The Business World is Transforming
  • By 2025 the worth of the Internet of Things will be $6.2 trillion.
  • The sharing economy will reach $330 billion by 2025.
  • For people starting their education, 65% will enter the workforce into jobs that don’t exist today.
  • The average tenure on the S&P 500 is dropping. Only 25% of the companies in 2012 will remain by 2023.
  • Automation and robotic usage will grow 2,000% from 2015-2030 amounting to $190 Billion market.
  • 86% of global CEO’s are championing digital transformation of their companies.
  • By 2025, half of world’s companies with revenues exceeding $1 billion will be headquartered in today’s emerging markets.
  • By 2018, the data created by the Internet of Things will reach 403 zettabytes a year.
  • By 2030 the population will be over 8 billion people and 50% of Global GDP growth will come 440 cities in emerging markets.
  • By 2030 more than 30% of workforce will be older than 55 in developed countries.

Planning is Imperative Within a #ResponsiveOrg

Planning is Imperative Within a #ResponsiveOrg
12/08/2017, Charles Zulanas , in Human Capital, Organizational Transformation, Responsive.org

However, as the pace of change accelerates, the challenges we face are becoming less and less predictable.”¹ To many organizations, the norm has become not knowing what is happening in their markets. According to ResponsiveOrg’s Manifesto, the following are tensions which most organizations must evaluate today, which you can see for yourself at http://www.responsive.org/manifesto:

planning-vs-experimentation

I have pondered these ideas and thought about their implications, and even started some dialogue about the topics on their group-wide Slack that has almost 2,000 members.

My main preoccupation was with the idea, “Why would planning generally be considered the opposing force of experimentation in the manifesto?”

In order to assess the argument, I’d have to look at how an organization can operate within organizations that only plan and those that only experiment.

100% Planning: If an organization was 100% planning, nothing would get done. You would have all of the information, but you would never implement. This is overthinking, which can’t be optimal.

100% Experimentation: If an organization was 100% experimentation, a lot of stuff would get done, but it would wear people out, and I’m not sure you’d be profitable with impulsive actions being the norm. At times when I’ve been impulsive, I normally offended other people or injured myself (or both). With everyone in the organization being impulsive, it would not be a positive or profitable situation and put you at risk. With 100% experimentation, you leave your company’s destiny to a game of luck and chance; that somehow a person without any information will end up with a building that fits all codes and regulations; a product that meets every consumer’s needs; where all users are 100% satisfied. This can’t be optimal either.

Why Planning is Essential

The best plans I’ve seen are always based on information. Plans use the data/information/expert advice available to make the best judgment as to how to proceed on any project. However, without execution of the plans there is no effectiveness to a plan. Without plans, you bring a lot of risk to your execution because you might not account for apparent risks.

Plans cannot be based on 100% information because there are always going to be some unknowns. Plans use the best information available to best predict the appropriate course of action. These plans can and probably should change as more pertinent information becomes available. If you are driving to work and you realize that a road that you usually take to work is closed, do you wait until the road reopens or do you find another way? As a business owner gains more information about their industry, they need to be constantly changing and adapting to the needs of their customers and market. The Marine Corps operates on the 70% principle. If you have 70% of the information, 70% of the analysis, and you are 70% sure it is the right decision, then you make the decision.

Planning for Unknowns

Planning is especially crucial for unknown and less predictable environments, bringing together the best information that you have in general. If your company is pitching a new project to a billion dollar customer that could make you richer than Warren Buffett, would you call on your least experienced or your most experienced salesman to present? Would you want your salesman to go in with no information whatsoever about the product, or learn as much as he could about it in advance asking Google, and anyone with expertise? If you hire someone who is experimenting with your multi-million dollar IT project, you could be in for an unpleasant surprise and increased costs.

I have zero experience building houses. I have no idea of the tension strengths that certain materials can sustain, how long it takes to build a house, or the money it would cost. If I were the one building my wife’s dream house, I would consult experts who have years of experience as home builders. The experts would tell me exactly what I would need at every stage of the project as well as risks associated with building a house a certain way. Even if no one has ever constructed something like my wife’s dream house before, I’d look for people who have done something similar and have proven they can achieve the results she’s looking for. When facing unpredictability in situations such as hiring new individuals, signing a deal, buying a product, or expanding a product line, operating on the best information possible with the most experienced people is a must.

