A new market entrant. A competitor that gets a bunch of great press. A peer that just raised a ton of money. The external environment presents myriad distractions that can cause founders and their teams to “freak out” and deviate from their established game plans. And in my experience, when plans and behaviors are quickly adjusted in response to short-term exogenous events, bad things happen. Well-conceived strategies and plans get tossed on the trash heap, rendering those in reactive-mode rudderless and adrift. While it may feel good in the short term to be “doing something,” just ask a professional trader what happens when the goal is to “participate in a trend” versus putting on a position that is carefully thought out, tested and looked at in the context of the overall portfolio. The answer: a bad trade that is soon regretted.
This seems like basic stuff, but it is very hard to have confidence in a plan if there is lots of exciting activity happening all around you. And it is even harder to remain firm in your resolve if there is a lack of confidence in the plans themselves. So how can founders steel themselves against the noise and focus on executing their own plans with confidence and consistency? I’d suggest a very straight-forward 10-step process:
1. Develop hypotheses
2. Test these hypotheses and collect data
3. Interpret and analyze the data and adjust the hypotheses
4. Retest the hypotheses and collect data
5. Establish the base case plan in the wake of the new data
6. Create KPIs in order to be able to measure success versus plan
7. Execute the plan
8. Collect data throughout the plan horizon
9. Evaluate data relative to KPIs and develop new hypotheses
10. Return to Step 2 and repeat
This isn’t rocket science. This doesn’t imply sticking your head in the sand while the market might be undergoing dramatic changes. It means creating a process and using objective data to assess strengths, weaknesses and challenges instead of reacting to non-data driven external factors that appear to portend big changes but might mean nothing. It is impossible to judge the quality of your planning and execution without good process, and process, unlike external factors, is the one thing you can actually control. And while the output of the 10 steps will look different for each company, I believe the approach is fairly generalizable and something from which every founder can take comfort.
I get very frustrated when I see good people and companies knocked off kilter by glamorous, shiny stuff happening in their external environment without the discipline of thought, data and feedback. Don’t let this happen to you.