Ideas & Debate

Why hot start-ups ditch original business ideas for Plan B after launch

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Tata Group chairman Ratan Tata stands next to a Nano car during the vehicle’s launch in Mumbai in 2009. The company is known for being flexible and receptive to new business ideas and innovations. PHOTO | AFP

I’ve been reading Getting to Plan B, a fascinating book which points out that had the founders of Google, PayPal or Starbucks stuck to their original business plans we probably would have never heard of them.

Indeed, argue authors John Mullins, a professor of entrepreneurship at the London Business School, and Randy Komisar, a lecturer in entrepreneurship at Stanford University, almost all successful start-ups ditch their initial “Plan A”.

The reasons why young organisations develop rather than disintegrate, Mullins and Komisar have found, is that they assume they will need to continue experimenting and evolving, being responsive to customer demand. Those that remain straightjacketed by their Plan A get stuck in a rut and miss opportunities.

It got me thinking more broadly about making and keeping to plans and rules… and about making and keeping to contracts.

The challenge as far as the latter are concerned is that the world has now become so concerned about formal and explicit Terms of Reference and so obligated to go through heavy procurement processes that even if circumstances change and it would make sense for a contract to be varied or extended, those involved may well be inhibited from doing so.

This is certainly understandable. Given all the abuses we have seen — all over the world — there was definitely a need to close down as many loopholes as possible. But in the process we have too often thrown out the baby with the bathwater.

It is in the public sector that planning and contracting are at their most rigid, and generally the larger the organisation the more difficult it is to allow for flexibility.

When one is dealing with a privately owned, entrepreneurially driven company, life is so much easier. A new opportunity comes up? Go for it.

Change the plan, vary the contract – by mutual agreement of course. No problem. Agility is the name of the game. Get to work, keep an open mind about shifting pace or direction and think agile. Yes, agile.

That’s a word I’m hearing more and more. In this world of rapid change, whether it comes from innovative competitors or industrial strength regulators or elsewhere, one must be nimble.

Today being prepared to “spin on a dime” is a basic necessity, as is continuously expanding one’s comfort zone.

A term I’ve not heard for some time is Skunkworks, which is taken from what Lockheed called its advanced development projects team that was responsible for a number of famously innovative aircraft designs.

Skunkworks, there and elsewhere, became the label for a group within an organisation that was given a high degree of autonomy and was protected from the normal bureaucracy, enabling it to experiment on advanced or secret projects unhindered.

Many times a customer would come to the Skunkworks with a request and on a handshake the project would begin, progressing thereafter at lightning speed. All within the big corporation!

I suppose it’s almost too much to expect that Skunkworks can exist in government. But just imagine how quickly we would reach our Vision 2030 if agile teams were released to come up with exciting new projects to pilot and from which to learn, so that then others could stress-test them and take them to scale.

Who knows? Maybe somewhere deep in the bowels of the bureaucracy such units do exist!

Let me come down to earth. But as I do so I think of another term that shows how at least at the individual level Skunkworkers exist in some large organisations.

They’re called intrapreneurs, people who love to spot opportunities and take risks and who don’t take no for an answer, almost as though they were working for themselves — bearing in mind that they can only thrive in environments where they are actually encouraged to behave in such ways.

The trouble with many people, not least in government but by no means only there, is that they conveniently invent inhibitors that gratuitously hold them back from pursuing initiatives that their bosses would actually wish them to. Many such folk are middle managers, and it is precisely these self-imposed restraints that keep them from rising further.

They become frustrated and bitter, and indeed some actually build a reputation by specialising in telling all around them what isn’t possible or allowed…further diminishing their chances of advancement. It becomes their self-defeating masochistic role in life, meanwhile deriving perverted pleasure from disabling the initiatives of others.

OK, one needs naysayers around, just like one needs mavericks — those who develop scripts that cast them in perpetually unconventional roles.

Above all though, successful organisations are those where top management has a feel for when to stay firmly wedded to a strategy and when to amend or even replace or reverse it.

When to build on success and when to cannibalise a winning line before someone else eats their lunch. When to take a risk and when to walk away from one.

In a September 2014 interview with McKinsey Quarterly, Ratan Tata, retired chairman of Tata Sons, commented wisely in ways that support what I have been saying, that one of the big dangers for any business is complacency, and that the challenge for leaders is how to keep injecting urgency and generating excitement.

People in Tata’s companies have been remarkably receptive to simple slogans such as “Question the unquestioned”, and “Lead, never follow”. Hm, sounds like the way Ruth Barra — about whom I wrote in a recent column — is encouraging her people at GM.

Finally, Tata has always been celebrated for living by good values. And what has this article been about if not values: agility and flexibility, urgency and excitement, boldness and entrepreneurship, learning and growth.

Wherever you work, at whatever level, and not least in large organisations – particularly public sector ones – think about these values, and live them to the full.