Espresso: Rory Sutherland EXPLAINS "Bottleneck Theory" and how it impacts your business

0:01There's a whole thing called bottleneck theory, sometimes called the theory of constraints.

0:05Rory Sutherland:Right. Which is that if you're intervening in any system, there is a point in the system. If you imagine the flow of water, okay? Yeah. If you want to increase the flow of water through a system, the place to intervene is the narrowest point, which is where the flow of water is ultimately being constrained. Everything you do somewhere else won't really have much effect. Until you open that part. Until you open up that constraint. Okay. And so the idea is, there's a guy called Eli Goldrat who wrote a book called The Goal, which is all about the theory of constraints. The Goal, G-O-A-L. Yeah. All about the theory of constraints.

0:42And the idea is, I think it's highly intelligent because I think it's quite applicable to marketing that actually, you know, if you're not selling as much shit as you think, okay, the question to ask is what is the constraint? And it could be distribution or it could be mental distribution, which is nobody's heard of you. So even though you're everywhere, nobody knows who you are or what you do.

1:06Rory Sutherland:Yeah. And so. Yeah, that's interesting. Who is it? It's physical availability and mental availability. That's a Byron Sharp thing. Yeah. Yeah. So Coke is very, very mentally available in the sense that if you're sitting at any. okay so sitting here or sitting in a cafe or sitting in a shit cafe or sitting in a michelin five three-star restaurant okay you know that if you ask for coke they basically have to bring you one otherwise they've got to explain why they don't stock coke now that doesn't really apply to dr pepper you know if you're sitting in a michelin three-star restaurant you said can i have a dr pepper cherry zero then they would say i'm afraid we don't have that and you'd feel like twat for asking whereas if they don't have Diet Coke they feel like a twat for not having it.

1:53Yeah, that's an interesting one because you could be a snobby restaurant and refuse to serve mayonnaise you probably have to serve that's a very interesting one so what are the, that's a great question, what are the condiments? Now mustard I would argue you have to have if you're a steak restaurant, okay? You have to have mustard, you probably have to have mayonnaise, ketchup, now brown sauce and ketchup are interesting because to be honest a lot of people like them and I would argue if you're serving breakfast and you don't offer brown sauce or ketchup if you're serving bacon, you're being a bit of an ass.

2:35And actually it's strange how you do have to ask, don't you? You would think, wouldn't you, that when you ordered a full English breakfast, there'd be a little pot of, I mean, at least on the table, there'd be a little pot of mayonnaise, a little pot of ketchup, a little pot of HP sauce. Because I would argue that actually, obviously HP sauce isn't a given in, say, the US, but in the UK, it would be for certain meals. And then it's interesting, in the US, I was in Texas, and I met the guy who's the chairman of the Texas Department of Transportation. met him for breakfast first thing he does when he sits down and his food arrives is okay can have a bottle of tabasco and if you're in the american southwest chili or some sort of hot sauce is basically a mandatory whereas in new york it probably you probably get tabasco in new york but in texas you wouldn't consider not having some sort of chili based condiment the reason we're doing the bottleneck podcast is because i think no i think there the problem we've had in business in government in politics is not that the toolkits are wrong because all toolkits are wrong economics is wrong all models are wrong some of them are useful a guy called george box said that it's that we have this kind of um i would argue we have this kind of abilene effect and I'll explain what that is in a moment, where if everybody uses the same model to solve problems, it's all very convenient for them administratively because they're all on the same page.

4:09But ultimately, you get a complete deficiency in terms of imagination. You're not allowed to use intuition anymore. You're not allowed to use creativity anymore. Everything is considered successful to the extent that it conforms to the model you're using. And I think we need far more models we just need to accept just as a good cop okay would say yes you know uh we'll you know we'll swab for dna we'll look for fingerprints we'll make door-to-door inquiries okay a good cop in the search for an insight or a breakthrough will deploy tons of different um and complementary methodologies you know yeah you'll go and talk to your you know you can talk to a couple of informants who may have heard in the street who is responsible for the you know the burner street bank raid you know you employ everything you can in pursuit of an insight what you don't do you're not allowed as a cop to become like a dna fundamentalist now that's not to say that dna is unimportant or uh or far from useful it's incredibly useful but you wouldn't make it your only mechanism for problem solving and what we've done is we've had either lawyers or economists who are overwhelmingly given the responsibility or finance in an organization who are overwhelmingly given the responsibility to sanction or prevent areas of human activity and it's simply too narrow a model to cover the complexity of modern life and so where we get to bottleneck theory the theory of constraints Eli Goldratt the goal he was a physicist who actually became effectively a kind of business consultant and business guru.

5:54But his background was in physics. And his argument is that in many complex systems, what you've got to do is look for the bottleneck, look for the point at which the entire system is being constrained by this one variable, far more than it's constrained by anything else. And then that's the place at which you intervene. How do you find the bottleneck? Well, interestingly, it could be, OK, it could be a entirely logistical bottleneck. OK, you don't you don't have enough distribution. You know, it could be a psychological one, which is not enough people are aware of your existence.

6:31Rory Sutherland:Yeah. And you might argue if you look at online food. The current and by the way, bottlenecks will move because as you solve one bottleneck, one another bottleneck tends to be created somewhere else. So the way to think about it analogously is if you have a traffic jam caused by, let's say, a road that narrows from two lanes into one, okay, your natural instinct might be to widen that road. But if 500 yards down the road, there's a really badly phased set of traffic lights, what you might be doing is simply moving the traffic jam from one place to another. yeah and actually until you've hacked the traffic lights which is a cheap operation it may be that when you hack the traffic lights the other problem disappears okay but until you've actually done the cheap bottleneck intervention there's no point in having debates about what you do elsewhere because however good you are upstream you're still constrained by this one particular area of constraint which i think explains why a lot of marketing activity and lot of business activity is kind of fat-tailed you know 20 % of what you do makes 80 % of the difference