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Why planning to fail might be the best thing you ever did

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You will not have to talk to many accountants about business planning before the old cliché 'fail to plan and plan to fail' is rolled out. What typically happens next is a lengthy document is produced that describes a single view of the future and espouses what you plan to do to make money in that future. The only certainty is that what happens in reality almost never reflects the plan, which itself is probably out of date within a month. I have written before about the volatile, uncertain, complex and ambiguous (VUCA) world in which we now live and suggested that business agility may be the antidote. If chaos really is the new normal, where does business planning fit into that world?

The answer seems to lie in recognising that most experts are unable to predict the future with any certainty and almost never anticipate the unintended consequences of past events or actions. What chance for you then? What we need to do with our plans is to stop gambling on a single outcome and instead stress test our strategies against various scenarios so that we can anticipate a range of responses that we might make to a range of possibilities. Such an approach is simply a risk reduction exercise, by predetermining how our strategies will develop in multiple future scenarios, rather than hanging our hats on just one outcome.

But the agile business goes further than this. An agile business embraces operational and market changes as part of its day to day activities. This is a business where decisions are made quickly and often, and frequently those decisions are made from the bottom up not the top down by those people at the coal face rather than the senior management.

How does all this suggest that planning to fail is the route to success? What the evidence shows is that agile businesses know that failing quickly, failing small and failing often is a better approach than the dogged pursuit of a plan that leads ultimately to a late, single, catastrophic failure. Their structures allow for their people on the ground to make sharp responses to real situations; in effect finding the right solution for the market by incremental changes, finding the best solution by thoughtful trial and error.

No doubt there are many accountants recoiling in horror at that thought. Trial and error is traditionally seen as a recipe for disaster and so we become stuck in a loop as we search for the perfect plan whilst the market is changing all around us. As Clausewitz said: "The enemy of a good plan is the search for a perfect one." Better to start in the expectation that the idea is not yet perfected and have the capability to develop and mould the solution in real time in a real market. It is this ambiguity that is challenging to cope with.

What then for the future of the business plan? In a rapidly evolving world we need plans that are equally capable of evolving. The strategic outcomes will remain constant, but a prescriptive business plan developed by the senior management team on the annual away day just does not cut the mustard any more.

Ultimately the purpose of a business plan is to reduce the risk of failure. In a stable world with a predictable future, a plan based on a single view of that world is adequate. In a world of chaos and constant change, an agile business that is nimble and dynamic, responding to success and failure as it happens and without a fixed plan, looks more sustainable.

Will Abbott
Partner, Head of Business Advisory
Randall & Payne LLP

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