Plan B

How to Hatch a Second Plan That's Always Better Than Your First

David Kord Murray

• Publisher: Free Press
• Year: 2011
• ISBN:
  9781439198384
• Topic: Business
• Subtopic: Management
• Index: Business

Why has Facebook been so limber, evolving so successfully even after a number of stumbles, while Myspace stalled and lost ground? Why was Wal-Mart able to expand so successfully into new offerings, such as groceries, while H&R Block dramatically failed to expand into offering financial services? The answer, David Murray reveals, is that Facebook and Wal-Mart both started with business models that empowered them to effectively adapt their plans as they executed them. The failure of detailed strategic plans that have taken a great deal of time and money to develop is one of the worst problems in business, and it's ever more urgent as the pace of change in business continues to accelerate. Murray, author of the acclaimed Wall Street Journal bestseller Borrowing Brilliance, argues that valiantly sticking to even a well-thought-out Plan A is the road to disaster. The greatest success comes to those who know how to construct and implement an adaptive Plan A that has within it the means of evolving into a superior Plan B by responding to problems confronted, discoveries made, changing market conditions, and the competition. Writing in a lively, engaging voice and using a series of specific examples drawn from companies including IBM, Intel, Facebook, American Express, and Kaiser Permanente, as well as from the art of war, including the Battle of Gettysburg and the D-Day invasion, and even from the space program, Murray presents powerful methods for constructing a plan that has the mechanisms for adaptation built in. Drawing on a wealth of research, he explains why we are fairly good at short-term predictions but why, in our ever more rapidly changing business world, even the best laid plans will eventually go astray. He then introduces the best techniques for creating an optimal original plan that takes into account our limited ability to predict, showing that vital to this process is that it be constructed so that we are alerted in time to make the right changes. In a brilliant discussion of strategy and tactics, he shows that the core of this adaptability is making sure that your strategy and tactics are well aligned with one another and that you have established the right metrics for measuring results. He then details precisely how to adapt throughout the execution process by constantly monitoring and assessing results, developing worst-case scenarios, and recognizing unanticipated opportunities. Plan B is an essential guide to harnessing the forces of change to achieve long-lasting success despite the most vexing challenges.

Chapter 1
Conceiving the Grand Strategy

Operation Mulberry, iTunes as a Can Opener, and the Seeds of Evolution

David took a blank piece of stationery from his pocket and laid it on the table in front of him. Alone, he lit a cigarette from the smoldering ashes of the last one he’d smoked. He’d been chainsmoking all day. His hand trembled slightly as he wrote a short note: “Our landings in the Cherbourg-Havre area have failed to gain a satisfactory foothold and I have withdrawn the troops. My decision to attack at this time and place was based upon the best information available. The troops, the air and the Navy did all that Bravery and devotion to duty could do. If any blame or fault attaches to the attempt it is mine alone.”

Dwight Eisenhower, whose parents originally named him David, looked up at the clock over the mantle of the mansion’s former drawing room; it was 9:45 in the evening. The drawing room had become the war room of the Supreme Allied Commander and was strewn with charts, reports, clipboards, telephones and telegraphs, colored markers, and wheeled ladders that accessed a floor-to-ceiling map of the west coast of mainland Europe. The azure smoke of his cigarette lingered in the air. For a moment his mind was awash in facts and figures, drowning in a thousand different details: Had he considered all of the options? Had he coordinated everything? Had he identified all the obstacles? A few minutes earlier he had made the decision to launch the largest amphibious assault in the history of mankind. He’d been working on the plans for almost a year. Now they were out of his hands. He put the note into his pocket; he’d give it to an aide the next day as a press release if things didn’t go as planned. After all, he knew better than anyone that they rarely do.

