advanced over time. The intent here is to present the application of some fundamental principles and scientific thinking to the performance of organizations, but in a context that goes beyond manufacturing. Above all, and similar to The Goal, this book is focused on achieving business success in a world of uncertainty.

Hanging Fire postulates a project-based business with multiple projects underway at any given time. But the same underlying principles presented in this project business can be applied to any environment where the combination of dependencies, interdependencies and variability leads to less-than-desirable outcomes. The major theme in Hanging Fire is creating reliable speed to market – developing new products and services expeditiously, getting them to the market rapidly, and have them generating revenue as soon as possible.

If you work in the world of projects, you and your organization face many risks. There are always unknowns in projects. These unknowns consist of those we can foresee (We know we may have trouble because this has never been tried.) But there are also the unknown unknowns, the surprises we encounter as the project progresses (This is not what we were expecting! What are we going to do now?)

Interwoven with the unknowns is variability. Going into a new project, we don’t always know exactly how much time a task is going to require to be successfully completed. Will it be one day or two days? One day or ten days? Three weeks or five? Six months or a year? And so on.

Just as daunting, we often do not know in advance how many iterations a task will require to fully contend with the unknown unknowns. That is, how many times will we have to work through a task until we get to the desired results? Will the report be accepted after the first draft, or will we have to write and review the report again and again until it is in acceptable form?

Then there are the issues of cost, time, and deliverables. Are we within budget? Will we finish on time? Can we accomplish the full scope of what this project is supposed to provide?

Of course, there is often pressure to get to market as rapidly as possible. This need for speed is imperative. There are times, particularly in product development projects, when the stakes are huge. If one company successfully brings a product to market ahead of others, it can, for a period of time, dominate the market category. The winner of the race to market can set the standard by which customers judge all other contenders. Those arriving in the marketplace second and all other late arrivals may find themselves forever playing catch-up, even if they deliver a technically superior product. This is why speed to market is so vital; there is so much to be won or lost in the race to be first and best.

Combine all those elements – the unknowns; the variability; the concerns over budget, time, and project scope; the race to get to market first – and we can begin to understand the pressures of project management. But so far, we are only talking about the challenges of one project!

In most project-based organizations, there are multiple projects going on simultaneously – a portfolio of projects that must be managed not only individually, but collectively. Typically, there are resources that must be shared between projects and across portfolios. The talent pool of available personnel is only so deep. What happens to one project when a needed resource is tied up working on another project – or perhaps three or four projects are waiting for the sole expert's attention? What happens when things don't go as planned? Difficulties in one project can and often do cascade, causing delays and difficulties in other projects.

Yet another challenge is the interpersonal dynamics that exist with the different personalities of key players. There can be rivalries between groups. Individual project managers as well as managers at higher levels may feel compelled to vie with each other or pull strings to get what they need – which in turn can amplify the turmoil. These are the realities of project portfolio management.

Complicating matters even more – often unknowingly – are the common coping mechanisms. Asked to estimate a finish time for specific task, for instance, the person responsible will add a safety factor before committing to a delivery date. When this occurs on task after task throughout the duration of the project, it accumulates into a lot of time that may or may not actually be needed. Yet, in a conventional project management setting, how often is the completed task handed off early as opposed to being handed in on time or perhaps even late? This certainly interferes with speed to market.

The difficulties of keeping even single projects on track, on budget, and within the planned time frame can be challenging enough. But to manage a portfolio of projects and still keep all of them on track, on budget, and yet beat competitors to the marketplace, that is the ultimate challenge – and, at one level, this is what Hanging Fire reveals.

The primary theme here is how to achieve business success in a world of uncertainty. Some businesses are production-based, as in The Goal, whereas some tend to be more project-based, as shown in this book. And some are only involved with procurement and re-distribution to the market. However, two things are certain in each of these:

(1) Actions produce Outcomes, and

(2) Dependencies, Interdependencies and Variability impact the Outcomes.

Success comes from knowing what actions will lead to the intended results, why those actions will produce those results, and what needs to be put in place to sustain those results.

Dale Houle and Hugh Cole

AGI - Goldratt Institute

May 2014

Authors' Note

HANGING FIRE is a business book written as a novel. Characters, companies, products, and events depicted herein are fictional inventions of imagination or are used in a fictional context, and are not intentionally drawn from actual counterparts. Likewise, the food product development procedures and movie production process may not reflect what would actually occur.

Part I

The Hanging Fire List

Chapter 1

The traffic lights in Mapleville were poorly timed and waits were unnecessarily long. When red finally changed to green, the Jaguar sedan lunged forward through the intersection and took the highway into the countryside. Driving the Jag, with some impatience, was Roland Dorn – Rolly – a man with white hair, but a face that still somehow suggested youth despite his sixty-two years of age. Rolly was the founder and president of Sizzle Food Development. Two passengers, both senior managers at Sizzle, were riding with him, but not pleasantly. Indeed, the two were engaged in an intense discussion.

