Recounting a masterclass in Theory of Constraints that resulted in a Dutch herring monopoly from 1400–1700
This story isn’t a red herring and I promise to tie it all back to the world of Scrum at the end.
Before 1400, most herring were caught by performing daily coastal expeditions. Fishing ships would leave from shore and return with a bellyful of herring on the same day. Fishing trips limited to a single day were necessary to prevent the herring from spoiling and tasting fishy.
Around 1400, the herring migrated away from the coasts of Sweden to the North Sea and British waters. This new herring reality put British and Scottish fishermen in pole position to dominate the market. Since they now had the best coastal proximity for daily back and forth trips to the herring shoals.
However, the British and the Scottish were unable to capitalize on the significant edge over the competition. Here’s a telling quote from an English fishing industry advocate that perfectly illustrates what happened instead:
“The Dutch… take herring at Yarmouth, and there, for the honour of the English nation, sell them for ready money, which is, as if the Dutch should come and mow our fields, and then sell us the hay.”
The Dutch, and not the privileged British or the Scottish, completely monopolized the herring market from 1400–1700. The Dutch bested the British and the Scottish at herring fishing, even though they were at a significant disadvantage. The Dutch coasts were far removed from both the herring and the countries that represented the largest market for herring.
How did the most unlikely country swoop in to dominate the world of herring fishing?
Let’s start by explaining Theory of Constraints that is referenced in the title of this article.
What is Theory of Constraints (ToC)?
Eliyahu M. Goldratt introduced and popularized the Theory of Constraints in the bestselling book ‘The Goal’. Here’s a powerful quote that illustrates ToC thinking:
“Any improvement not at the constraint is an illusion” — Eliyahu M. Goldratt
Wow, sounds kinda abstract and complicated right?
Let me try to explain it with a simple thought experiment. Imagine we’re opening up our very own coffee shop. It’s a special coffee shop. No, it is not that kind of special coffee shop.
It is an imaginary coffee shop that has the following exceptional properties:
- We only sell cappuccinos, one per customer. To make a cappuccino, you first make an espresso, and afterward, you add manually frothed milk foam.
- We have an infinite supply of cups, milk, and coffee.
- We have infinite demand: an eternal supply of customers. We make and serve the best cappuccinos in the world!
Now imagine our magnificent cappuccino shop is operated by 3 people, who have their own specializations, can’t take work over from each other, and have a specific cappuccino handling capacity.
- A cashier who takes orders and handles the payment — 800 cappuccinos per day
- A barista who has perfected the art of making espresso and doesn’t make cappuccino foam— 300 cappuccinos per day
- A barista who has mastered flawless cappuccino foam but is unable to make espresso — 200 cappuccinos per day
We could represent our simple flow of cappuccinos as follows:
How many cappuccinos per day would we be able to produce at most? 200 cappuccinos per day.
What would happen if we would double the capacity of our cashier? Our infinite demand would result in 200 cappuccinos and 1400 angry customers.
What would happen if we also decide to triple the capacity of our espresso barista? We’d be wasting 700 espressos on top of having 1400 angry customers, while still only being able to produce only 200 cappuccinos.
What would happen if we decided to only double our capacity to produce cappuccino foam? We’d be able to produce enough milk foam for 400 cappuccinos per day. However, then the espresso barista would become the bottleneck resulting in a maximum capacity of 300 cappuccinos per day.
The capacity of the bottleneck determines how many cappuccinos we can make per day. If we improve the capacity of the bottleneck so it overtakes the next slowest step in the process, then that step becomes the new constraint. We can then only improve the process further by tackling the new bottleneck and leaving the old one alone.
Hopefully, now you fully grasp that any process improvement not at the constraint is an illusion. The worst-performing step is the only one that matters until another step takes over the last place.
Okay, enough about hot caffeinated beverages and let’s put an end to this intermezzo. Now back to the exciting world of herring.
What is the constraint in herring fishing?
If we visualize and simplify the herring fishing process it would look as follows:
The rate-limiting step, also known as the bottleneck, in the delivery of herring was the fishing — catching herring. Every day the fishing boats had to find the herring shoals, capture the herring with nets, and return to shore to immediately process the herring to keep them fresh.
