High Resolution S&OP

I am writing you a long letter because I don't have time to write a short one. Les Provinciales - Blaise Pascal.

All practitioners of S&OP (Sales and Operations Planning) around the world know perfectly well: the greatest difficulty in the challenging art of S&OP is to extract crucial conversations in order to make decisions or to ask management to do so when the issue falls outside the scope of our responsibilities.

This may seem obvious, but practice shows that many S&OP processes get lost in producing tables filled with numbers that are not always intelligible and often merely state findings from which no conclusions are drawn, let alone actions taken.

To remedy this common problem, a good practice is to bring the greatest clarity to the assumptions behind the numbers, which then become the forecasts retained. These forecasts (the median scenario) should be framed by risks and opportunities, allowing the establishment of a pessimistic scenario (if all risks materialize and no opportunities arise) and an optimistic scenario (if all opportunities materialize and no risks arise).

The quintessential S&OP tool for verbalizing this information is prosaically but explicitly named the six-box model (6BOX), as illustrated in this document:

Appearing in the late 1990s, the six-box model is the tool that has been most successful in implementing S&OP, and, above all, it has endured the longest. The reason is simple: it is an easy and quick tool to implement, and it instantly creates value by synthesizing conversations and forcing one to get to the heart of the matter. The simple comparison between old assumptions and new assumptions allows one to instantly see if a forecast is stable or not. The absence of decisions taken prompts questions about the level of delegation within the company, and the balance between risks and opportunities gives an indication of the robustness or vulnerability of the forecast, etc.

Compared to its illustrious Lean equivalent, Toyota’s A3, the six-box model has not achieved the same level of universality. Certainly, by its nature (each S&OP is unique), there is no “Toyota” of S&OP, which does not help to generalize this standard. However, in my opinion, the deep reasons for the partial success of the six-box model lie in its very structure, which has some points for improvement to become a universal tool for all sizes of companies and all cultures.

A great general must know the art of change. If he sticks to a vague understanding of certain principles, a routine application of the rules of art, if his methods of command lack flexibility, if he examines situations according to certain patterns, if he makes his decisions mechanically, he does not deserve to command. Sun Tzu - The Art of War

According to the principle of sociologist Edgar Morin, who just celebrated his 102nd birthday, everything that does not regenerate, degenerates. Acknowledging this common-sense principle, at Value Games, we propose to regenerate the six-box model by adding a seventh box and giving it the more evocative name of "Resolutions."

The reasons for evolving the six-box model into Resolutions are entirely practical. The first is that some of our clients preferred to split the six-box model into two for readability purposes. The second is that some companies, generally smaller ones, made all decisions in step 5 of the S&OP (the last step), and therefore saw it as artificial to force a “decisions taken” box. Acknowledging this reality, we propose to replace “decisions taken” with “conclusions.” Moreover, in some cultures, particularly Chinese culture, making a decision at a given moment is not imperative, as Chinese thought, influenced by Taoism, cultivates the art of maturation, where the decision is made only when the time is right, and not before. This is reminiscent of the response by Chinese Premier Zhou Enlai when asked, "What do you think of the 1789 revolution?" to which he replied, "It’s a bit too early to judge."

The third reason is that the logic of the six-box model, following the OODA loop cycle (Observe→Orient→Decide→Act) used by the military, lacked the "Act" box for action.

Consequently, we propose the following format for Resolutions:

This one-page document can be divided into two parts, with the first part EXPLORE, and the second part EXPLOIT.

Like its predecessor, the six-box model, which no one 25 years ago would have imagined achieving such success, only practice and the rate of adoption will determine the future of Resolutions. We will then know if Resolutions was an evolution, a revolution, or simply an elaboration. As for me, I would lean more towards a revolution, but with the caution of Zhou Enlai, without predicting the time frame 😁.

And you, what is your prediction for Resolutions, and what resolutions will you make after this reading?

"There is a great distance from mere intention to will, from will to resolution, from resolution to the choice of means, from the choice of means to application." Cardinal de Retz