Book Notes - It's Not Luck

It’s Not Luck by Eliyahu Goldratt [1994]

Summary:
To develop unrefusable offers in marketing:
1. Understand the Undesirable effects of your customers and link them together in a logical Current Reality Tree.
2. From the Current Reality Tree understand the Core Problem, the Core Problem is normally expressed as a conflict in a Conflict Resolution Diagram.
3. Once you have identified the conflict look for injections to break the conflict and then use these injections to construct a Future Reality Tree.
4. To bring your future reality tree down to earth insert Negative Branch reservations which you can trim so that the solution is workable.
5. Next construct a Transition Tree to plan how you will move from the current to future states.
6. If required use a Prerequisites Tree to understand what specific steps are required to reach a specific goal.
7. Implement the above.

General Notes:
Most companies understand their UDE’s but not their Core Problems, if you can understand the Core Problem in you or your clients businesses you can offer real value.

Definitions:
CRT = Current Reality Tree = Logical diagram of undesirable effects used to surface root causes.
UDE = Undesirable Effect = Symptoms of the root cause problems.
RC = Root Cause = The cause of a number of related UDE’s.
CP = Core Problem = There are normally only 1 or 2 core problems for all of the undesirable effects and root causes and by solving the problems all UDE’s are eliminated.
CRD = Conflict Resolution Diagram = Also known as the “evaporating cloud” logical diagram of the conflict between necessary conditions.
FRT = Future Reality Tree = The opposite of the UDE’s in the current reality tree, the future state of where you want to go.
NBR = Negative Branch Reservation = Branches added to the Future reality tree that outline any potential problems with the FRT. Similar to Murphy’s Analysis.
TT = Transition Tree = A how to guide to go from the present to the desired future.
PRT = Prerequisites Tree = What steps are required to achieve a certain objective.

Notes:
Page 8: Similar negotiating technique to Getting To Yes.
Page 9: Negotiating steps:
1. As soon as you identify that you are in a negotiating situation that does not have an acceptable compromise, immediately stop the dialogue.
2. Set the right frame of mind, accept that it is not the other person to be blamed but the situation.
3. Write the cloud; a) What do I want, b) what do they want, c) what need is the cause for what I want, d) what need is the reason for what they want, e) what is the common goal of both parties.
4. Examine the assumptions that lead you to believe there is a conflict and attempt to break the assumptions.
Page 41: Forecast accuracy increases with the square root of the number of locations being delivered to, e.g. the forecast for 4 shops is twice as accurate as 1 and 25 shops is 5 times as accurate as 1 shop. It therefore makes much more sense to keep as much stock centrally as possible so that you can supply what is needed to the locations it is required without cross shipments.
Page 43: Buffer the customer like you would a physical constraint in a plant; expected production (sales) by replenishment time (shipping time).
Page 94: Except in simple situations you should construct a Current Reality Tree BEFORE you construct your cloud to make sure that you are tackling the root cause of the conflict and not merely a symptom.
Page 112: How to construct a CRT:
1. Identify ~15 UDE’s.
2. Find a cause and effect relationship between at least 2 of your UDE’s.
3. If the gap between these steps is large try finding an intermediate step.
4. Add ‘injections’ to bridge any insufficiencies in the logic.
5. Once you are happy with the connection between the first two UDE’s add another UDE that logically fits in.
6. Keep expanding the tree with new injections and UDE’s until all UDE’s are included in the tree.
7. Identify your root cause by tracing back the arrows in the logical diagram to the one or two UDE’s/Injections common to all branches.
8. Express this Root Cause in the form of a Conflict Resolution Diagram and examine the assumptions behind the arrows.
Page 142: Market segmentation is the key to coming up with unrefusable offers.
Page 162: If you can break the conflict arrow in an Evaporating Cloud that usually results in the most powerful solutions to your problems.
Page 173: Once you have the Future Reality Tree canvas for ‘reservations’ and add them as negative logical branches on the tree. Some will not be big issues and ignored and those that are a big risk should be trimmed.
Page 175: To cause market segmentation develop one CRT for the overall market and then add additional UDE’s for each client or sector, develop a core offer, then have modules that can be added to solve the additional UDE’s.
Page 179: How to construct an FRT:
1. Start at the top of the page with your goals.
2. At the bottom put an injection that helped you break the core problem in the Current Reality Tree.
3. Attempt to reach the objectives from the original injection by adding further injections and statements.
4. Start again but add Negative Branch Reservations to trim the fantasy elements of the tree.
5. If you have problems thinking of NBR’s look back at the CRT for ideas.
6. Using the NBR’s generate new more practical injections and re-write the FRT using these new injections.
Page 183: Negative Branch Reservations are what change a future reality tree from fantasy to something that should be practical.
Page 186: Most companies know their UDE’s but not their core problems, use CRT’s to identify the companies core problems and solve them, these are the most powerful solutions.
Page 197: Problem solving technique of weighing positives and negatives and trimming the negatives, starts at bottom of page.
Page 207: Involve the client in the sale, present a negative branch and have them help you trim it.
Page 207: Try something different, instead of pressuring the client into the sale offer to give them time to go away and consider the offer. If they ask you to proceed present a list of the usual obstacles to closing the sale, by this stage they are bought in and should help you trim these obstacles too.
Page 211: You can select who your customer is, it can be your direct customer or the end customer or any customer in between.
Page 220: Often people don’t trim a negative branch because they think that the injection required causes more trouble than it is worth. However this is normally not the case, often although the injection causes more negative branches they can be trimmed more easily than the initial branch.
Page 235: How to construct a Prerequisites Tree:
1. Start with an objective.
2. Raise obstacles about why the objective cannot be accomplished.
3. Work out Intermediate Objectives to overcome all of the objectives.
4. Organise Intermediate objectives into a logical tree, working out which parts must be done in series and which can be done in parallel. (Like a project management network diagram)
Page 273: Three necessary conditions for companies:
1. Make money now as well as in the future.
2. Provide a secure and satisfying environment for employees now as well as in the future.
3. Provide satisfaction to the market now as well as in the future.
Page 282: Strategy principles:
1. Segment your workforce across segmented markets.
2. Even if you are dominant in a market, do not take the whole market.
3. Only enter segments where there is a low risk that they will drop at the same time.
If you do the above you can ride the s-curves, as one or many market drops you can move your people to new more lucrative markets that you have not yet fully exploited, that way you will not have to layoff employees.

Quotes:
Page 169: “In order to drastically change the perception in the eyes of the market, [you] don’t have to upgrade the physical product. [You] can change the periphery, the section of the offer that is not the product itself. And this my friends can be done with almost no investment and very quickly.”
Page 185: “A product that relieves the prospects problems brings benefits – the more and bigger the problems the greater the benefits.”
Page 186: “If we want a marketing solution for our company, we shouldn’t analyze our company, we should analyse our company’s markets.”
Page 272: “You can fool a few customers for a long time. You can mislead many customers for a long time. But you cannot mislead many, for long.”
Page 275: “We shouldn’t ever build a strategy based on a market forecast.”