Plan B: How to Hatch a Second Plan That's Always Better Than Your First

258 Pages·2011·106.57 MB·English

by  David Kord Murray

PLAN
How to Hatch a Second Plan That's
Always Better Than Your First
David Kord Murray
Free Press
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Designed by Jacquelynne Hudson
Manufactured in the United States of America
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Library of Congress Cataloging-in-Publication Data
Murray, David Kord
Plan B: How to hatch a second plan that's dways better than your 6rst / David Kord
Murray.
P' cm'
1. Business planning. 2.Creative abilfty in business. 3. Creative thinking. I. Title.
HD30.28.M87 2011
658.4'Ol-dc22
2011010010
ISBN 978-1-439L-9835 -3
ISBN 978-l-439L-9838-4 (ebook)
For Katie
Being your father is the most important thing I am. Thanks
for Disney, Angels Landing, cheer, NYC, Lake Powell, not
allowing dogs in the park, and being you.
CONTENTS
Change
INTRODUCTION. Planning for the Plans to 1
Strategy
cHAPTER t. Conceiving the Grand 13
Operation Mulberry, iTunes as a Can Opener,
and tbe Seeds of Euolution
Problems
cHAPTER z. Choosing Your 23
A Concept Called the Facebook, Soluing tbe Healtb Care Crisis,
Dying of a Tbeory, and tbe Principle of Problems
lnventory
CHAPTER 3. Making a Tactical 39
A Successful Failure, the Fat Man and Little Boy, and tbe
Principle of Solutions
Battlefield
CHAPTER 4. Selecting Your 51
Circus of tbe Sun, Von Clausewitz, Positioning and tbe
Principle of Force
Tactics
CHAPTER 5. Aligning Your Strategy and 63
Ten Tbousand Empty Stores, the Motber and Cbild Reunion,
and tbe Principle of Concurrent Thinking
Goals
CHAPTER 6. Setting Your 83
The IBM 360, a Rornan Longsbip, and tbe Principle of
Cascading Objectives
A
CHAPTER 7. Writing Plan 95
Ernest Herningway, Writing as Tltinbing Ambience Candles,
and the Principle of Paper Plans
Futures
cHAPTER 8. Forecasting Your Multiple 111
Memories oJ tbe Future, tbe Hindsight Bias, Minus 748o,
and the Principle of Muhiple Futures
Failure
cHAPTER g. Reinforcing Success and Abandoning 131
Beginners Sex, the Slippery Slope, the Winner's Bias, and the
Principle of Doubt
viii
Contents
Metrics
CHAPTER 10. Managing by 151
News Feed, LurkingVariables, tbe Confrmation Bias, and tbe
Principle of Correlation and Causation
CHAPTER t1. Evolving to Plan B 173
Preferred Capital, the Principle of Tactical Alterations, and the
Principle of Strategic Alterations
CHAPTER 12. Creating the Culture 193
Tbe Lake Wobegon Efect, tbe Illusion of Knowledge, and the
Principle of Strategic Debate
coNcluslotrt. Plan B as the Fluid Child of Plan A 215
APPENDIX ONE. The Eleven Principles of
Management
Adaptive 223
APPENDIX TWO. The Nine Processes of
Management
Adaptive 229
BIBLIOGRAPHY
235
ACKNOWLEDGMENTS
241
INDEX
243
PLAN
B
Introduction
Planning for the Plans to Change
The kid looked out of place. He wore a hooded sweatshirt, dirry
jeans, and T-shirt with something pithy written across his chest.
He was slouched over in deep thought, so I couldnt read what the
shirt said. The wrinkled clothes, dark circles under his eyes, and
apparent lack of sel0awareness made me think that he hadnt slept
in days. I figured he was a courier or bike messenger.
We were all in a small waiting room; my business partner,
the kid who hadnt slept in days, and me. The posh office was
the headquarters of Accel Partners, a multibillion-dollar venture
capital firm in downtown Palo Alto. Theyd funded start-ups like
Macromedia, Rhapsody, and Veritas Software. We were there to
pitch our own start-up, an online tax preparation company called
TaxNet. Wdd had a successful first year, had more than 120,000
customers, and now needed funding for product development and
aggressive marketing. We were making the rounds in Silicon Val-
ley, up and down Sand Hill Road in the hope of getting $20 mil-
lion to fulfill our strategic plan.
As we waited, the kid leaned back in his chair, and I could see
that his T-shirt read cooe MoNKEy. Aha, I thought. He wasnt a
PLAN B
couriet he was a programmer, and he was there to pitch a business
just like we were. He was the competition.
"Do you have a companyi" I asked him.
'A company? No, not. reallyi' he answered, never looking up
or making eye contact. Then he thought for a moment and said,
"Well, sort of ...I guessJ'
Before I could probe any further, Andy walked into the room.
Andy was an analyst with Accel, and Tom and I stood up to shake
his hand; the kid did not.
'We'll be ready for you guys in a few minutes," Andy told us.
Then he turned to the kid and said,"Come on inj'
Later in the day, Tom and I learned that Accel had approved
the funding of the kid's"sort of company" and he had been there to
sign rhe paperwork and get $12 million for a minoriry share of his
start-up. I remember Andy trying to explain the business model
to us. It didnt rcally make sense to me. When I asked how it made
money, Andy said it didnt. It seemed absurd, that Accel would
take a minority position in a company with no revenue stream.It
also made me think that we had a much bemer idea than the kid
