I’ve come across very distressing, very disturbing statistics which point to:
• 95% of CEOs that fail to grow their business.
• 17% grow incrementally.
• 48% get stuck around the break-even point.
• 11% get into a debt trap.
• 19% go bankrupt.
And it completely amazes me because these are very competent people, well-educated, intelligent, capable and how come we have this statistic which shows up everywhere in the world.
I’ve been doing a lot of research and I found very interesting answers.
One answer I found was SWOT.
That everybody loves to start strategy or their strategic thinking process with a SWOT analysis – Strength, Weakness, Opportunities and Threats.
And the foundation of this is very very strong. There’s no question about it. But really what happens when you work with SWOT is where the problem lies.
We had a very interesting participant in London Business School in the Sloan Master’s Program. He used to be the managing director of one of the large banks in Europe.
And every time people in the class got up and started to share about something he would just say– He was a French guy – used to say Bleh! Bleh!
Bleh! Bleh! means Blah! Blah!
And he used to sit right behind me, I was wondering what is this guy doing blah blah blah blah.
And then somebody told me that this guy only works with figures, so if you’re going to be a poet and going to talk about lot of explanations, it doesn’t cut it with him.
When I look back, I find that maybe there’s a lot of blah blah that goes into this SWOT, that we are explaining a lot of things.
Where does this whole dynamic of explanation come? It comes in journalism. It comes in philosophy. It comes in history, poetry and so on and so forth.
But when we are concerned to make things work, there is only one subject and that is Physics.
When you start applying physics to business, when you start applying physics to what you’re doing, the probability of success starts to go up.
I started researching that where are people who have brought physics into business.
And I found the Theory of Constraints.
The Theory of Constraints versus SWOT is a no-brainer.
When you want to increase throughput of a system, you need to find the weakest link. You need to find the bottleneck because that bottleneck chokes the throughput. The bottleneck governs the throughput.
If you have a big chain and you identify which of them are strong, which are weak, where are the opportunities for growth, what would threaten you, and you start investing your time, effort, money, everything to optimize that SWOT, sure, you will end up with a strong chain, but at what investment? Versus being able to identify which is the weakest link, which is the bottleneck and then strengthening that, just one link.
Then with very precise investment of time, effort, money, energy, you’ll have a strong chain.
Business owners that apply SWOT are ending up wasting so much of their resources.
And as a result, the chances of them growing their business starts to falter and that’s not where it stops.
They start with something, it doesn’t work and quickly now they’re going to pivot away from that.
Again, they’re going to apply SWOT, again, they’re going to apply SWOT, and they keep on pivoting very very fast and everybody in their core team kind of looks with glazed eyes at each other and they snigger and they ask the question, “What is the last book our boss has just read?” “What is the seminar he attended?” And now he is coming and he is going to implement things and then he’s going to try it and – I mean, it doesn’t work.
When you apply physics and you find the bottleneck then you have the guts to persevere with your strategy and keep persevering until you create a breakthrough.
And unless you persevere on fundamental principles of physics, you are going to again end up going in the wrong direction.
SWOT versus Theory of Constraints.
When you start applying the Theory of Constraints, results start to grow, results start to multiply.
And that is what will take your business from a probable destination called 95% that fail to grow to 5% that actually succeed.
Video reference number: 022014