Friday, May 24, 2013
Business Success Requires More Than a Good Plan
In my last post I talked about envisioning the outcome of a business plan and working back to the beginning activities to help in planning. I have used this end-to-beginning process in several business situations and it resulted in some tremendous successes.
Unfortunately excellent planning does not offset an entrepreneur’s dogged desire to pursue a business idea regardless of the hurdles that must be overcome.
In one instance I started a daily newspaper in a small town that already had a daily newspaper that was owned by a large communications corporation. The corporate daily had alienated the community and its advertisers so I felt the timing was right for a competing newspaper. I attracted investors based on this premise and told them that only one newspaper would survive.
The end-to-beginning planning process was used and all of its elements were incorporated into a Critical Path/PERT planning process. The result was the creation of a newspaper from the ground up in 90 days. The staff was focused on serving the community and we were hitting the ball out of the park in market share and revenue gains.
I had pointed out to investors, only one newspaper would survive. It was apparent from the very beginning of the planning process that to be successful would require failure by the competition. We knew that it would be difficult but our dislike of the newspaper owned by the large corporation and our belief that we would win the community support led us to believe we could overcome any obstacle.
In The Art of War, Sun Tzu says that a force that is superior in size and resources will always win. To counter this strength the smaller in the battle must capture something that is critically important to the one with superior resources.
In this newspaper war, the competitor had the resource advantage but we believed that a locally owned newspaper would gain the community support needed for a newspaper to survive. We felt this community support was the critically important advantage required by the eventual winner.
While that might have been true to some extent it overlooked the ability of the competitor to focus resources on winning that support. Also overlooked was the real critical need for our competitor to demonstrate to other communities that starting a second newspaper was not a good idea. The competitor knew that if a locally owned newspaper succeeded in this market other markets could be in jeopardy.
In this case we did not identify a specific item that, once captured, couldn’t be regained by the competition. The result was a victory for our competitor through resources expended to gain community support. Our strategy was a good one, our planning was flawless and our efforts were valiant but we could not match the resources that the competitor could focus on winning the battle.
A couple of years later I was brought into a similar battle, which we did win. In this case we carefully identified a critical revenue stream that needed to be won. We identified this early on and the result was in fact a smaller newspaper winning the advantage over the larger corporate owned newspaper. Even so the corporation did not give up the market, it offered to purchase the new locally owned newspaper at a price the owners could not refuse. So in the end Sun Tzu was correct, the force with the largest store of resources won.
I tell these stories to caution entrepreneurs that while vision, commitment, strategy and planning are critical, it is important that all obstacles to success be identified and dealt with realistically.
I have had successes over clearly dominant competitors and those successes required an objective study of the actions required and the potential reaction by the competitor. In most cases victory was based on choosing a strategy that couldn’t be reacted to by the competitor (a disruptive technology) or by feinting a move that caused the competitor to make a critical error.
This is one of the reasons I am in favor of end-to-beginning planning. This process, if used well, points up all of the potential challenges that must be dealt with to create a successful business.
The thoughtful manager will identify areas that can result in failure and plan accordingly.