Make growth easy by focusing only on what limits it. Eliyahu M. Goldratt documented this thinking in What is this thing called Theory of Constraints and how should it be implemented? and in his novel The Goal.
The five focusing steps
- Identify the system's constraint.
- Exploit: decide how to get the most out of the constraint.
- Subordinate everything else to that decision.
- Elevate the constraint.
- Repeat. If a constraint has been broken, go back to step one. Don't let inertia become the new constraint.
Bottleneck or constraint?
A bottleneck is a resource whose capacity is less than or equal to demand. A constraint is whatever limits the organization in reaching its goal. Once you find a constraint, look for its cause. It usually originates somewhere else.
Where are the constraints in extreme revenue growth?
Find the biggest constraint on your revenue. What slows down throughput: the amount of revenue you can sell and deliver? And is that constraint within your influence?
The mindset
- We view the business as one system.
- We have one clear goal, and everyone contributes to it.
- We care about throughput: of orders, of money.
- We create the constraint of our system, so we must find and resolve it.
All people, functions, rules and management processes influence how much a company sells. Not only the sales department.
When the constraint is outside your company
Say you sell widgets to a client who builds advanced widgets from them. If their customer only needs three advanced widgets a year, your client cannot buy more from you, however good your marketing is. To grow, bring the constraint under your influence: when their customer needs six instead of three, your revenue doubles.
The way to do that is to remove your client's biggest constraint, so they end up needing more of what you sell. Goldratt used exactly this to turn stagnant businesses into growing ones.
From my own agency: demand for growth hackers who could run client projects on their own was high, but the people who did the operational work lacked client-facing experience, and experienced leads were scarce. The constraint sat in the labor market. We built our own training program and grew faster as a result.
Buying constraints
Serial entrepreneur and TOC expert Simon van den Brekel: map your value network and find the biggest constraint on your order flow, including the constraints of your client's growth. When prospects like your story but don't buy, these are the constraints I see most:
| Constraint | What the buyer thinks |
|---|---|
| Implementation costs | What will it cost me to implement this? |
| Lack of internal resources | I don't have the team to implement this. |
| Lack of internal knowledge | I don't have the skills to implement this. |
Remove these proactively and buying gets easy. When buying is easy, revenue growth gets easy.