The landscape of business is ever changing. 2011 is halfway over and already so much has gone down. I imagine most management professionals out there would agree that the first two quarters have felt like a roller coaster.
It's been on my mind to revaluate my company's business plan amid all the changes as of late and create a new plan, budget, goals etc.
But then I got to thinking about the last plan I wrote...it was a great plan but in the middle of following it the economy drastically changed! Some competitors dropped off, many old customers disappeared, we gained new ones and had to learn how to serve their needs, our vendors tightened lines of credit, some of them disappeared too. It felt like we were running a totally different organization.
I've come to realize that business planning and forecasting (especially over the long-run) is really just guessing. There are way too many variables outside of what you can actually control, like: market conditions, your competition, your customers, the wonderful economy and so on. Throughout my years in business school and in almost all the classical publications I've read, managers are advised to write "business plans."
It sounds responsible, yes. But now I ask, "What’s the point?!"
Recently I read this article by Eric Markowitz, where he writes about Araceli Camargo's notion that planning is actually bad for business. Here's an excerpt:
Some research supports this claim. In 2007, The Wall Street Journal reported that “budding entrepreneurs can spend months, sometimes years, polishing elaborate 50- to 100-page business plans that include financial projections, market research, and intricate details on day-to-day planning and organization…But skeptics say there's little concrete evidence that extensive planning is highly correlated to success." Two years later, in 2009, The Journal clarified further, noting that "researchers found no evidence (emphasis added) that either the content or presentation of the plan influences venture capital-funding decisions."
Now I'm a HUGE planner. I'm constantly making plans in my life's personal pursuits - planning events, projects, and things you have control over is a great way to be a productive individual. But the problem I see with planning in the business world is this:
Writing a business plan makes you feel in control of things you really can’t control.
I've come to realize that business is all about improvising. You have to be able to take on an opportunity when it presents itself. I've also learned that you have the most information about a situation when you’re right in the thick of it. Planning before you’ve actually done it doesn’t make any sense; before is the worst time to make an important decision. This is often the reason why you feel incredibly overwhelmed after a long planning meeting.
I'm always thinking about the future and how I should solve problems that I see on the horizon. But I no longer feel like I need to write it down and obsess over it. I use to stress about keeping to business plans, financial projections, and stratagem…but it was a waste of energy because these are all just guesses! When you start to think about it like that, it's really not so serious.
I've decided I'm going to quit guessing. I'm just going to decide what I'll do this week and stop worrying about the rest of 2011. I'll start with the most important thing I can think of and move on from there. This sounds much better than following a plan blindly that has no correlation with reality.
Paul Hill, Ph.D.
I design, plan, and evaluate economic development programs for Utah State University.
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