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Discovery Driven Planning

Basics

• Bake profitability into your venture's plan
• Calculate allowable costs
• Identify your assumptions
• Determine if the venture still makes sense
• Test assumptions at milestones

In Action

• Start with a reverse income statement: total and per unit figures
• Lay out all of the activities needed to run the venture: unit economics, sales, manufacturing, operations, capital assumptions
• Track all of the assumptions (assumption, measurement)
• With better data, revise the reverse income statement
• Plan to test assumptions at milestones

Dangerous Implicit Assumptions

• Customers will buy our product because we think it is a good product.
• Customers will buy our product because it is technically superior.
• Customer will agree with our perception that the product is "great"
• Customers run no risk in buying from us instead of continuing to buy from their past suppliers.
• The product will sell itself.
• Distributors are desperate to stock and service the product
• We can develop the product on time and on budget
• We will have no trouble attracting the right staff
• Competitors will respond rationally
• We can insulate the product from competition
• We will be able to hold down prices while gaining share rapidly
• The rest of the company will gladly support our strategy and provide help as necessary.

Also

• For every disaster we had a spreadsheet that looked great
• Don't use conventional planning for highly uncertain things

McGrath, R. and MacMillan, I. "Discovery-Driven Planning." Harvard Business Review. July-August 1005.

Connections

from: Harvard Business Review Article portfolio-risk-scoring
playing-to-win