| Optimism about the future certainly has a | | | | business executives became excited about |
| positive place in the overall scheme of | | | | creating a new piece of equipment that would |
| things, but it is frequently found to fuel | | | | greatly reduce the cost for customers. |
| wishful thinking. Consider the typical | | | | Leading technical consultants from the East |
| hockey-stick forecast of the future. | | | | were brought in to this Mid-western business, |
| | | | and the consultants confirmed a rosy |
| Let's say your operation has been doing | | | | technology forecast and market for the |
| poorly. In fact, results as measured by | | | | product. |
| revenues and profits have been dropping. | | | | |
| | | | The company's chief financial officer was |
| You sit down and plan ways to overcome this | | | | unconvinced, so he decided to monitor the |
| negative trend. Because the solutions take | | | | situation closely. What he discovered was |
| time and money, you plan for things to get | | | | that compared to the original business plan |
| worse in the immediate near term, but you | | | | on which the new product development |
| optimistically assume that all your new plans | | | | investment was based, the cost of |
| will work, causing the organization's results | | | | implementing the project and time to |
| to turn up at some point in the future. | | | | completion increased regularly every six |
| | | | months. |
| With this viewpoint, a graph of the | | | | |
| operation's revenues and profits over time | | | | At the same time, the estimated future sales |
| will look like a hockey stick with the past, | | | | and profits from the new equipment kept |
| present, and near-term future going down like | | | | dropping every six months. He drew a chart |
| the length of the stick, and the future | | | | showing that if this changing forecast trend |
| turning up like its blade as the stick rest | | | | continued, the project would be a big money |
| on the ice at the point where the length and | | | | loser. |
| the blade meet. After a few years of | | | | |
| implementing this plan, you often find that | | | | He got nowhere with his observations. |
| the only part of the hockey stick you can see | | | | Everyone else wanted to believe in the |
| when you examine the results is a handle | | | | product's success, so the project continued. |
| still going down. | | | | Sure enough, the project was a big loser in |
| | | | the end. |
| In the 1980s, a leading business equipment | | | | |
| company was faced with declining demand for | | | | One way to have overcome this problem would |
| its most profitable product line. Sales and | | | | have been to authorize the project based on |
| earnings inched up a little based on service | | | | the contingency of meeting interim targets |
| revenues for the previously sold and | | | | for cost, product performance, on-time |
| installed equipment base, but new equipment | | | | completion, profit and market outlook. Then |
| sales were dropping rapidly. Using a | | | | when those factors weakened, the plug would |
| technique called "gap planning," the | | | | have been pulled automatically and most of |
| operation looked for ways to fill the "gap" | | | | the costs could have been avoided. If the |
| between its current direction and what it | | | | project had been going well, these interim |
| wanted to accomplish. | | | | targets would not have harmed the project's |
| | | | ultimate success in any way. |
| After rejecting several alternatives, the | | | | |