93% of businesses abandon their original plan

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I wrote in 2009 that: I DON’T BELIEVE IN BUSINESS PLANNING. That got quite a few comments, some in agreement and some not.

I was told by one commentator: If you plan and never do then fail is assured.

And another said: To succeed long term though, (…) require planning, unless the plan is to react in a status-quo knee-jerk manner.

To prove my point, I followed that post up by taking a dig at the inability of all the ‘business planners’ to see the GFC coming.

Well, it seems as if a Harvard Professor agrees.

Amar Bhidé researched and wrote The Origin and Evolution of New Businesses (Oxford University Press,) and found that 93 percent of all successful companies had to abandon their original business plan — because the original plan proved not to be viable

Roy Williams (Wizard of Ads) writes on Bide’s work and concludes:

Successful companies have an ability to improvise. Unsuccessful companies blindly "stick to the plan.

The principal difference between hope and a plan is presumption about the future.

The intended plan is deliberate.
The improvised plan is emergent.

Eric Barker describes the difference between ‘deliberate’ and ‘emergent’ as follows: 

"Deliberate is what’s in the business plan, the PowerPoint deck, the list of goals. And that’s what ends up changing 93% of the time. Emergent is what you find along the way. It’s when your baby nephew ignores the gift you bought him… but LOVES the shiny wrapping paper. The heart medication research… that ends up becoming Viagra."

I called the ‘emergent plan’ the business model – that is the FRAMEWORK that describes how you intend to produce money in your business. I have written many times that our ability to change is the core capability we must acquire.

And now the professor agrees. Read that opening line again: 93% of successful businesses abandon the original plan.

Despite the poor track record and low probability of success of a business plan, WHY do organisations, banks, consultants and the like STILL insist on business planning as some sort of panacea?

I think the world is catching on and moving on. In the current internet start-up culture we even have a word for it – you ‘PIVOT’ the business.

  • GROUPON started as ThePoint.com, a site launched in November 2007 that lets you start a campaign asking people to give money or do something as a group 
  • INSTAGRAM founders started a location-based service called Burbn, most comparable to Foursquare.
  • FLCKR started a ‘Game Neverending’, a massively multiplayer online roleplaying game
  • And FACEBOOK once was Facemash, a site comparable to HotOrNot.com, putting two pictures of people next to each other and asking the user to identify which one was 'hotter.'

There is a very long list, Google the topic if you are interested.

The first flaw of every plan is that it fails to appreciate that the future is not more of the past. And even if the planners can see that future clearly, it suffers from the second flaw of all business plans; that it reflects the prejudices, the fears and the internal politics of the people writing the plan.

The solution is to develop and/or understand your business model very clearly. Then construct a business system that will help you become antifragile (not merely resilient) so that you constantly adapt (and pivot) towards success.