The Critical Path

In the world of project management, there exists a useful concept knows as the “critical path” for a project.

A critical path is that part of the project which has the fewest available resources that also has the most downstream dependencies.

In other words, it’s the step in the project that prevents many other later steps in the project from starting.

For example, in a construction project, the critical path early in the project is the architect’s blueprint.

Without the blueprint, no construction can begin because it's unclear what needs to be done.

Once a blueprint has been finalized, multiple steps of the project can take place. Heavy equipment that is needed can be ordered. Materials can be ordered. Multiple parts of the project can now take place in parallel once the critical path step has been completed.

Later in a construction project, building the structural framing of a new home is the critical path. Once you have the structural supports of the walls and roof built, it is now possible for plumbing, electrical, and roofing work to all be done in parallel.

You can’t build a roof for a house if the house has no walls.

You can’t run electrical wires through the house if the house has no walls.

You can’t run pipes through the house if the house has no walls.

So in building a home, the building of the walls is often a critical path step because the lack of completion of this vital step blocks progress on multiple downstream tasks.

In the manufacturing world, industrial engineers think of the critical path as the bottleneck in a production line.

If you’re running a car manufacturing facility, you pay attention to which stations on the production line are working below target capacity.

If the entire line can produce 100 cars per day, but the painting station of the line can only paint 50 cars per day -- the entire throughput of the production line will be constrained to 50 cars per day.

For manufacturing plants, the throughput of the line will never exceed the throughput of the least productive step in the line.

Stated differently, your production line is only as efficient as the weakest link in your system.

These same concepts also apply to the front office in a business. When you’re managing the sales and marketing efforts of a business, that too is a production line of sorts. Instead of producing automobiles, your sales and marketing “production line” produces sales contracts signed by prospects.

Let's say your marketing team produces 100 prospects per day, but your sales team has the capacity to call on 200 prospects per day.

What’s the constraint or bottleneck in this system?

It’s the marketing department’s ability to produce only 100 prospects.

Your system will only produce the number of deals associated with 100 prospects per day.

In such a scenario, if you doubled the salesforce so that, instead of being able to call 200 prospects per day, they can now call on 400 prospects, how many prospects will actually be called?

In this case, only the 100 prospects produced by the marketing department.

Even though you double the investment, you have no increase in revenue.

The big lesson in this kind of thinking is that investing in anything other than the bottleneck in your system is a waste of time and money.

The overall throughput your system will be capped at is the throughput of the most constrained step in the line.

When you truly understand this concept, it prompts you to think differently about every business decision you make.

When you apply this concept, you only invest in alleviating your #1 bottleneck and avoid investing in anything other than that.

 

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