Successful Organizations Plan by Experimenting on Low Risk Projects and Use Data to Pivot

Based on information and plans, experiments are no longer as risky. The initial Google Chrome used to be the slowest internet browser on the web. However, after receiving feedback, they made changes and planned to make small updates as often as possible. Now, the number one internet browser in the world became Google Chrome. From then, other internet browsers realized that “rapid release” software updates were the only way to operate. As a result, the internet browsers continue to compete for speed while elevating the customer experience with frequent small changes vs infrequent large changes.

Successful Organizations Plan BEFORE They Change

Berkshire Hathaway CEO, Warren Buffett, states that he only needs to make one good business deal a year. Coming from one of the most successful investors in the world, he does his fair share of planning. Buffett and his associates read for more than eight hours every day, wading through market research, reports, and interviews in order to get the best idea of how a deal would go if they purchased. Berkshire Hathaway understands that their goal is to provide the best long-term investment for their customers. They experiment for the long-term as well by becoming as knowledgeable as possible about topics before investing. As a result, Buffett and his associates are able to beat the market in their investments. Buffett overturned the popular belief that active trading (hedge funds) would perform better than buying and holding an S&P 500 no-load index fund.

The most successful start-ups do not have their big break overnight either. To the contrary. Most successful start-ups had years of planning and preparation (See http://www.businessinsider.com/most-valuable-us-startups-2016-12/#1-uber-8). Companies that have achieved billion dollar market caps within the space of a decade had people who became experts in their industries over many years. They knew exactly what the industry needed and made a plan for rolling out their products and services.

After launching a new product, it takes an average of 3 years to turn a profit. According to Fortune Magazine (contrary to the conventional 90% failure rate), approximately 60% of start-ups fail as a result of inadequate planning. Failures as a result of inadequate planning could be summarized as follows:

  1. Not understanding their market
  2. Not knowing their customer needs
  3. Poor financial management or accounting
  4. Too much or too little marketing
  5. Not enough staffing or too many on staff
  6. Not hiring for the right expertise

Conclusion

In an environment where a company has less information about where they are going, erring on the side of experimentation (or action) might be wise as opposed to never ending plans. Without planning, experimentation would be fraught with errors, risks, and unfortunate circumstances. I do not know what is right or if a better tension could be found as opposed to planning and experimentation.

A Proposal for a Different Tension for ResponsiveOrgs – Reactive vs Proactive

A bias to action is often different than a bias to plan. Too much planning means you don’t try more than one thing; you just execute on the one plan that you have, based on the information you  have. Whereas, experimentation (being proactive) could mean trying multiple things at the same time. Maybe it is the case that being reactive in your industry, no matter what your industry, is far worse than being proactive. Being reactive to the changes going on and not having a plan may mean you are more likely to be disrupted. If you are proactive and have a plan you will be able to adapt to market changes. In regards to behavior in business, the person who is reactive will sooner be out of a job than the person who is proactive. Letting other people decide your actions for you, or reacting, is the state of not being in command of your own conduct. Being proactive shows a sense of inner balance and a confidence in how you are acting is right (For reference see Do You Act, Or React? By Sidney J. Harris in the Chicago Daily News). However, this is just a proposal.

Post Script

Our goal at MSSBTI is to help businesses everywhere to constantly aim for the ideal to create transformational organizations. If you have ideas on what should be the traits of an ideal organization, add your thoughts to the Slack message board or join the conversation at the upcoming ResponsiveOrg Phoenix meeting on Tuesday, December 12th at 5pm. RSVP HERE.


¹ http://www.responsive.org/manifesto
² https://www.entrepreneur.com/article/229499
³ http://fortune.com/2017/06/27/startup-advice-data-failure/


Other articles on Strategic Transformation

Strategic Planning in a Dancing Landscape
High Performance Teams and the Art of Ensembling
Surviving the Business Transformation “Death Zone”
Accelerating the Shift Toward Exponential Leaders
How Can I Begin the Shift to Exponential Leadership Myself?

Charles Zulanas

Senior Consultant, MSS Business Transformation Advisory

Chuck Zulanas is a 2017 graduate of Arizona State University with a Master’s degree in Construction Management. He has worked with the Performance Based Studies Research Group where he consulted with the Arizona Department of Environmental Quality, Kingdom of Saudi Arabia, Neogard Corporation, the State of Utah, and ON Semiconductor. He has authored/co-authored 5 publications in his undergraduate and graduate coursework.  MSSBTA.com

 

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