Eisenhower studied military planning at West Point, at the Army Command and General Staff College, and as a staff officer for General Douglas MacArthur. In December 1943, he was promoted to Supreme Allied Commander in Europe and put in charge of invading occupied France. The Germans had more than fifty divisions of battle-tested veterans dug into the beachheads and guarding the harbors. They were commanded by the highly competent Erwin Rommel. It would be the most sophisticated invasion in the history of warfare. The invasion fleet was made up of eight different navies, including 6,939 vessels: 1,213 warships, 4,126 landing craft, 736 ancillary craft, and 864 merchant vessels. The first day, D-Day, they landed 160,000 troops on five different beaches stretching for more than fifty miles along the French coast. Millions more would follow. The air assault, using British and U.S. planes, targeted the bridges, rail lines, and roads that could be used to reinforce the German defenders. The grand strategy was called Operation Overlord, and it comprised dozens of other major operations, each with its own strategic plan and each with its own set of subplans. Operation Neptune, for example, was the amphibious assault plan that coordinated the five thousand landing craft, and Operation Tonga was the coordination of the nearly ten thousand British paratroopers. There were hundreds of these minor operations, each a planning nightmare and each with its own code name. Eisenhower had coordinated and signed off on each individual plan, studying their tactics and aligning them with the overall strategy.

Across the channel, the Germans knew the invasion was coming. They had an extensive spy network in Britain. It’s impossible to hide three million soldiers and thousands of ships. The question was: Where was the attack going to take place? The Germans heavily fortified the harbors along the French coast in anticipation. Rommel predicted a landing at Calais, a small town northeast of Normandy at the narrowest point of the English Channel; you can see the white cliffs of Dover from the harbor breakwater on a clear day. The coast of Normandy, on the other hand, was an extremely unlikely spot because it was open beach, susceptible to wind and sudden storms, and it had no natural harbors. Sure, the marines could be landed, but what were they going to do after that? How could the materials, weapons, and tanks be off-loaded onto the shore? The answer was Operation Mulberry.

The idea, which Eisenhower called “so unique” and “completely fantastic,” was to construct a series of five artificial harbors, together providing more harbor capacity than Gibraltar, and to do it in just a few days. The Mulberry strategy comprised six tactical components. The first, called Operation Phoenix, involved building breakwaters out past the surf line, of sunken blockships with unloading docks on the lee side. The second was Operation Gooseberry, the construction of onshore breakwaters comprised of battered old freighters sunk in sheltering arcs. Operation Lobnitz was the construction of floating pier heads where ships could unload cargo and supplies. Operation Whale was the construction of causeways built between the Lobnitz pier heads and the high-tide mark on the shore. Bombardon was the name given to the outer floating breakwaters, floating islands really, and the sixth and final component, called Operation Rhino, was a series of ferries used to transfer cargo from ships or the Phoenix piers and the floating islands to the beach. The objective was to be able to offload more than five thousand tons of equipment and supplies per day.

Of course, we all know how the story ended. The coordination of air, sea, and land operations worked, and the attack was successful. Ike had predicted 60 to 70 percent casualties on the first day, but only 2,500 of the 160,000 were killed that morning, and though tragic, it was a far cry from expectations. The British and U.S. airplanes succeeded in knocking out key railway lines and bridges, and the 24,000 paratroopers provided a key blocking army so that Rommel was unable to reinforce his troops in Normandy. And Operation Mulberry began as the marines stormed the beaches and started unloading trucks, tanks, artillery pieces, food, fuel, and ammunition only a few hours after the beach was breached. The artificial harbors far exceeded their goal, and in a few days more than three million troops used them as disembarking points. Though they took a beating during storms over the next few months, the harbors worked so well that the Allies continued to use them even after the major ports of Le Havre, Cherbourg, and Calais had been secured. By October, the temporary harbors had to be closed, but only after landing 627 million tons of supplies.

Eisenhower would chase the Germans out of France and into Germany using those supplies and force the suicide of Adolf Hitler and the surrender of the Third Reich less than a year later. The note that Eisenhower had scribbled and put into his pocket, the one in which he predicted the failure of the invasion, was never handed to his aide, was never used as a press release, and was forgotten inside his shirt pocket.

