Many mass market start-up entrepreneurs use causal reasoning skills to try and predict the future in an effort to avoid surprises. However, many more modern-day entrepreneurs use effectual reasoning to turn an unexpected result or condition into a profitable end. They plan for the expected, but try not to extend too much in the way or resources just in case they are forced to pivot. Surprises are welcomed as inputs to pivot their new venture.
In a former career, I was a Fire Control Technician (FT) in the United States Coast Guard. As an FT, we used a radar to track a target and a sophisticated computer to account for a score of variables to adjust the aim of our gun mounted on the bow of our ship. These variables included air temperature, wind speed and direction, projectile and powder temperature as well as a dozen other factors that would ultimately affect the flight of a projectile weighing more than 50 lbs. as it travels from the muzzle of our gun to the target potentially ten miles down range.
The goal was to point the gun at an imaginary spot in space where the bullet and target would both occupy the same space at a given point sometime in the future, hitting and destroying the target on the first shot. A lot of effort was required to deliver an accurate first shot. After all, during a ship-to-ship or ship-to-airplane battle, hitting your target first is essential to survival.
This fire control example is equivalent to the needs of mass market product type start-ups which rely on lots of upfront planning where speed and accuracy of execution are paramount. Moreover, this approach is the paradigm of conventional business advice that promotes lots of upfront planning prior to launch and assumes that pre-start money is no object and all that matters is a successful first launch.
Compare the fire control example to the way a Gunner’s Mate (GM) in the Coast Guard approaches the same problem. They use a bunch of relatively cheap 50 caliber bullets and a simple optical sight. The GM simply aims at the target, knowing that his first few rounds will most likely miss the target since he does not account for any of the variables which affect the trajectory of the projectile up front. After a burst of a few rounds, he simply observes the fall of shot and then adjusts his aim using what we in the shooting sport call “Kentucky Windage” until he hits the target.
The leverage contingency principle is the embodiment of the GM’s example. It uses little upfront planning, lots of cheap Minimally Viable Products (MVP’s), and observes the results to adjust their next move until a better solution is reached. Rather than following the “ready, aim, fire” model of the mass market start-up entrepreneur, the modern-day entrepreneur practices the “ready, fire, adjust aim” model until they get a hit.
In the early stages of a company, many entrepreneurs often experience a “ready, aim, aim, aim, and never get to fire” scenario. In contrast, successful entrepreneurs plan for contingencies and use their effectual reasoning to recognize and leverage surprises to adjust their aim.
All too often conventional business advice discourages entrepreneurs from practicing the leverage contingency principle. Instead of encouraging the entrepreneur to make small incremental steps to observe what happens and adjust their models, they recommend extensive upfront planning, in the form of an extensive business plan, as a way to hit their ultimate target or goal on the first try without any type of feedback loop to test assumptions during the development process.
Is your planning designed to predict demand and avoid surprises or is your planning designed to use a feedback loop to test assumptions before becoming too committed to a direction, therefore welcoming surprises as needed course correction?
For additional insights into why more successful local service and infrastructure companies are abandoning classic business planning, check out “The New Small Business Manifesto“.
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