Planning not to learn

GUEST COLUMN

Not long ago, we spoke with Kip, who a few years earlier had jumped at the chance to lead a promising high-growth new business within his company. Kip was alive with ambition.

For two decades, he had worked his way up the ladder "" from manual labour to management. He believed this new assignment was his ticket to the top.

The CEO chose Kip for the job because he admired Kip's leadership style. He was a motivator. He was an energiser. He had the ability to rally people around a vision, even if it was years away.

What Kip was not was a planner. He spent as little time planning as he could get away with. Kip had given the need for planning careful thought "" and rejected it.

The first observation Kip shared about time spent planning was that it was time not spent doing. Like many people leading new initiatives, Kip believed he was in an all-out race. Without a relentless focus on execution, he would not be first to market.

When forced into planning meetings, he deflected attention away from immediate results. He talked constantly about the long-term transformational potential of his business. He did not want to be bogged down in details. He wanted to work flat out and focus on the vision.

True, there is a tradeoff between planning and doing. And planning in many companies is an exacting process requiring hours of analysis. Kip's staff was thin, and his wariness was understandable.

But Kip did not need plans similar to those of his peers who ran established businesses. Their plans guided efficient execution and quick isolation of problems. (Example: the cause of a revenue shortfall was that an unexpectedly high number of sales people in the south-east sub-region left the company.)

What Kip needed was simpler. He needed to identify a handful of critical unknowns that could make or break his business and specify measures to resolve them quickly.

But Kip did not see it this way. He thought planning was pointless. Planning was about predicting outcomes, and in a nascent industry, outcomes were inherently unpredictable. So why bother?

To learn.
Most people that we talk with agree that the first imperative for any new and unproven business is to learn quickly. No competitor knows what the future holds when an industry is just emerging. The winner is not the one that starts with the best strategy, but the one that learns and adapts the quickest.

So far, so good. But what must leaders learn? People leading new businesses must learn to make better predictions. They must build their understanding of which actions will lead to positive outcomes and which will not. You don't get better at predicting by avoiding it.

At first, predictions are wild guesses. Later, informed estimates. Eventually, reliable forecasts. This progression is a natural part of the process of proving a new business. Once predictions are reliable, standards can be set. Notions of what constitutes acceptable performance become crucial norms within any growing company.

Getting better at predicting can be an intuitive process "" if and only if feedback is immediate. We are spoiled as children. We get used to immediate feedback. We swing a bat and know immediately if we hit the ball. We play a video game and immediately know our score. We take a test in school and get a grade the next day.

In business, we do not have the luxury of immediate feedback. As a result, the process of getting better at predicting "" learning from experience "" needs structure. It needs discipline.

Planning provides that structure and discipline. Predictions are made, recorded, retained, and eventually compared with outcomes. Analysis of that comparison is the heart of learning.

Kip's avoidance of planning had an unfortunate result. It cost him his business. Flush with resources in the dotcom mania, Kip had invested in several business models simultaneously. In the subsequent bust, the company could not sustain such lavish funding.

Because he had not identified critical unknowns and gathered evidence against each, Kip did not know which parts of his business were succeeding and which were failing. The business could only be viewed as a whole. And as a whole, it failed.

(Vijay Govindarajan is the Earl C Daum 1924 Professor of International Business and the founding director of the William F Achtmeyer Center for Global Leadership at the Tuck School of Business at Dartmouth College.
Chris Trimble is on the faculty at the Tuck School of Business at Dartmouth College. He is also the executive director of the William F Achtmeyer Center for Global Leadership at Tuck.
Copyright: Vijay Govindarajan and Chris Trimble)