Chapter 5
Step Five: Creating a Workable Plan
The first three steps of Stacking the Deck focused on concepts that combine substance and emotion: establishing the need for change, building and focusing the leadership team, moving people to buy into a dynamic vision of the future, and inspiring them even when the going gets tough. All of these require an intellectual understanding of how processes and organizations are structured, the creativity to imagine a better future state, the emotional awareness to appreciate others' perspectives, and the ability to complement your talents and capabilities with those of others. Step Four introduced us to the practical action needed to identify and avoid barriers. As we enter Step Five, we get down to the nitty-gritty of planning the details of breakthrough change.
If you have read through the book and are now working through the Stacking the Deck steps with an actual change initiative, you already have an idea of the impact your change will have. You also have a sense of the problems and barriers you may face as you implement it. Now you need to translate the inspiring vision of the future that you and your team have developed into a workable, real-world plan. Here you must draw heavily on your practical and strategic management experience.
Planning and Budgeting
Assuming that you know (or have studied) the basics of planning and budgeting, this chapter—and this book in general—takes that understanding one step beyond. Here we discuss how planning and budgeting change when we scale up and initiate breakthrough change.
By definition, bold, breakthrough changes aren't predictable, reliable, or controllable in the classic sense. Yet most organizational systems are focused on safely maintaining all the indicators that organizations like—predictability, reliability, control, and risk minimization—within a certain comfort zone. Breakthrough change initiatives fly in the face of each of those qualities.
Having known each other from our years at Citibank, Dick Kovacevich and I readily jumped into these topics during our conversation about leading change. Dick was the chairman and CEO of Wells Fargo from 1998 to 2007 and was instrumental in leading its growth. He shared some very strong observations regarding the mistakes organizations make when they try to create a plan for breakthrough change. “Companies need to have multiple types of plans. There is a short-term quantitative budget, a short-term action item list, and then a strategic plan. The first two—short-term quantitative budget and short-term action items—are what you prepare and use to run the everyday business and to report out to your various constituencies.” Dick emphasized that he doesn't put a breakthrough change in either of those categories. We both well understood that far from minimizing risk, breakthrough change initiatives introduce new risk into the organization.
Dick continued, “The strategic plan, what some may call a three-to-five year plan, is not very quantitative or detailed. What's most important there are the big changes and lofty goals and visions you set for the company rather than hard quantifiable metrics. With the strategic plan, we do have a process for managing the project and figuring out what we are going to do and how much we are going to spend over five years, but it is analyzed totally separate from budgeting.”
The traditional corporate management systems for planning, budgeting, performance appraisal, and the like are not made to accommodate breakthrough change and, in fact, work contrary to the goals and needs of such a change. So when you propose a breakthrough change, you will often find yourself needing to dramatically modify and rethink how these basic processes fundamentally work.
Dick went on to say, “The only budgeting aspect of the strategic plan is the cost that we have to put into our budget to fund projects we are working on. But we have to be careful. One of the biggest mistakes people make in change is looking at projects through a quantitative lens (metrics or timeline) when we don't yet have any idea of what we're really talking about.” He emphasized the danger inherent in this approach, stating that “we are marching into the unknown with a breakthrough change, and simply cannot have a detailed budget since we don't yet know enough to precisely estimate and quantify the economics.”
By way of illustration, he wound up with a story that is vintage Dick Kovacevich: “When I was CEO of Wells Fargo, we wanted to grow the average number of financial products our customers had with us. Of the 14 products we measured, our average customer had 1.7, and I wanted to grow to 8. The reason I chose 8? It rhymes with GREAT! That's it: put a big hairy goal out there without knowing how you will achieve it. Then, once you've set that reach goal, you have to go build the strategic plan to get there.”
At the time of our interview, in August 2013, Dick explained that 31 percent of all their customers then had eight or more products with Wells Fargo. Could be that Dick's attitude and the culture he encouraged are integral to Wells Fargo's current status as the most highly valued banking institution in the world.
