What Everybody Ought To Know About Planning Under Uncertainty

What Everybody Ought To Know About Planning Under Uncertainty

Rita McGrath

THOUGHT SPARKS

RITA MCGRATH I THOUGHT SPARKS

Today's agenda The article “Discovery Driven Planning” was published in 1995. The book-length treatment came out in 2009. And yet, we’re only now catching up to what entrepreneurs and corporate innovators have long understood – when you are dealing with uncertainty, you need a plan to learn.

Creating breakthrough growth in a systematic way

Discovery driven growth involves pursuing your objectives under uncertainty in a way that is both pragmatic and low risk. The essential discipline is to specify a future that is attractive, then work backward into what would have to be true today, the next day, the next week, the next month, and so on. It’s a very different approach than conventional planning on several dimensions. It also requires different behaviors from leaders.

Definition of success In conventional management, leaders are assumed to be able to anticipate contingencies and plan with a great deal of knowledge. Success is therefore often defined as making your numbers and hitting projections. With a discovery driven mindset, in contrast, success consists of learning as fast as you can, as cheaply as you can, to make progress toward goals.

Management Timeframe

Despite all the moaning about short-termism in management, it is true that in a conventionally run organization managers spend the vast amount of their time on day to day and operational issues. That’s what got most of them promoted, after all! Today’s problems always look as though they will be devastating without managerial attention and they yank people away from a future oriented focus. The urgent often drives out the important.

Timing

In conventional planning, the annual rhythm of a budget cycle typically dictates a lot of the timing of corporate decision-making. Strategy is often a footnote, as managers argue backwards and forwards about what numbers should be committed to and when certain objectives are going to be delivered. The whole process is hugely time consuming and once its done, nobody wants to go back and revise it.

Changes in direction

Although the lean startup movement has made people more tolerant of pivots than perhaps they were before, in many organizations there is still a sneaking sense that if you had to make a change in direction or revise your plan that you got it wrong.

Drucker’s well regarded “management by objectives” approach suggests that both leaders and those working with them can articulate clearly what goals are to be met and with what means.

Project redirection and disengagement

Shrinking or stopping a project is often considered a really bad thing. After all, it was probably approved with hundreds of pages of PowerPoint notes and tons of annotated spreadsheets (with the duly placed hockey stick of growth at the 3 to 5 year mark). It may well have been fully staffed with costly people and technological talent. It may have even been promised to investors as the Next Big Growth vector for the company, as was the case with Motorola’s spectacular flop, the Iridium project.

Approach to Funding Because most budgeting programs assume considerable certainty, new ventures are often set up as though they were established businesses.

This often results in their having all their funding allocated at once (which we’ve already established is a bad idea). Worse, it also often results in funding being unpredictable. Let the parent company have a bad year, and the easiest things to cut are those new little ventures that haven’t demonstrated market acceptance yet.

Assumptions

In uncertain conditions, the ratio of assumptions one needs to make to knowledge that one has is high. Everybody knows this. What everybody doesn’t do, or do with enough discipline, is to document those assumptions and develop a clear path to testing them. In fact, in many organizations even to state that a decision is being based on assumptions is regarded askance.

Downside risk An options oriented rather than a full-on venture launch allows you to be smart about managing risk. At each decision point as your venture unfolds, you can ask the question “does the upside still justify the continued investment?” If the answer is no, then you can stop. This offers you the benefit of knowing at each step along the way what your exposure to the next step is.

Try it – it actually works and you can learn how Although it isn’t part of every leaders’ toolkit – yet – the discovery driven approach is pretty straightforward. Its benefits are tremendous – faster learning, lower risk, and a way to get everybody on the same page with what we all believe to be true.

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