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Planning is a risk reduction tool, not a value creation one. To create value, you have to have real commercial interactions in the market. Market feedback better informs strategy than brainstorming sessions ever will, yet companies may pay millions for strategy consultants but not the same amount for limited product experiments.

A friend of mine has been a technology investor all his life. He has a particular passion seeing startups take ideas, turn them into minimum viable products (MVP), test them in real markets and pivot as needed for the next iteration of products and services. Getting ideas out of the back-office and into the market quickly, as he would put it. He has guided such agile startups in industries ranging from software through fintech to telco equipment in both the US and China.

Whenever his companies “disrupt” incumbent competitors he admits to always being amazed that bigger rivals with better access to capital, talent, and channels are often incapable of mounting timely defenses in the market.

His observation is that there is a fundamental difference in how startups vs big companies perceive market strategy and more importantly how they spend their time when innovating. Big companies spend 80% of their time planning and strategizing and 20% actually trying products in markets. Startups are the opposite, most of the effort is releases and pivots with real customers and products.

For example, Tencent in China is famous for such iterative approach by funding and incubating mobile startups, encouraging them to launch products early and often and keep pivoting the product, pricing, promotions until the adoption reaches a certain threshold, say 5 or 10 million active users. If it does not, the product is shelved after a certain number of pivots. Early customers are actually funding later experiments and become customers for the future launches of similar products. It becomes a virtuous cycle. He believes this mindset is followed in many larger Chinese companies which is the reason they are moving so much faster in AI, blockchain, automation, fintech and other areas than their European or US counterparts.

No such iterative value creation happens in planning, proofs of concepts, strategy retreats and similar endeavors devoid of real, commercial market feedback. Planning is useful to avoid risk and traps but should be limited to a small portion of innovation time and resources.

Build, ship, get feedback and adjust the approach until the customer’s need is met. That’s value creation and it has always been. There is no ROI on planning alone.

At least that’s what my friend convinced me of.

 

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