Making Assessments: From the Present to the Future
When the founders of JetBlue were first contemplating their new airline, they brainstormed with blue-sky thinking and used a blank piece of paper, sketching out the broad strokes of what they were hoping to accomplish. Starting anew and long-term planning do have certain parallels: the need to assess where you are, where you want to be, and how to get there. These assessments are vital to leading breakthrough change, whether you are starting from scratch, reshaping an aspect of the business, entering a new market, or looking to expand your reach.
Initial Assessment: Where We Are
When Ron Graves became chief executive of Pinkberry in 2007, the frozen yogurt company already had launched more than 20 stores in Los Angeles and New York City. Ron sensed that given “the brand's passionate and cult-like following, Pinkberry had the potential to be a global brand.” But instead of quickly rolling out more stores, Graves took a year to assess the organization. As he put it, “I knew we'd be growing fast, so laying a solid foundation with the infrastructure that would support rapid growth was paramount.” His process was in three stages:
- He built a team of investors, board members, and management personnel with the capabilities to guide the company through a global expansion.
- Ron and his team then clarified Pinkberry's mission and core values, including entrepreneurial spirit, uncompromising quality, and customer delight—guiding principles so foundational to Pinkberry's success that he personally teaches them to all new employees and franchisees.
- He then outlined a strategy for growth that included franchisees who shared the company's values, had multiunit operating experience, had deep local roots and knowledge, and were financially sound.
Once its foundation was set, Pinkberry hit the domestic and international market in full force. The company expanded into the Middle East in 2009 and opened more than 50 stores in the region. Since then, it has continued its domestic and international expansion and as of 2014 has nearly 250 stores across 27 states and in 19 countries. The early assessment was a major factor in the company's ability to “establish a balance between the structure and discipline necessary to scale without compromising our values.” This is a balancing act that Ron says the company “must fight for every day, then, now, and in the future.”
Whatever the business and circumstances, virtually all plans start with a thorough assessment of “where we are” (WWA). This assessment should take into account not just operations and processes, but all other factors that contribute to a company or organization's position in the marketplace. You want to look at factors such as competitive position, customer satisfaction and quality of output, productivity and efficiency, human resource considerations, and more. Any or all of these aspects may need to change in order to get your vision off the ground.
You must also gauge all the skills you are going to need over the course of the initiative: marketing, sales, operational efficiency, familiarity with social networking, and whatever else your specific change initiative requires. Do you have those skills on your team, and if not, where can you get them? Whether it's consulting firms, staffing agencies, or simply going to other departments within the company, you need to have a plan to get the expertise you require (we'll return to this critical subject in Chapter 8).
There are many junctures where an inexperienced or overconfident leader can make a misstep. In the early planning stage, for example, many managers simply project the current state of affairs into the future, including some marginal improvements in productivity and quality. It's fine to make simple, linear projections if you are planning for incremental change. In fact, doing so is a predictable, reliable, low-risk approach. And often this may be the right course of action. If, however, you are aiming for breakthrough change, you need to do much more.
Assessment for Breakthrough Change: Where We Want to Be
Breakthrough change is not linear. It's not an incremental momentum plan. Instead it demands a leap to a fundamentally new and different position. Assuming we're after breakthrough change, the second big assessment revolves around “where we want to be” (WWWTB). It's your job as the leader of the breakthrough change to fully articulate your concept of the future. Whether from one's education, habits, or from a desire to take the safe course, leaders often have a strong tendency to define WWWTB as a simple projection of WWA (where we are) with perhaps modest or even aggressive improvement. But truly breakthrough change is a chance to substantially redefine the future to be something very new and different, perhaps a competitive leap forward. What will success look like in this new situation? How will we measure that success?
Citi's Debby Hopkins and I discussed the need to expand the conversation from the start, so that we aren't defining the future by what we're doing today. As she put it, “You want to change the dialogue that goes on in determining a future path. When you get people engaged in the conversation of options, thinking about the range of possibilities—the full range of possibilities—they're more able to get away from their linear way of thinking. That's particularly important in this world of the fast-changing business model and constant reinvention.”
