Not a single Fortune 500 was started with a business plan; not one. They understood that the second worst thing someone starting a business can do is create a traditional business plan, and the worst thing they can do is follow it.
Exhaustive Pre-Planning Is a Disease
Highly detailed pre-planning is a business disease of the Industrial Age that became popular as companies grew to giant proportions and as educators began imposing their cognitive world view on an otherwise intuitive business world. They forgot how they got there and started telling everyone else to do something they would have never done—plan out the next five years of your business in detail before you get started.
How it Really Works
Jason Fried, co-founder of 37Signals tweeted, “Unless you are a fortune-teller, long-term business planning is a fantasy.”
Bill Hewlett said of the early days of HP, “When I talk to business schools occasionally, the professor of management is devastated when I say we didn’t have any plans when we started.” With $500 and no clear direction at all, Hewlett and Packard built the cornerstone company for Silicon Valley.
Dick and Mac McDonald opened a hot dog stand in 1937, which didn’t become the McDonald’s we know until eighteen years later, when Ray Kroc bought the rights to it. Just about every successful business has followed a similar path to one of these three; no fancy business plan and a lot of groping around to find the right formula.
Pre-Planning is a New Thing
Pre-planning wasn’t a hallmark of business before the Factory System of the early 1900s. But when you’re propping up a giant factory or trying to take over an entire industry, it lends itself to a lot of senseless pre-planning.
Business plans really only became popular recently, and the rest of us have caught the disease. It has become an obsession in business schools and with government organizations like the SBA. Ironically, it has only picked up steam as the Industrial Age which spawned it fades behind us. This obsession is a natural (but unhelpful) outcome of an Industrial-based education system that relies more heavily on cognitive and didactic lecturing than on real-world learning.
Pre-Planning Is Unsupported By The Facts
In 2011 a website posted an article about Fortune 500 businesses that had started in a garage or other interesting places. They listed the top five, then gave the seven lessons you should learn from these startups. Number one was “Develop a business plan”. This was a strange conclusion, since there was nothing in the history of these startups that would lead anyone to conclude a business plan was a good idea. It was a giant, illogical and biased leap, and completely ignored the history of these companies. But the obsession with exhaustive pre-planning that we inherited from the Industrial Age is so ingrained that we see it even where it doesn’t exist.
Pre-Planning Favors Lawyers, Not Business Founders
The roots of this obsession go back to the late 1800s. Judge Lord Esher, an Englishman steeped in the Industrial Age, expressed the need for pre-planning in every facet of life. His teaching has evolved into what is called the Precautionary Principle, which generally states that if you can think of something that might go wrong, don’t do anything until you have a contingency in place to cover for every paralyzing possibility. If you do something without having covered all possible contingencies, according to Judge Esher, you’re criminally liable.
Lawyers, who are largely Industrialists, love the Precautionary Principle. It cost McDonald’s millions of dollars because someone spilled coffee on herself that already had a “hot” warning label. The Precautionary Principle says McDonalds should have never served hot coffee without knowing that some judge would find their warning too small, or that someone would try to open the cup one-handed in between their legs while driving.
Pre-Planning Kills Creativity
That all sounds pretty reasonable, except it is sucking the life out of our willingness and ability to create, innovate and take the risks necessary to build great things. The cleaned up world we inherited from the 19th and 20th century Industrialists have nearly sterilized the creativity right out of us. We are becoming so risk-averse that it is a national epidemic. The education system, the government and big business all are teaching us to live by the Precautionary Principle; don’t move until you have everything figured out.
Great Founders Do Very Little Pre-Planning
Great businesses don’t start that way, regardless of how much professors and the education system extol the virtues of pre-planning and the sacred cow called “The Business Plan”. Bill Hewlett’s version of planning rules, “We were just opportunistic. We did anything to bring in a nickel. We made a bowling alley foul-line indicator, a clock drive for a telescope, a thing to make a urinal flush automatically, and a shock machine to make people lose weight. Here we were, with about $500 in capital, trying whatever someone thought we might be able to do. So we got into this thing not by design but because it worked out that way.”
That’s how real businesses start, including virtually every business you can think of today that has been highly successful – they made it up as they went along, and planning was something they did as they moved, not before they moved.
Detailed Pre-Planning Doesn’t Work
While speaking to thousands around the world, I find that somewhere between 3-6% of business owners who did not need a bank loan to start, created a business plan anyway. But I have yet to find a single business plan at any level that worked out the way the plan said it would three to five years later. It’s like taking snapshots of traffic lights from one place to another and then trying to actually drive using the photos. Nothing good will come of it.
Movement Creates The Plan
I’m not against planning – we should be doing it at every step along the way as we are moving. I’m not even against a little bit of pre-planning. But massive pre-planning has a near 0% effectiveness at doing anything but killing innovation.
Successful companies do it more like HP. They come up with a very simple idea, get moving, then evaluate and plan as they go. They don’t stop to plan, because successful entrepreneurs understand that planning never creates movement, but movement creates the plan. Every Fortune 500 is a testimonial to this. I’ve started ten successful businesses that way. Stop planning. Get moving.
Implement Now. Perfect As You Go.
Massive pre-planning is a business disease of the Industrial Age. Dump the business plan. Implement now, and perfect as you go. If you do, you have a much higher chance of success than if you plan it all out before you get started.
Article as seen on Inc.com