"My question is, have you established even the concept for this . . . this great new thing?" asked the one in the front passenger seat, a woman in her late thirties – brown hair with blond highlights, face of a model – Diana Prideaux.

Actually, we are evaluating a number of concepts that might be viable, said the man sitting in the back seat, a man named Conrad Zimmer, generally referred to as Zimmy. And as you know, these things take time. We have to get it right.

Understood, said Diana, "but are you even close to nailing down one of them for this fantastic new, yummy whatever that is going to be revolutionary? Because my project managers and I have real work to do for real clients."

Zimmy, who was very thin and rather pale, often gave the impression of being in constant motion even when he was sitting still. He all but sputtered as he started to reply.

Well! . . . I mean! . . . What are you saying, Diana? That my group isn't doing real work? I mean – !

Excuse me, Rolly interrupted. Diana, I'm not exactly sure what you're trying to say, but I think you are over-stepping. This is a matter that is between Zimmy and me.

"Rolly, thank you, but, said Zimmy, I feel I need to make my point, which is that it's not just a matter of coming up with a concept, it's a matter of finding the right concept. And the process to achieve that can take a while. So that is why we are still collecting data, still screening, still experimenting, still testing feasibility – "

Meanwhile, do you understand that my project managers and I are the ones who are paying the bills for this company? Diana asked. We have obligations to actual clients who pay us actual money to develop food products for them, and we are the ones bringing in the profits –

"You are not the only profit-maker in this company," Zimmy shot back.

I'm am not taking anything away from SoLo Mayo, your one big hit so far –

"Our big hit," said Zimmy and Rolly almost in unison.

Right, right, I'm sorry! said Diana. "But my point, Zimmy, is that your search for the holy grail of new food offerings or whatever is interfering with my ability to do the client work that right now accounts for the vast majority of hard revenues. I mean, who's to say this new thing, whatever it is, will ever become the big hit that SoLo has become?"

That is why we're screening, Diana! That is why we're being rigorous! Why we're being as creative as we can be!

Okay, all right, enough! said Rolly.

He was braking the big Jag to make a turn, though there was in fact no road to turn onto, just a short strip of newly poured gravel leading right to the middle of a grassy field. For decades, the field had been a cow pasture. But that was now changing, as evidenced by the tents that the caterers had erected and the throngs of people who had arrived.

Look, said Rolly, as he brought the Jag to a stop in the center of the pasture, I am glad we got this out in the open. We will continue this discussion later. But right now, let's get our game faces on. Let's be pleasant! Let's smile! This is a significant day in the history of the company – the ground-breaking for our new corporate campus! A year from now, we will be walking into the state-of-the-art food product development facility of our dreams!

If we still have any clients by then, muttered Diana, who was quite upset.

"That was completely uncalled for!" Rolly told her.

Sorry, Diana said.

Rolly then shut off the Jag's engine, and the three simultaneously got out of the huge sedan, smiling as instructed to greet the guests attending the ceremony.

•

Now let me understand, a woman from the chamber of commerce was asking Rolly, what does your company do?

Sizzle these days is really two businesses, Rolly explained. In the first, which is our original business, we create or improve food products for other companies on a project basis, which they then manufacture and market to the public. We are like their research and development arm. In other words, if you had a small to medium size food company and you did not have your own test kitchen or packaging designers or a sophisticated market research capability, you could come to us – for a fee of course – and we would develop a new product for you to sell. Or if you had a problem with one of your products, you could come to Sizzle and our food scientists would figure out what was going wrong and what to do to fix it.

Oh, I see.

But we also have a new, growth business called Sizzle Brands in which we are developing and marketing our own food products – such as SoLo Mayo!

He gestured toward the nearby prominent display of SoLo, the fabulous ultra-low-calorie, zero-fat, smooth, creamy, rich-tasting fake mayonnaise that supermarkets were having trouble keeping stocked on their shelves.

You make SoLo Mayo? the woman asked.

Yes – well, no, Sizzle does not physically make SoLo. We use what is known as a copacker to manufacture the actual product. But it is our brand, our first smash hit, the first of what we hope will be many, and we market it through distributors and food brokers and so on all across North America. And we will soon be expanding our marketing into Europe, Asia, Latin America – to mayonnaise lovers everywhere!

Very interesting.

By the way, all of the hors d'oeuvres we're serving today were made by our very talented test-kitchen staff just down the road at our current company headquarters in, shall we say, 'downtown' Mapleville. And I think they used SoLo Mayo in just about all of them.

