I continue my thinking about the value of business education, the influence of random events and the value of business planning on entrepreneurial endeavors. Here’s my latest thought. Running a small business can be compared to playing chess. Good players are constantly thinking many moves ahead; the better the player, the further into the future they can envision. They understand that as soon as the opponent makes their next move, most of the prior analysis is discarded and a new round of analysis begins. As well, they also understand broad strategic goals that might include the relative value of pieces and territories of the board. And finally, they clearly understand the rules of battle and the more experience they gather; the more likely they will be able to anticipate likely outcomes.
For entrepreneurial ventures I have never been a fan of the writing of lengthy business plans. Recently, an article in the business section of the Times discussed that most venture capitalists don’t even bother to read the plans. My reasons have been twofold. First, the author of the plan tends to fall too deeply in love with it and as a result, less open to alternative strategies. Second, as in my chess example above, the plan is usually obsolete after the opponent’s first move.
In entrepreneurial ventures one’s chess opponent can be considered to be the actions of all of the external influences under which one has no or limited control. These include the market, the customers, the employees, the vendors and even the basic product technology. All are constantly pushing the reality of the plan in a variety of directions that are sometimes expected and sometimes not.
As I have stated in prior entries, I’m convinced that the short term strategic goals of small entrepreneurial ventures must be first and foremost simply survival. As such, the winds of market influences can easily, and most often do, drive a company to radical departures from its intended direction. Flexibility is the key attribute of management; constantly looking to convert opportunities into cash flow.