The conversations you want to encourage—creative, wonderfully energizing discussions—become the starting point in contemplating WWWTB. These are true dialogues, open-ended conversations; they are more than one-way, or even two-way. Be sure that you and your people are imagining the most timely, highest-potential breakthrough. What you don't want is for people to picture just more of the same, only faster. At this stage, you want to think imaginatively, envisioning a different future. Contemplate the galaxy of that future. When it's time to make choices, you will be able to choose from a wide array of possibilities. Even then, as much as WWWTB is a specific goal, we must also recognize that change, particularly breakthrough change, is a process of exploration and discovery along the way. We must leave ourselves the space to learn and the flexibility to redefine our destination—all without our economics completely falling apart.
Later in the process, when you're determining how to bring WWWTB to reality, you'll be more precise as you narrow the neighborhood to an address via strategic planning processes and decision making. For that stage, which we turn to next, Intel's Renée James emphasized the need to be pragmatic about where you really are and where you are going, acknowledging the personal risk and fear that come with “stopping doing something that's made you successful. You may be staking your everything and maybe your company's everything on this leap toward the future.”
Assessment for Action: How Do We Get There?
The first two assessments lead logically to the third: “how do we get there?” (HDWGT). That is, how do we get from where we are (WWA) to where we want to be (WWWTB)? The second assessment, WWWTB, is the vision question that we first discussed in Step Three. The difference here is that rather than painting a big, sweeping picture of the future, we must now define that future as a set of specific goals, deliverables, and metrics, because now we are creating the actual plan. When you can fully answer the “how,” breaking it down in terms of partitioning, metrics, people, and pilots (Steps Six through Nine), then you will have developed a meaningful plan of action. Where this stage in breakthrough change differs from the usual planning process is an even greater recognition of the unforeseen. Because your pathway to the future is not continuous or predictable, you need to leave room in the plan for missteps, dead ends, delays, and a great deal of learning along the way.
In discussing the challenges of getting a group from where you are to where you want to be, Renée James had this to say: “If you cannot ‘bridge,’ if you cannot get your people to see from where they are to where they are going, they will never put their trust in you and the project. If you can't tell them the first step—and how that first step translates into a possible future—it's really hard for them to move at all.” And that is exactly why you must consider, carefully and thoroughly, each of the questions inherent in the three assessments.
Planning Components
Like many other business plans, the plan for a breakthrough change has the following key components:
- Goals and deliverables
- Tasks
- Deadlines
- Capital and other resources
- People
You'll often need to deal with these components differently in a plan for breakthrough change.
Goals and Deliverables
The first component, in which you define goals and deliverables, must occur multiple times over the life of the initiative. In contrast to planning an incremental change, you don't know exactly what the outcome will be at the beginning of a breakthrough change initiative. If, however, you are using the Stacking the Deck process, you will have a reasonably good idea. You should have a clear need to change and a compelling vision of the future. But that isn't the same as a specific set of executable goals you can move toward. You can usually partition breakthrough change into a number of discrete initiatives having defined deliverables. By dividing your overall goal into smaller, step-by-step goals, you will have a series of checkpoints that you can use to determine if you are on track. When you subdivide a single, giant goal into smaller targets, you allow for more control and momentum building.
Breaking down the initiative into a series of goals is also a useful way to deal with potential shortages of time and money. If resources and time frames are tight, scaling down the deliverable definition may be a solution. For example, this could involve an initial launch in a limited number of locations rather than a complete rollout. Your new deliverable becomes that first small pilot implementation, and you will reevaluate the overall plan after that portion is completed. (A detailed discussion of pilot implementations is in Chapter 9.)
Tasks
Once you have the broad strokes of a plan, you must lay out the tasks you need to accomplish. This part of the planning process remains the same for most project and operational plans, whether the change is incremental or breakthrough. Push-back and resistance are nearly inevitable with most changes—and they will cause delays and cost money. You must anticipate and plan for this, to avoid or at least minimize disappointments and difficult conversations with your superiors as you miss deadlines and struggle to hit your budgets.
