Planning is important, but most people don't plan the right way

Last week Bracken touched on the usefulness of planning at a start-up. It's pretty common these days to suggest that planning isn't very useful. The consensus among most lean start-ups seems to be that you should spend as little time as possible in meetings reviewing strategies and projections, and you should instead spend that time actually building your company.

This tactic is understandably controversial. After all, if you don't spend much time planning out your business, aren't you sure to make mistakes? Businesses don't randomly become successful (except for Twitter). Success is generally the result of great ideas, great strategy, and great execution (again, this makes you wonder why Twitter is so successful). So how can you really argue that planning isn't important?

This conversation is happening all over the world. New school businesses criticize planning while old school businesses defend it. But I think that both sides are speaking different languages and that's why no one can agree. No one can really deny that planning is absolutely essential to the success of any business. The real issue is: What is the most effective way to approach planning?

10 years ago, there was only one way to plan out your business strategy. You'd sit in a conference room with your business partners and look at excel reports, powerpoint presentations, and endless printed out pages of information. You'd research the current market, come up with projections for the future, and use these numbers to predict how your company might perform. After days (or weeks or months) of this, you'd come up with some clear strategy and then you'd get to work executing it.

That strategy might have been necessary 10 years ago, because most businesses needed significant investment to get off the ground. A mistake early in the process would have been incredibly expensive, so it was worth spending as much time as possible up-front to minimize mistakes. Well, things have changed. There are many types of businesses that can be started with almost no investment other than time. Software in particular is an industry where you really only need a computer to get started (which you probably already have). As long as you can pay your electric bill, your company is still alive. This means that the cost of failure is insignificant. You can start a business today, and close down a week from now, and you'd probably just be out about a hundred dollars and some time.

The ability to accept failure without any major consequences significantly changes how a company should approach planning. It's not that planning is any less important for these companies, it's just that they can plan much more effectively by combining the planning and execution stages into one. These companies can spend a couple hours brainstorming ideas, pick a direction, and then get started. Every few hours they can review what they're doing and adapt based on their experiences. Traditional companies have to base their planning on assumptions (a.k.a. guesses). No matter how much time you spend, you can't know for sure what challenges your business will actually face until you actually face them. By iteratively planning and executing in small increments, you can make sure that you only spend time on challenges that actually matter.

So to summarize, I don't think anyone can deny that planning is essential. But I encourage everyone to consider that planning doesn't have to happen all at once before you get started. The more real-life experience you have, the more relevant information will be available to you. The more information you have, the better your plans will be.