Operation Overlord and its associated suboperations were part of a “grand strategy,” an important concept to understand. A grand strategy in business, as in warfare, aligns our resources and tactics so that our tactics work in unison to solve the problems we’ve identified.

The Grand Strategy

B. H. Liddell Hart, a British military theorist, coined the term “grand strategy” and described it like this: “The role of grand strategy—higher strategy—is to coordinate and direct all the resources of a nation, or band of nations, toward the attainment of the political object of the war—the goal defined by fundamental policy.” In other words, it is a coordination of a series of tactics that solve both high-level problems (what Hart calls “high strategy,” which are political) and lower-level problems (battlefield problems). Great strategic thinkers and great strategic planners, like Eisenhower, have an overall sense of their strategy and how everything works together to make the impact much stronger. A grand strategy is created and tied together by a series of cascading problems. If Ike wants to land his forces at Normandy, this creates a whole slew of lower-level problems, such as having to build a temporary harbor.

The same is true in business. Consider, for a moment, the history of the tin can and the can opener. The tin can was invented in 1813, while the rotary can opener wasn’t invented until 1870, fifty-seven years later. Huh? You see, originally, the tin can was used to solve the problem of feeding military troops on long excursions into enemy territory. The cans kept the food from spoiling and were highly portable, able to survive the rough treatment that long excursions demanded. A can opener wasn’t needed because the soldiers had bayonets that they used to cut the lids off. The various companies that produced the cans tried selling them to the general public, but they didn’t catch on. They were too difficult to open, and most people didn’t have a bayonet handy. It wasn’t until 1870 that the rotary can opener was patented. Once it was, the demand for canned food soared. For decades, it would become the primary delivery mechanism for preserving food. Amazingly, it took more than fifty years for someone to devise a grand strategy for the tin can. Go figure, right?

Other businesses have a much better track record of devising grand strategies. Few do it better than Steve Jobs and his team at Apple. For example, in the fall of 2000, Jobs convened a group of Apple employees to develop a “digital hub” strategy. Its goal was to create software for the growing market of personal digital devices such as electronic organizers (for example, the PalmPilot), MP3 music players, digital cameras, and digital camcorders. It was during those discussions and the evaluation of those markets that Jobs realized that digital music players were either “big and clunky or small and useless.” The user interfaces, which Apple has always been particularly good at designing, were “unbelievably awful.” Sensing an opportunity, Jobs changed the focus of his ad hoc group and decided that Apple would build its own MP3 player. In less than a year, under the watchful eye of Jobs, chief engineer Jon Rubinstein and design engineer Jonathan Ive created the iPod. Steve introduced it, with great fanfare, to the public on October 23, 2001. It was a Mac-compatible product with a 5 GB hard drive, and as Steve said, “you can put 1000 songs in your pocket.”

The product was an instant hit. Thanks, in great part, to the sleek design conceived by Ive, it was a device that was so unique that it took everyone by surprise. But it was really the grand strategy, conceived in the mind of Steve Jobs, that made the iPod a commercial success. Unlike the history of the tin can, Apple created the ancillary products, the can openers, which made the iPod not just “cool” but easy to use and practical in its function. iTunes and the iTunes Store were the can openers. Jobs and his team developed a key understanding of the problems facing their iPod users and a multitiered strategy that encompassed the entire digital music experience. This included the digital player (the iPod); a digital storage and management device (iTunes and your personal computer); and a digital music store (the iTunes Store). Like Operation Overlord, Operation iPod was comprised of multiple suboperations, each designed to solve a specific problem associated with digital music.