Well, I can't wait to try some, the woman said, just as one of the caterers came by offering a platter of finger sandwiches.

•

The spring day was sunny and clear, though cool. The hired caterers had erected tents – open-air canopies – in case of rain, but there was little worry of that.

Beneath the canopy of one of the tents was an easel with an artist's rendering of the new building. This showed that it would be no standard, boring office box. The design featured a number of visually interesting elements, chief among them the three towers that would rise at varying heights above the main structure. These would have pyramidal roofs and narrow windows at the top, suggesting, as the architect himself put it, a medieval walled town in Tuscany.

As the architect was explaining this at some length to a throng of attendees, Diana Prideaux stood nearby, glass of punch in hand.

And you see, Spencer went on, at the rear of the building, the southern exposure, will be a courtyard with a lovely garden with fresh herbs – thyme, rosemary, dill, and so on –

Diana was well acquainted with these details. Her attention began to wander.

To the far side of the easel were two men. One was a heavy, dancing-bear of a man in a dark suit, white shirt and silk tie. This one Diana knew. He was Nick Martel, the general contractor. She had met him in one of the meetings with the architect. The other man was wearing a wrinkled blue blazer over a red and white Ohio State University polo shirt, blue jeans, and scuffed brown work boots. He was tall, lean, muscular, had longish sandy hair and blue eyes. There was a handsome yet rawboned look about him. But he was not young. He was in his thirties or early forties, Diana guessed. He struck her as being an aging kid, getting older, yet reluctant to surrender his youth.

He was glancing about here and there and seemed a bit uncomfortable and out of place. And then, Diana realized with a tiny shock, those blue eyes had fixed on her legs. His casual gaze traveled upwards, and when he reached her face, her large brown eyes met his blues. Caught looking, he smiled, gave a respectful little nod to her, then glanced away.

. . . And of course, the architect was saying, the grounds surrounding the building will be an edible landscape of fruit trees, berry bushes, and so on, with meandering walkways and patios . . .

Diana discreetly stepped away from the throng and approached the two men. The one in the suit, Nick, greeted her, saying, Hey! Diana! How's it going?

Fine, thanks. Say, I just was wondering if you had a construction schedule yet? When will you actually start?

This afternoon, said Nick.

Really? Today?

Assuming the bulldozer shows up, said the man in the blazer.

Have you met my brother? Nick asked. This is Greg, my kid brother and business partner. Greg, this is Diana . . . I'm sorry, Di, I can't remember how to pronounce your last name.

"Pree-doh. It's French. Pleased to meet you," Diana said, extending her hand to Greg.

My brother handles most of the construction supervision, Nick explained. He deals with our crews, the subs – subcontractors, that is – and actually gets his fingernails dirty sometimes.

Yes, sometimes I do, said Greg. Nick handles the banks, the customers, the architects, the suppliers, the lawyers – while I do all the real work.

Diana smiled and asked, So when is this bulldozer coming?

Around one o'clock, said Nick.

Really? I hope the caterers can clean up and get the tents down in time.

Listen, once I get that 'dozer revved up, I'll take care of the tents, Greg kidded.

You'll be driving the bulldozer? Diana asked.

I do whatever Nick tells me.

He's a licensed operating engineer, said Nick, not to mention jack of all trades.

Well, you must be a handy guy to have around, she said to Greg. But I can't believe you're starting today.

We just want to get as early a start as we can, said Nick.

And I'm sure you want to get the check that's issued once construction begins, Diana said, having looked over the contract.

Well, that too, Nick admitted. But you know, the sooner we start the sooner we finish.

And with that bonus incentive if you finish on time, said Diana, not to mention the penalties if you don't . . .

Not to worry, Nick assured her. We'll be done on time. Won't we, Greg?

Greg's expression showed he was less confident. Nick reached into his pocket for a roll of antacid tablets, and popped one into his mouth just as Rolly Dorn appeared at Diana's shoulder.

How's my favorite general contractor doing today? Rolly asked Nick. We're just waiting for the governor to arrive, then we'll get started.

Just then the sound of gravel crunching under tires came to their ears, and they looked toward the highway to see a big black limousine with a police escort driving into the cow pasture.

Here comes the gov, Greg said. Then to Diana he added, Nice to meet you.

Same here, she said. I'm sure we'll bump into each other again as the project moves forward.

I hope so.

•

The governor of Ohio, of whom Rolly Dorn was a longstanding acquaintance and supporter, stepped out of the state limo to a smattering of applause. After a suitable amount of hobnobbing, Rolly Dorn gave a five-minute speech. He then introduced the governor, who launched into a ten-minute speech about the vital role of small business and entrepreneurship in rebuilding the Ohio economy. But after ten minutes, he was just hitting his oral stride, so the speech ran on to fifteen minutes, then twenty, and by then he was speaking extemporaneously about anything that came to mind.