who hadnt slept in days.
I didnt know it at the time, but I had just witnessed a historic
moment in the history of Silicon Valley. Today, Accel's $12 mil-
lion investment is worth billions, and the "sort of company" is
better known as Facebook, while the kid is now a multibillion-
aire, beffer known as Mark Zrckerberg. Today, whenever I see an
interview with him or a mention of him in the press, I think back
to that day and then ask myself this question: How did Zucker-
berg get from the waiting room where I met him to a place on the
world stage where his idea is used as a means of communication
berween friends and family while at the same time it's being used
to engineer the nonviolent overthrow of oppressive government
regimesl Or, more simply: How did Facebook evolve so success-
tullyi
Planning for the Plans to Change 3
The story of Facebook is well known. Hell, it was rurned into
an Oscar-winning screenplay. So there's no need to recount it all.
What is especially interesting and does bear attention here is the
methodology thet Zuckerberg used to drive the evolution of his
business model. You see, Facebook didnt just appear fully formed
in his mind one day; and, contrary to popular belief,he didnt steal
the idea for it. He followed an evolutionary process to build the
site, a practical way to manage the day-to-day operations of his
business that was combined with a deeply theoretical and strategic
understanding of social networking. From the beginning Zu.ck-
erberg was involved in the development of new tactics and new
features, writing code, identifyingproblems, and then developing
innovative solutions for solving them. He still is. Put simply, he
is very tactical. At the same time, he was theorizing about social
necworking and developing a particular hypothesis about it. He is
also very strategic. It's those two qudities that allow him to intel-
ligently make continued modifications to his business model, both
tacticd and strategic, that are incredibly effective.
Today, the business environment is changing so quickly that
such a form of adaptive management is needed to keep up with
it. Product life cycles that were once measured in decades are now
being measured in years, even months. The average iPhone app
stays on the bestseller list for a few weeks, then becomes obsolete.
Technologies are being developed that constantly creete new busi-
ness models and in the process destroy old ones. Things archap-
pening so fast that by the time your CEO signs offon his strategic
plan, it's out of date and in some cases even archaic. Businesses
must make the strategic planning process part of the implementa-
tion process, so that business plans can adapt to the environment,
the way Facebook does. If they doni they'll end up as a footnote
in the history of failed business models.
The history book of business contains a long chapter on com-
panies that failed to adapt as the world changed around them.
PLAN B
Thke a case in point. Growing up in the suburbs of Boston, I once
had aspirations to work at the Polaroid Corporation. For decades
it owned the instant photography business, and it was known as
one of the best employers in Massachusetts. Then, in the 1990s,
something happened: digital photography. At 6rst digital cam-
eras were very expensive and the qualiry of their photos was less
than stellar, so they didnt appear to be a serious threat. But as the
decade wore on they got cheaper and better, and Polaroid's sales
began to stagnate,In 1995, the company hired a new CEO to
devise a strategF for the problem. In the next three years he cut
costs, reduced the staff by more than three thousand employ-
ees, and managed to roll out more than sixry new products. But
despite all this, instead of adapting to the new technology, the
company stayed focused on its existing model."Some people think
photography is going to go away as everything in our industry
becomes digitizedi' the new CEO said. "But I disagree. I think
analog photography will endure, because it still satis6es many
users, and digital imaging businesses will grow up around it, creat-
ing a much bigger, faster-growing marketi'So, while other compa-
nies developed new digital cameras, Polaroid cretted a low-priced
analog camera called the One Step and products for specific seg-
ments, such as the Barbie Instant Camera.It didnt work, and the
company filed for bankruptcy in 2001.
In the last few years, the chapter on failed business models has
expanded to include names such as Circuit Ciry, General Motors,
and Blockbuster. Each of these companies hung on to an obsolete
model and so feiled to develop a new plan-a Plan B-that was
best suited to the new world.In hindsight, it looks as though they
just made some bad predictions and some bad decisions, and we
might conclude that the companies must have been run by fools.
But thatt not the answer. Fools were not running the companies.
It was the process they used that was foolish, not the people oper-
ating it.It's a process that was developed in a simpler dme, when