The Seeds of Evolution

Business models, put simply, are solutions to problems. And business models are created and evolve by solving new problems or finding new ways to solve existing problems. Take, for example, Apple’s music store business model. While iTunes began as a can opener for the iPod, today it is at the center of one of Apple’s core divisions, generating billions of dollars in revenue and dwarfing the sales of the iPod. Not bad for an ancillary product designed to solve a lower-level problem. Let’s study its evolution for a moment to see how a new business model can evolve from an existing one. Plan B evolves from Plan A; it’s not a contingency plan.

At the time that Apple was developing the iPod, there were two ways for people to acquire digital music. They could copy it from their CDs (although most were write-protected). Or they could download it from a peer-to-peer digital music site such as Napster or Kazaa for free. Napster had 26 million users. However, Napster was in the midst of a legal battle with the recording industry. Earlier in the year, Lars Ulrich, the drummer for the heavy-metal band Metallica, discovered that a version of a new song had been stolen and was available on Napster before it was officially released. Ulrich and Metallica filed suit against Napster, and while the iPod was being developed it became apparent that Napster would be shut down for copyright infringement. This meant that 26 million customers would be out there with nowhere to go and the availability of digital songs would be severely limited. At the same time, behind the scenes, Steve Jobs was busy created the third leg in his grand strategy, a new website called the iTunes Store. It opened in early 2003, and it was designed to work seamlessly with the iPod and iTunes.

The original iTunes Store catalog was 200,000 songs, there were no subscription fees, and the price of a song was 99 cents. On the first day, more than 250,000 songs were sold. By the end of the week more than a million had been sold. Today, Apple is the largest music distributor in the world and controls 70 percent of all online digital music sales. The site itself has evolved with dozens of creative features. Every time I log on to the store there is a slew of recommendations for me, based on a sophisticated algorithm that compares my own personal catalog of music with artists, songs, and albums from other users who have similar music tastes. It works really well, and this is how I find most of my new music.

In February 2010, Steve Jobs called Louis Sulcer of Woodstock, Georgia, to give him a $10,000 iTunes gift card. Earlier in the day Louie had downloaded a Johnny Cash song called “Guess Things Happen That Way.” It was the ten billionth song sold on iTunes, and there’s no reason, in the short term, that the store won’t continue to grow.

The success of Ike’s D-Day plan was also due, in great part, to the fact that it was able to adapt in real time. In other words, the highly detailed planning planted the seeds of evolution. Many things didn’t happen the way he had anticipated. For example, Operation Neptune called for the early landing of hundreds of amphibious tanks that would be used as blocking vehicles for the troops as they came in behind the tanks. However, 90 percent of the tanks never made shore. They sank, leaving the first wave of marines horribly exposed and without the firepower they needed to take the 155 mm howitzers that lined the hills above the beaches. But the field commanders were able to improvise, make tactical adjustments to the plan, because each had an in-depth awareness of his own objective, of the key problem that he was tasked with solving. Under the command of Lieutenant Colonel James Rudder, two hundred soldiers of the 2nd Ranger Battalion climbed a nine-story rock face with bayonets and grappling hooks, while grenades rained down on them, and were able to knock out the howitzers, even without the support of the amphibious tanks. That cleared the way for the next wave of marines. Later Eisenhower said, “In preparing for battle I have always found that plans are useless, but planning is indispensable.”

Several days after the D-Day invasion, Harry Butcher, Eisenhower’s naval aide, found the crumpled note Ike had written and forgotten in his shirt pocket. Deeply moved after reading it, he put it into a personal folder and after the war gave it to Ike as a keepsake. Today it’s on periodic display at the Dwight D. Eisenhower Presidential Library and Museum in Abilene, Kansas, a testament to the idea of adaptive management and the evolution of a plan.

In the next few chapters, we’re going to lay out the principles of constructing Plan A so that adaptation is built into its DNA. Plan A, if done right, is born for evolutionary change, for growing up and being different from its parents, better equipped for the world it lives in.

