The Business Plan
If failing to plan is planning to fail, then how do some leaders manage to succeed without the aid of a formal business plan? Business planning has a painful reputation. In fact, I regularly speak with leaders of successful organizations who tell me that it is among the most frustrating and painful challenges they have with some going so far as to avoid formal business plans entirely! Moreover, why do so many entrepreneurs’ lived experiences stand in opposition to conventional wisdom that planning must precede success, with effective planning for early-stage startups remaining largely a black box for practitioners and researchers alike? If success is predefined within the boundaries of business plans, why do we see global corporate juggernauts emerge such as Facebook and Google or regional firms develop such as the Texas grocery chain HEB that started as a small country store in 1905 and grew to become the state’s largest private employer? Clearly these organizations look nothing like the firms their founders envisioned in any business plan they wrote.
Successful firms are not defined or bound by their business plan and research suggests that improvisation can be a perfectly legitimate business strategy. Yet almost any Business 101 textbook or online startup guide positions a well-crafted business plan among the first steps on the journey to success. Military strategists continue to plan in advance despite the observation from Prussian Field Marshal Helmuth von Moltke (the elder) in the early 1800’s that “the first casualty of war is the plan.” Business leaders continue to produce business plans despite regularly admitting that written plans become out of date well before the ink dries on the page. What gives? Clearly, there is more to success than conventional wisdom suggests. It’s time to unpack our assumptions and reexamine whether a business plan is even worth the time it takes to produce it, especially given how quickly it is made obsolete as circumstance evolve in a digital-first economy.
As elementary as it may seem, the first question to wrestle with is whether or not we understand what a business plan really is! If you have ever typed “business plan example” into Google, you know that the more that 3,800,000,000 results will include everything from plans with hundreds of pages that feel like a small novel to plans that fit on a single page. Even within websites from a single organization you are likely to see multiple iterations for what a business plan can be. For example, if one enters “business plan template” in the search field of the SCORE website (a well-known, business-focused, non-profit) it returns 32 different business plan outlines with written instructions to complete them. These templates vary in length and complexity, and are designed for multiple business types at various stages of organizational maturity.
Most people assume that having more choice is better than having less, but this is true only to a certain point. Decision-fatigue and choice overload can set in when the number of available options becomes overwhelming. This is especially true if one believes that there is a single correct answer that must be discerned from the mass of options in order to achieve optimum results. However, the good news is that when it comes to business planning, one need not worry about getting THE right answer. If you are writing a business plan for reasons that are meaningful to you and to your organization, then any approach that speaks to your goals for crafting it can work. Results depend on how the plan is used after it is written, not how it looks on the page. Leaders have the freedom to make a business plan be whatever they need it to be in order to keep their team on the same page and move their organization forward.
So if the reason behind the plan is more important than the method used to create it, then we need to examine why organizations and entrepreneurs end up writing business plans in the first place. Research published in the Journal of Management in 2004 provides some insight. In a two year study of nearly 400 entrepreneurs, researchers identified the forces that pushed leaders to produce a business plan and examined business and organizational outcomes to see whether the having a plan really made a difference. They found that “institutional variables, such as coercion and mimetic forces, are important predictors influencing the propensity… to write business plans” (Honig and Karlsson p. 29). In other words, people wrote business plans when they felt they had to (coercion) or because that’s what they saw everyone else do (mimicry). Given that, it’s no wonder that they also found no evidence that producing a business plan actually increased positive outcomes such as profitability relative to those that did not produce a plan in their study! If a business plan can take almost any form and the only reason you are writing one is because you think you have to or because you want to mimic what other successful leaders have done, STOP. That approach will not create your desired results.
In their work on getting to plan B, Mullins and Komisar point out that successful organizations evolve and change over time and few of today’s mega-brands look anything like what their founders envisioned before the company began. Successful organizations are rarely designed: They are discovered and grown over time. In that light, the main objective for a business plan is not to serve as a recipe that the organization must follow in order to produce its product or service. Rather, it is a document that summarizes the organization’s current thinking and priorities. Leaders should write a business plan in order to clarify their thinking so that others can join them and contribute.
Effective business plans spell out who the organization will serve and why. It uses plain language to communicate how the firm will serve its customers or clients, where leaders believe they should be adding the most value, and how decisions will be made. After reading the business plan, there should be few if any surprises about how resources will be allocated to support the work of the firm and what activities should take priority. The goal of a business plan should never be to eliminate decision-making by members of a team. Rather, it should equip employees with the context and information that they need to make decisions that are are in keeping with those of senior leaders.
Successful leaders refuse to approach business plans as a set of instructions or computer code for “programming” their business or their team. Instead, they approach their business plans in terms of a social dance whereby the skill and clarity of the following partner are just as important as the lead. To ensure that the lead is clear and the follower can respond, both dancers rely on the structure of the dance to move together without stepping on each other’s toes. All social dances include a basic step that everyone commits to memory. The basic step is to social dance as the business plan is to an organization. When the business plan or basic step is internalized, it does not eliminate creative thought or interpretation in business or the dance. On the contrary, it creates a common language for its expression! The business plan and basic step free up capacity for a creativity and improvisation by ensuring that everyone knows where their partner’s weight is committed and how they have agreed to move in sync. This is what allows each partner to step confidently in response to a changing business climate or musical stimulus, knowing they will be able to step together and move in the same direction.
I hope this article helps you relax a little when the time comes for you to produce your next business plan. Remember, the exact format of your business plan is irrelevant. You do not need to produce a literary masterpiece for your business to prosper. Even a lower quality plan can succeed if it clearly sets the stage for your organization’s broader choices and strategic focus, and if it is used to empower your team to make the day-to-day decisions necessary to play their part. What matters is why you want a plan, how you choose to use it, and whether it has what your team needs to stay on the same page as you move together. It takes a lot of work to evaluate your options but it pays to be intentional as you lead your team, organization, or enterprise. Knowledgeable guidance can help, but no one else can do the work for you. You are the ultimate authority on what your business is and how fast it can move toward what you want it to become. Use the business plan to set the tempo for the dance accordingly.
Let’s get to work!
References
Honig and Karlsson (2004). Institutional forces and the written business plan. Journal of Management
Mullins and Komisar (2010). A business plan? Or a journey to plan B? MIT Sloan Management Review
Thomas (1990). Operational Art and Analysis (OPARTAN). Military Operations Research Society
Volker and Philips (2018). Six Points: A Plan for Success. Journal of Management Policy and Practice
