The Red Curve

People with a background in TOC know about the red and green curves. In this blog entry I describe those curves and point to a new blog I have started on Wordpress.

What are the red and green curves of TOC?

As the story goes, years ago Eli was describing the kind of growth that was possible for organizations.  I believe this was at a conference in Cambridge, England, but I could be mistaken.

The first curve he drew was the green curve.  The green curve represents a kind of improvement, but it's asymptotic improvement.  Yes, the company is still improving, year after year, but with each year the improvement becomes less and less.  Never zero, but always less.

Eli refers to this as "stagnating at a higher level."

The other curve is the so-called "red curve."  It represents a qualitatively different kind of improvement: exponential growth.  Eli happened to be using a red pen when he drew this curve and so that name has stuck.

The figure on the right shows these two curves.  The black line that divides them represents linear growth for the organization.

Most people find the red curve as unrealistic.  They don't think their organization can grow in this way year after year.

And yet, if you expect 30% growth each year, what kind of curve would you expect to see?  One that flattens out, as the green curve has done, or one that grows exponentially, like the red curve?

For grins, I wrote a little model in Python, where a company grows at 30% per year for ten years.  Net Profit starts out at $100,000 on the first day of the first year of the simulation.  After plotting the data in Excel I had the chart you see on the right.

And so, if your CEO is demanding 30% growth year after year, he or she is demanding red-curve performance.  Do you believe you can achieve it?  If you can achieve it, can you sustain it?

I believe red-curve performance is achievable and sustainable.  But not according to the means most often used today.

I have started a new blog for discussions on exactly this topic.  That blog is redcurve.wordpress.com. 

It's meant to provide a place for meaningful discussion of the issues that block us from obtaining red-curve growth from the many different human-based systems most important to us.  I went to Wordpress for a few different reasons, but primarily because blogging their is significantly less cumbersome than the Plone-based blogging engine I use here.