For a long time, startups had to learn how big companies do business planning. Now the flow is reversing and we see management consulting organizations pitch methodologies to big companies that have come from the start up world.
Now that software is eating the world, big companies seek to understand how such tiny young companies can have such big impact so quickly.
I am deliberately using the word Business Planning rather than Strategic Planning because Strategic in a corporate setting has all too often had the connotation of being divorced from near term business priorities. Startups who need to hit KPIs in order to close the next funding round or meet payroll from revenue cannot afford to take their eye off near term priorities for long. Business Planning must have a long term view and a near term view – which brings us to Zoom Out Zoom In methodology.
Zoom Out Zoom In methodology
When I heard Zoom Out Zoom In methodology being described at a conference, my instinctive reaction was:
This is how startups think.
Having been a startup guy for a much of my career, it just seemed intuitive and real.
The problem with any methodology is that it quickly degenerates into a fad with magical thinking as in “all we need is a bit of Zoom Out Zoom In methodology”. So I hesitate to talk about methodology; it is the thinking behind it that matters and the integration with execution.
The startup mantra is:
Focus on today and the big picture future, ignore the rest.
It is a barbell approach.
At one end of the barbell is today. Today is about the immediate stuff you have to get done to grow the business, to deliver to clients, collect cash and so on. In corporate term this means this quarter and next quarter.
If the next quarter looks bad, investors can dump your stock and you will be taken over – a strategic plan then gets thrown into the “round filing tray”.
The other end of the barbell is the big picture. The big picture is looking at how the world might look like 5-10 years from now and start building towards that. This is what Daily Fintech refers to as skating to where the puck is headed (not where it is now).
The medium term external view that big companies have traditionally focussed on is tough to envisage. Another startup mantra is:
Change takes longer than we think but the eventual impact is bigger than we think.
That is the lesson we learned from the Dot Com era. Projections made c 1996-1999 were far too optimistic on timing but the eventual impact of the Internet going mainstream has been bigger than even the most wild forecasts from that era. It is the same with Blockchain technology – it will probably take longer than many think but the eventually impact will be much bigger than envisaged.
Zoom Out is not just Scenario Planning
A conventional strategic planning tool is Scenario Planning. The leader was an oil company – BP. Oil is a market where both demand and production are clearly understood. It is like post war manufacturing companies – you could easily forecast demand so then you could plan the manufacturing process. There are external factors influencing the price of oil (such as macro cycles and how cartels behave), but this is only one variable.
In markets that are being disrupted (or facing digitization or undergoing a big shift or at an inflection point or whatever language you want to use), Future Scenario Planning is too rigid.
John Hagel, one of my favorite management thinkers (who I finally got to meet in person at SIBOS in Geneva) describes this as planning based on trajectories not terrain.
During Zoom Out, one seeks answers to two questions:
1. what will your current business look like in that future world?
2. what does the profile of a market leader look like in that future world?
If profile of a market leader in that future world look looks like a minor evolution of your current business, then no strategic action is needed, it will be business as usual. If however, the profile of a market leader in that future world look looks fundamentally different to your current business, then the business needs to look at strategic options.
Zoom In, looks at the immediate things that could be done that a) bring in near term revenue and b) move towards the profile of a market leader in that future world.
Strategy every day
Startups don’t see strategic planning as a one time activity. They do a bit of strategic planning every day. The plan is constantly being evaluated based on market feedback. Every action is seen as an experiment on the market. There is no success or failure in an experiment on the market. You might have a thesis, but you are not attached to that thesis. Like a scientist running an experiment, you seek truth even if it invalidates a thesis. From that truth, you adapt the plan.
Your Zoom Out thesis has to be correct, but that can be totally vague in terms of timing and scope. It can be something like “at some point in the future”:
– people will shop online to save money and time
– people like to communicate with each other online
– people will exchange value online in real time using Blockchain technology
As you grow, the experiments become bigger and have more impact. The problem for big companies is that any experiment has to be on a massive scale and the cost (in terms of brand damage and management bandwidth more than financial) of getting your thesis wrong is too high. That is what leads to plans that take 6 months and a Minimum Viable Product that takes 2 years and only then do you find that the market is not interested. In those 30 months, the market has changed and some startups have got to Product Market Fit and are starting to scale.
The only way for big companies to fix that is with skunk works type intrapreneurial ventures within the company that operate without brand or other company resources other than small amount of capital (which increases as the startup hits metrics). The big capital decision is when to use the brand (at the scaling phase).