Sunday, January 24, 2010

Four Planning Strategies

Michael Frese divides real-world small-business planning into four methodologies. As you read, try to think about how you would apply these methodologies to your current projects.

Reactive Strategy.  Your actions are not planned in advance, but are instead determined on-the-fly in response to the current situation.

Complete Planning Strategy. Your actions are proactively planned well in advance. You try to have a clear knowledge of what tasks you will need to complete and what scenarios will occur, and you try to anticipate exactly what problems may arise.

Opportunistic Strategy. You begin with a basic plan, but then adjust the plan frequently as new information presents itself.

Critical Point Strategy. "Do the hardest part first," to paraphrase Bloomberg. You start out with a goal and tackle the most important or the riskiest barrier to achievement of your goal. Once you've implemented a solution to that problem, you go on to the next-highest priority issue.

From two related studies of 80 small business owners in the Netherlands:

"Reactive Strategy was negatively related to firm success, while a Critical Point Strategy was positively related. The combination of Critical Point and Opportunistic Strategy was most and the combination of Opportunistic and Reactive was least successful." -How to Plan as a Small Scale Business Owner
The Critical Point and Opportunistic strategy combination was also the most common combination in the sample.
"Business owners that perform poorly employ a Reactive Strategy, with poor performance leading to increased use of reactive behavior. High performing business owners start out focussing on the most crucial issues (Critical Point Strategy), with high performance leading to a more top-down (Complete Planning) approach... Strategy use is dependent upon the type and level of environmental uncertainty. Complete Planning strategy is used less frequently in a fast changing environment and more often in a complex environment." -Strategies, uncertainty and performance of small business startups
Complete Planning can be beneficial if events usually unfold as planned, but most of us in Silicon Valley find such predictability elusive.