Discovery Driven Planning:  Identifying Key Metrics

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The skeleton of a discovery driven plan has to do with the key metrics that you use to make assumptions, and which drive the relationships among the elements featured in your plan.  It is often difficult, though, for aspiring entrepreneurs to come up with relevant key metrics.  In a really new business (think the early days of the Internet) nobody even knew what the relevant key metrics were going to be!  To help out, in our first book The Entrepreneurial Mindset, we published a set of questions that you can ask to consider what key metrics might be useful. 

Keep reading to get the full list. 

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Discovery Driven Planning:  Getting started and a dog-walking example

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To develop a discovery driven plan, you’ll proceed through five interlinked steps.  These are:

  1. Start with a compelling outcome - meaning, know what would make the investment worthwhile
  2. Benchmark your ideas against market demand and competitive offers
  3. Define the operational specifications for how the business will work, operationally, including defining your unit of business
  4. Describe and document your assumptions
  5. Identify the key milestones that will be useful to you as the business unfolds

You can download a worksheet that walks you through the steps from here:

DDP_Worksheet.doc

Read the rest of the entry for a detailed example. 

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Discovery Driven Planning:  Different from conventional planning

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Discovery Driven Planning was developed because years of research showed that companies using conventional planning methods to invest in new opportunities were systematically failing.  When we researched the reasons, we found that conventional planning leads to systematically poor decision-making in a new venture, or other uncertain situation.  With a conventional plan, projections are made based on whatever is known at the time, and the metric for the worth of the plan is how close actual outcomes came to projections.  When you think about it, this is crazy, because when you have very little knowledge about a situation, the primary objective should be to learn.  Instead, conventional plans lead people to blind themselves to emerging realities, desperately trying to make a flawed plan happen as they had anticipated. 

The fundamental thing to remember when you are venturing into uncertain territory is that your ratio of assumptions that you have to make to knowledge that you have is quite high.  Human beings are terrible processors of assumptions!  First, we tend to forget them.  Indeed, research conducted by Russ Ackoff, who was at the University of Pennsylvania at the time, found that in an average company the length of time required to forget half the assumptions underlying an important decision was about 6 weeks. 

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The Despair of Entrepreneurship Professors are perennially popular but doomed business ideas

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One of the most dreaded aspects of being an entrepreneurship professor are the hundreds of times that students will come up with the same - bad - business concept when tasked with building businesses of their own.  A perennial favorite is dog-walking services.  Comes up every semester!  Now, I don’t have a problem with dogs or dog walkers, just with a Columbia MBA deciding to put the degree to use in that occupation - doesn’t make much sense.

Of course, every so often a bright idea comes along that defies the common wisdom of the entrepreneurship professor.  Just such an inspiration appears to have visited our colleagues over at the Kellogg School, as I read the following story from Business Week.
image

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Discovery Driven Planning alive and well and living on Wikipedia

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Well, it’s been said that you can find out a lot about just about anything on Wikipedia (although you should always double-check what you’ve found!).  It was gratifying therefore to see that Discovery Driven Planning has made it into a Wikipedia article (together with some direct quotes from our original Harvard Business Review article).  The heading for the piece is assumption based planning and it covers a couple of other useful techniques for planning under uncertainty. 

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