Discovery-driven planning

The major reason for failure in initiating new growth projects in uncertain environments is the basic tenet of classic project management - the initial strategy is assumed to be correct, and large sums are expended without dealing with the fundamental assumptions.

Because assumptions about the unknown generally turn out to be wrong, new ventures inevitably experience deviations from their original planned targets. Indeed, new ventures frequently require fundamental redirection.

The probability of failure simply comes with the territory. But many failures could be prevented or their cost contained if senior managers approached innovative ventures with the right planning and control tools.

Companies possess all the data necessary to determine that a real opportunity exists but make implicit and inappropriate assumptions about their ability to implement their plan.

Even worse than individual biases are the social and political processes that effectively inhibit organizational learning. Because the test of a conventional plan’s correctness is how close projections came to outcomes, there is huge pressure on people involved in growth programs to stick to the plan and make it happen at all costs. People stick with guesses they have made public, rather than admit to possible ignorance. They’ll defend a failing approach to the brink of and sometimes past the brink of disaster, rather than make the more sensible decision to redirect or shut down a strategic project.

So you need to invest small amounts of money- money you can afford to lose-to get the information that you need so that you can invest more confidently. So, as you invest in learning.

Discovery-driven planning is a powerful tool for any significant strategic undertaking that is fraught with uncertainty- new product or market ventures, technology development, joint ventures, strategic alliances, even major systems redevelopment. Unlike platform-based planning, in which much is known, discovery-driven planning forces managers to articulate what they don’t know, and it forces a discipline for learning. As a planning tool, it thus raises the visibility of the make-or-break uncertainties common to new ventures and helps managers address them at the lowest possible cost.

Discovery-driven planning is vastly different from conventional planning. In conventional planning, success means delivering numbers close to what you thought you would deliver. In discovery-driven planning, success means generating the maximum amount of useful learning for the minimum expenditure. Discovery-driven planning is most useful when the situation is highly uncertain. Discovery-driven planning recognizes that planning for a new venture involves envisioning the unknown.

Discovery-driven planning offers a systematic way to uncover the dangerous implicit assumptions that would otherwise slip unnoticed and thus unchallenged into the plan. The process imposes a strict discipline that is captured in four related documents: a reverse income statement, which models the basic economics of the business; pro forma operations specs, which lay out the operations needed to run the business; a key assumptions checklist, which is used to ensure that assumptions are checked; and a milestone planning chart, which specifies the assumptions to be tested at each project milestone. As the venture unfolds and new data are uncovered, each of the documents is updated.

Projects implemented in highly uncertain conditions must be driven by an adaptive process in which the key uncertainties/assumptions are constantly in the forefront of project leaders’ minds. The key learning objectives are how to (1) define the key uncertainties, (2) prioritize the key uncertainties, and (3) develop a milestone-driven implementation plan based on these uncertainties.