Chapter 2
Choosing Your Problems

A Concept Called the Facebook, Solving the Health Care Crisis, Dying of a Theory, and the Principle of Problems

At the time Mark Zuckerberg founded Facebook, there were two very popular, well-established, and growing social networking sites. The first was Friendster, and it had millions of users, though it had fallen out of favor because of technical problems. The second, started a year earlier, was called Myspace, and it had more than five million members and was expanding astronomically. It was the darling of the Internet.

Founded by Chris DeWolfe and Tom Anderson, Myspace was born of the frustration they had with Friendster as it began to crash repeatedly and become painfully slow. They loved the Friendster concept but didn’t like its execution. Like others, Anderson envisioned social networking as a tool for connecting people of similar interests and beliefs. His site would solve the age-old problem of “networking,” meeting new people. From this problem he developed a hypothesis from his experience with and observations of Friendster. He believed that social networking would allow you to develop your own cyberpersonality, using it to carefully craft yourself into who you wanted to be. On Friendster there were people called “fakesters” who had developed an online personality. The popularity of chat rooms and dating sites confirmed his idea about what people wanted from social networking. Myspace would give people the tools and freedom to custom design their own websites, helping them meet the kind of people they wanted to meet. Myspace wasn’t about being who you were, it was about being who you wanted to be.

This hypothesis led to an obvious objective and metrics for evaluating its success. The goal was to attract as many users as possible and connect them to one another. The first contest among Myspace employees was to see who could sign up the most people and who could garner the most friends. That’s also why Myspace put few restrictions on who could join and how they could use the site. So the primary metric was the number of connections users made among the user base.

The networking hypothesis also guided DeWolfe and Anderson in developing a series of tactics. They included the ability to customize your site, free blogs you could use to express yourself, and tools to facilitate meeting and accepting new friends. Sure enough, one of the reasons for Myspace’s phenomenal growth was the ability users had to modify the HTML code of their profile pages. People loved it and spent hours creating their own websites. Using these features, a part-time model named Tila Nguyen famously developed her own cyberpersonality—called Tila Tequila—and set out to dominate the Myspace cyberworld. She created a profile page with revealing photos, a fake bio, and flirtatious, innuendo-laced postings, and she garnered more than 1.7 million friends. She epitomized the Myspace strategy and the theory it was based on.

Though Zuckerberg borrowed ideas liberally from both Myspace and Friendster, early on he began to develop his own theory about social networking, one significantly different from that of Myspace. He decided to solve a completely different problem. He wasn’t interested in facilitating users’ meeting new people, he wanted to enhance their existing relationships. His hypothesis was that this was what people would most want from social networking, and that led him to determine that Facebook would be a communication tool people could use to stay in touch with one another. Zuckerberg’s theory was based on the success of instant messaging and e-mail, two other extremely popular Internet activities. He was an AOL Instant Messaging (AIM) freak, preferring to communicate through it even when he was sitting in the same room as his friends. The success of AIM had a huge impact on him and helped to confirm his belief in a more connected and open communication platform. He especially loved the way AIM users posted clever “away” messages when they weren’t online. According to David Kirkpatrick in his book The Facebook Effect, “AIM away messages were so important to Zuckerberg that another one of his earlier software projects was a tool that alerted him when friends’ messages changed.” His interest in away messages contributed to the feature we know now as the “Wall.”

Over the years, Zuckerberg refined his hypothesis as he tested his theory through implementation. He came to believe that cyberspace was merely a reflection of reality, not a different reality, referring to it as the “social graph.” As part of this theory, he believed strongly in transparency about who users were and the integrity of their profiles. He didn’t want fakesters. He felt that honesty was the cornerstone of a good relationship, and so it would be the cornerstone of the Facebook experience. “Our mission since day one has been to make society more open.”

This hypothesis translated into a different business model. Initially there were restrictions on who could join Facebook. For the first couple of years, only college students, and only those with valid e-mail addresses, could join; that made it d...