Afterwards, photographs were taken as a line of people in business attire pressed the tips of the new shovels into the earth and overturned small clods of dirt. Everyone got a complimentary jar of SoLo Mayo, and in the news photo taken with the governor, Rolly Dorn was holding the enormous value-size jar of SoLo. Then as the governor's limo headed back to Columbus and the others got into their cars, Rolly again sought out Nick Martel to have a few words with him.

Diana tells me you're starting construction today, he said to Nick.

Yep. In fact, said Nick, here comes the equipment.

Coming up the highway was a dump truck towing a trailer with a big yellow Caterpillar bulldozer on it.

Okay, great, Rolly said, "because the clock is now running. A year from now, our lease will expire on the current building, and the new building must be ready for us to move in. Besides that, we're bursting at the seams in the building where we are now, and we need the extra space – not to mention the new equipment and everything else – as soon as possible and with no disruption to our business. That's why I had the lawyers put in those bonus and penalty clauses."

Understood. It'll be ready, Nick said.

Fine. I'll authorize the check to be cut and we'll get it to you, said Rolly.

They shook hands.

As Rolly walked away, Greg quietly said to his brother, You must have rocks in your head to sign a contract with those penalty clauses.

Hey, there's a big, fat bonus in there too!

Yeah, well, the best laid plans go astray, Nick. I mean, look at the Keller building. We're supposed to be finished with that and we're not! We've got months of work still to do on that!

Shhhh! Not so loud!

My point is, in all our years in construction, how often do we finish a major project on time, in budget, with all the bells and whistles installed?

I'm a gamblin' man, Nick said with a shrug. I think we can do it.

•

Now, said Rolly as he piloted the Jaguar back to town, where were we?

Neither Zimmy nor Diana spoke up.

Well, as I recall, Rolly prompted, Diana was expressing some reservations about our ability to retain our client base. Something about not having any clients, was it? I don't understand why you would make such a comment, Diana.

All right, I am sorry. I apologize, she said. Obviously, it was an ill-considered remark made in a moment of frustration.

Let's get specific, said Rolly. What exactly is making you frustrated?

I am frustrated because my project managers and I are having trouble meeting commitments to clients.

And why do think that is? What is the cause?

I can tell you one thing, said Diana, it seems like every time my managers try to schedule something in the Test Kitchen, Sizzle Brands already has it booked solid. And every time we go to the third floor to check on something we need from Marketing Services, everybody up there is plodding along on new graphics for SoLo Mayo or demographics for this razzle-dazzle concept that doesn't even have a name yet!

Now wait a minute, Zimmy said. "First of all we do have a project code name for the next offering; we're calling it 'Tango.' But we're keeping it quiet for as long as we can. And secondly, if my group books a resource, we need that resource! You're implying that if we're in the Test Kitchen or whatever, we're wasting time, but that's just not the case!"

All right, hold on, Rolly said to Zimmy. "I want to get Diana's point of view first. Diana, is that it? It's all because Zimmy overbooks the Test Kitchen and uses Marketing Services, which by the way he is entitled to use?"

Feeling cornered, Diana sat in silence for a moment. Rolly waited.

Look, Diana said, it just feels like we are constantly getting in each other's way. Like we're on top of each other. Everything seems to happen in slow motion, and yet at the same time, everybody is scrambling to get everything done on time.

Hurry up and wait, Zimmy mumbled from the back seat.

Yes, there I agree with you, she said. Hurry up and wait – or hurry up and switch to the next thing, because it's due and we're late! Why can't we finish on time? Why can't we consistently stay within budget? Why do we have to farm out things that we have the capability to do in-house? Why? Well, one reason is because Sizzle Brands always seems to get preference!

Zimmy in his agitation, was by now leaning forward, between the two front seats.

"Rolly, you gave me a mission, he said. That mission is to build Sizzle Brands, to create and market great new products of our own and to build these into major franchises so that we can take charge of our own future, and vastly multiply the success of the company. Now, Diana also has a mission, the original mission of the company, which is to perform food product development services for other companies. And I respect her mission. But she has her mission; I have mine. I have to push as hard as I possibly can to get the resources I need to accomplish my mission."

That doesn't mean you should get everything that you want at the expense of everybody else! she countered.

"I need everything that I ask for, Diana!"

Not immediately!

Yes, immediately. Or I wouldn't be asking for it when I do, said Zimmy.

Okay, okay, okay! said Rolly. Time out!

The argument