Discovery-driven planning

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Discovery-driven planning is a planning technique first introduced in a Harvard Business Review article by Rita Gunther McGrath and Ian C. MacMillan in 1995 [1] and subsequently referenced in a number of books and articles. [2] [3] Its main thesis is that when one is operating in arenas with significant amounts of uncertainty, that a different approach applies than is normally used in conventional planning. In conventional planning, the correctness of a plan is generally judged by how close outcomes come to projections. In discovery-driven planning, it is assumed that plan parameters may change as new information is revealed. With conventional planning, it is considered appropriate to fund the entire project, as the expectation is that one can predict a positive outcome. In discovery-driven planning, funds are released based on the accomplishment of key milestones or checkpoints, at which point additional funding can be made available predicated on reasonable expectations for future success. [4] Conventional project management tools, such as stage-gate models or the use of financial tools to assess innovation, have been found to be flawed in that they are not well suited for the uncertainty of innovation-oriented projects [5] [6]

<i>Harvard Business Review</i> journal

Harvard Business Review (HBR) is a general management magazine published by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. HBR is published six times a year and is headquartered in Brighton, Massachusetts.

Rita Gunther McGrath American business writer

Rita Gunther McGrath is an American strategic management scholar and professor of management at the Columbia Business School. She is known for her work on strategy, innovation and entrepreneurship, including the development of discovery-driven planning.

Contents

Discovery-driven planning has been widely used in entrepreneurship curricula and has recently been cited by Steve Blank as a foundational idea in the lean startup methodology [7]

Steve Blank American businessman

Steve Blank is a Silicon Valley entrepreneur based in Pescadero, California.

Lean startup is a methodology for developing businesses and products, which aims to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning.

Five disciplines

A discovery-driven plan incorporates five disciplines or plan elements:

  1. Definition of success for the plan or initiative, including a "reverse" income statement
  2. Benchmarking against market and competitive parameters
  3. Specification of operational requirements
  4. Documentation of assumptions
  5. Specification of key checkpoints

Using discovery-driven planning, it is often possible to iterate the ideas in a plan, encouraging experimentation at lowest possible cost. The methodology is consistent with the application of real options reasoning to business planning, in which ventures are considered "real" options. A real option is a small investment made today which buys the right, but not the obligation to make further investments. [8] [9] [10]

See also

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Strategic planning and uncertainty intertwine in a realistic framework where companies and organizations are bounded to develop and compete in a world dominated by complexity, ambiguity, and uncertainty in which unpredictable, unstoppable and, sometimes, meaningless circumstances may have a direct impact on the expected outcomes. In this scenario, formal planning systems are criticized by a number of academics, who argue that conventional methods, based on classic analytical tools, fail to shape a strategy that can adjust to the changing market and enhance the competitiveness of each business unit, which is the basic principle of a competitive business strategy. Strategy planning systems are supposed to produce the best approaches to concretize long term objectives. However, since strategy deals with the upcoming future, the strategic context of an organization will always be uncertain, therefore the first choice an organisation has to make is when to act; acting now or when the uncertainty has been resolved.

References

  1. ↑ McGrath, R. G. & MacMillan, I. C. 1995. Discovery driven planning. Harvard Business Review , 73(4): 44–54.
  2. ↑ McGrath, R. G. & MacMillan, I. C. 2009. Discovery driven growth: a breakthrough process to reduce risk and seize opportunity. Boston: Harvard Business Publishing.
  3. ↑ Christensen, C. M. 1997. The innovator's dilemma: When new technologies cause great firms to fail. Boston: Harvard Business School Press.
  4. ↑ Block, Z. & MacMillan, I. C. 1985. Milestones for successful venture planning. Harvard Business Review , 63(5): 84–90.
  5. ↑ Rajesh, S. & Zafar, I. 2008. Stage-gate controls, learning failure, and adverse effect on novel new products. Journal of Marketing , 72(1): 118. JSTOR   30162204
  6. ↑ Christensen, C., Kaufman, S., & Shih, W. 2008. Innovation killers: how financial tools destroy your capacity to do new things. Harvard Business Review , 86(1): 98–105, 137.
  7. ↑ Blank, S. 2013. Why the lean start-up changes everything. Harvard Business Review , 91(5): 63–72.
  8. ↑ McGrath, R. G. 1997. A real options logic for initiating technology positioning investments. Academy of Management Review , 22(4): 974–996. JSTOR   259251
  9. ↑ van Putten, A. B. & MacMillan, I. C. 2004. Making real options really work. Harvard Business Review , 82(12): 134.
  10. ↑ Dixit, A. K. & Pindyck, R. S. 1994. Investment under uncertainty. Princeton: Princeton University Press.
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