If you remember our example of the cappuccinos, then the logical conclusion is that to improve our ability to sell herring, the only step that matters is the constraint: our ability to catch herring.
What is the best way of doing this? We should maximize our time spent fishing.
Overcoming the constraint by maximizing fishing time
The Dutch realized that going back and forth every day from the coast to the sea and vice versa on the hunt for herring isn’t effective if we want to maximize our time spent fishing. Given the fact Dutch coasts were further removed than their competitors, that meant they would have even less time to fish
The Dutch concluded there were three obstacles that would need to be overcome to maximize the fishing time:
- How can we make a fishing ship robust enough to stay for long periods of time in the North Sea and survive storms in the open seas?
- How can we ensure the herring is fresh and of high-quality, while the ship can remain at sea?
- How can we extend the amount of time spent at sea as much as possible? How do we have the fishing ship make as few trips back to the coast as possible, for example to fetch goods or transport fish?
The Dutch tackled the first obstacle, being able to stay at sea for extended periods of time, by developing a special type of ship called the ‘Haringbuis’ (Herring buss), which was superior to all other herring fishing vessels of the time. The ship allowed the Dutch to make long voyages and survive storms in the open seas.
The second obstacle, keeping the herring fresh and of high-quality while remaining at sea longer, was addressed by multiple processing innovations pioneered by the Dutch. The Dutch were the first to start processing the fish immediately on the ship. The Haringbuis was fitted with a compartment with holes continuously washed by seawater to keep the herring fresh while awaiting processing.
Processing was done by gibbing the herring. In gibbing, the gills and part of the gullet of the herring were removed, to eliminate any bitter taste. The herring was then cured in a barrel with salt to preserve it better. The result was that Dutch herring stayed fresh longer and tasted better than any other herring.
The third obstacle, reducing back and forth trips and staying at sea as long as possible, was resolved by having each herring buss accompanied by three service vessels called ‘Ventjager’ (Yagar) to offload any task not directly related to fishing, such as:
- Fetching barrels of salt
- Returning empty barrels at sea
- Transporting herring to other countries
These service vessels ensured fishing downtime could be kept as low as possible. The herring busses could do what they do best: catch herring, while other activities were left to the nimble yagar ships.
All these innovations together allowed the Dutch herring fleet to stay at sea and follow herring schools for 6 months over a distance of 500 miles.
Meanwhile, the Scottish and British had to wait till the herring came close enough to their coasts to make their daily back and forth fishing expeditions possible. As a result, the Scottish and British could nothing but watch the Dutch take all the herring out of their waters.
A Dutch Masterclass in Theory-of-Constraints
In short, this is the story of how a small country acquired a strong monopoly in the European herring export market. It’s a Dutch master-class in Theory-of-Constraints — understanding the constraints you are facing and nimbly exploiting them to obliterate the competition.
We’ve talked a lot about cappuccinos and herring, how does this relate to Scrum? Before you implement any process improvements, take the time to understand what is your bottleneck. Otherwise, you’ll waste time improving something that only grants the illusion of progress.
Scrum isn’t just about working hard, it’s about inspection and adaptation. If you don’t frame the problem in the right way, you’ll never be able to come up with the best solution. The British and the Scottish were too hung up on coastal fishing, and thought the Dutch were foolish to spend so much money to have a little service fleet hover around the herring fishing boats. They didn’t see the bigger picture and limited themselves to improving their coastal back and forth trips.
If you stick to the same paradigm, you can only expect incremental improvements. Only by breaking the paradigm, can you make a giant leap of progress. There is no magical formula that promises to get you there, but if you keep trying the same things as in the past it is foolish to expect different results.
Be bold, take risks, experiment and try out unlikely things. You might bump into something unexpected that takes the game to a whole different level. But keep in mind, the way you think impacts what you are willing to try out.
The same thinking that got you so far, might not be able to take you any further.
I was inspired to write this post after reading a scientific publication and found it to be a magnificent account of Theory-of-Constraints in practice — THE GOAL AND THE GOLD MINE: Constraints Management and the Dutch Herring Fishing Industry, 1400–1700 Michael Scott Martin.
If you find this story enticing, I can recommend you to read the far more extensive and elaborate original publication.