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Tom H C Anderson Interviews Business Guru Eliyahu M. Goldratt

May 19th, 2010 · 6 Comments

Part One of Five - Eliyahu M. Goldratt on Market Research (Customers and Intuition)

I recently had a lengthy talk with Dr. Eli Goldratt, the famous Israeli physicist who has become one of the most well known management gurus of all time partly due to his work with the Theory of Constraints (TOC). His 1984 book The Goal is required reading in most MBA programs around the world, and since then he has published several other books, most recently Isn’t it Obvious which looks into retail.

I think Eli is a truly fascinating thinker and a bit of a polymath. Because our discussion was so lengthy and covered various topics, I’ve decided to publish it in five parts over the next few days. I’ll omit our initial discussion specifically related to Anderson Analytics of course ;)

I hope you find my discussion with Eli as interesting as I did. Today’s excerpt below will serve mainly as a brief intro.

TA: Dr. Goldratt, I think you’ve written some of the greatest management books of all time. And people are beginning to realize that the TOC theory, which seems to be more focused on factory line situations, translates to service-type businesses. I’m wondering, Eli, if we can use TOC effectively even at higher end services such as market research, or business consulting?

EG: I don’t think that I have much doubt about it, and I’ll tell you why. Take your field; you are trying to convince a client to engage you to do some important research in some very defined area in order to get some more reliable answers for him to consider, or even to change, his decisions. And this is what you call the ‘high end’. What about if you had to do the same thing with a client, but where your job is to convince him to totally change the way he manages every aspect of his whole company. The whole thing. Do you think that’s a little bit more difficult?

TA: Sure.

EG: Sure. But that’s exactly what I’m doing, and I’m using the Theory of Constraints for it. So now you see why I don’t have any doubts that the Theory of Constraints would work for such a field.
But let me give you the real difference. You say that you have read some of my books, correct?

TA: Right.

EG: My last book I entitled ‘Isn’t It Obvious?’, and the idea here is not to say that it’s obvious, but to say something else: if you do a proper analysis, when you come up with a solution, the solution looks so obvious that you are mad with yourself for not having seen it before! These are solutions that work. You see, in physics the rule is that anything that works must be so simple that, when all physicists see it, they will be hitting themselves over the head for not seeing it before.
But somehow, in business, we admire sophistication rather than simplicity. A solution that is not obvious once you see it will never work. A solution that is obvious once you see it will definitely work. The only problem is that to find such solutions is not simple. But what I’ve tried to do in every single book is to present that such solutions exist, even to huge problems that were considered to be unsolvable before. And each time, I think that the readers of my books are all saying, “It’s common sense!”. Which means: it’s obvious now.

TA: Right. Well, I mean, customers are a bit difficult because, as customers, we don’t always behave rationally. There’s a lot of thought in market research now that a lot of our decision making is not very rational at all; the reason we select a brand is emotional and even unconscious.

EG: Oy, oy, oy, oy, oy! First of all, define rational. Define emotional. You cannot separate the things, ok? Because let’s face it, you’ve worked a lot with clients. Have you noticed to what extent their decisions are intuitive? Correct?

TA: Right.

EG: Now, have you also noticed that intuition stems from emotion? For things that we are not emotional about, we have zero intuition?

TA: Sure.

EG: So you see, intuition and emotion are linked together. The other thing is that every expert in logic will tell you that you cannot apply logic without intuition. It’s an impossibility. So it’s all interwoven. So, when we say sometimes that customers are not logical, it means only that customers are using a different starting assumption than what we had assumed. But it’s perfectly logical from there on.
Now, why did they use this starting assumption while are we using something else? There can be many reasons for it; many times it’s history. Stop separating the things, they are all intermingled. Emotion, intuition and logic are totally intertwined.

TA: How do you define intuition?

EG: Intuition is the ability to jump to a conclusion without any intermediate steps.

TA: Right. Well that’s the problem. Understanding that intuition and…

EG: Yes, you can decipher it. But carry on.

That’s it for today. Tune in for the next post as I get Eli’s thoughts on the theory of constraints and more specifically on the offshoring of market research!

@TomHCAnderson

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