Deadlines
Deadlines are incredibly important in projects of this nature. You must be constantly reinforcing the importance of critical deadlines as they relate to key deliverables. There are often many moving parts in breakthrough initiatives and they are often interrelated. Pause or remove one and everything grinds to a halt. A single delay along a critical path will push everything back. Delays are the enemy of ambitious initiatives. They eat away at resources, team credibility, and momentum. You combat delay the same way leaders approach other problems: anticipate, anticipate, anticipate. Build an expectation of delays into your plan, and don't cut time frames too close to the bone.
You must build the sense that every key deadline will somehow be met. It may require weekends and late nights, but the team must—and will—rise to the occasion. Without this attitude, practice, and commitment, slippage will pile upon slippage. A few small lapses can seem innocent on their own, but if they build on one another they can derail your whole initiative. You must develop an ambitious (and realistic) plan and guide the team toward the goals. In the process, you need to build and maintain commitment and a spirit of determination. We'll discuss this in greater detail when we go beyond the nine steps of Stacking the Deck and discuss leadership communication, in Chapter 11.
Capital and Other Resources
In examining the gap between where we are and where we want to be, leaders will begin to identify the resources necessary to get there. There's likely to be a series of economic and institutional limits on those resources. As a result, the budgets typically awarded for these projects seem much tighter to those who are responsible for the actual outcomes. You need to negotiate from a place of strength and knowledge to secure the best possible framework for your change initiative. It is far wiser to negotiate your needs up front, even before signing on, because you can discuss weaknesses and strengths of the project without having them reflect on you.
Debby Hopkins and I discussed the difficulties of developing a financial plan for breakthrough change, particularly one that takes us into entirely new territory with inherently unknown outcomes. She was clear in her belief that any big change needs “a maverick, a zealot who is passionate about the change—that this is where we need to go—and a phased approach.” She explained that Citi uses “a stage-gated process for funding innovation projects.” This allows Citi to maintain “our fundamental point of view about the proposed change: this could be huge, this could create a whole new market in financial services that has yet to be defined. We develop hypotheses that we need to start proving.” She continued, saying that as they “progress through the gates and closer to market, we then introduce more traditional measures and targets.” Using the stage-gated system allows Citi to “explore big ideas without committing big money.”
Debby's process of putting limits—putting gates—on funding provides a reality check and time for reevaluation. It makes a great deal of sense. Leaders may allow their enthusiasm for a project's vision to result in underestimating potential difficulties and challenges. It is all too easy to imagine that a project will be less difficult and less expensive than it really will be, that the capital and other resources we've been allotted will be more than enough to complete the project. We do this in part because change often seems “simple,” perhaps even obvious, and partly because humans have a penchant for wishful thinking.
While I've learned just how hard change can be, I persist as a change junkie. The question that rings in my head is often “How hard can it be?” Often, too, it is addressing that very question with honesty and depth that's difficult—and critical. This tendency to underestimate applies to time and resource requirements (such as money and personnel). Given the unpredictability of breakthrough change initiatives, budgetary overruns do not necessarily mean the project is failing. Instead, if planning is thorough and information is shared early, problems that might otherwise seem disastrous can be overcome.
John Donahoe shared a story from eBay that underscored the need for assessment and making an honest—brutally honest—plan for the future. “One of my CFO's best moves was a very honest assessment of our financial future. We had our investor meeting right in the dark depths of 2009 when the global economy was in free fall. At the time, no one was even giving quarterly guidance because things were so bad and prospects were so grim. My CFO made me go out and put our financial goals for the next three years on the table. I said, in effect, ‘In year one, we're going to lose more share and it's going to get worse. In year two, it will get a little bit better. And here's where we expect to be three years from now.’”
I could picture the reaction he'd faced, and John confirmed it. “The investors and analysts didn't love any of it. They certainly didn't love year one and year two and they didn't even totally love year three. But having put those numbers out there liberated everyone. We told the truth about what was possible and conceivable. It gave us the freedom to get worse before we got better and it gave us a baseline against which we could measure success.” John explained that they were able to build a sense of success internally and externally because they outstripped their established goals. Having described the future as his CFO advised and putting “it into an external context turned out to be incredibly important. When we weren't making progress I could say, ‘This is what we said we were going to do. And we're on track, or we're going to surpass what we said here.’ And even if no external force is giving us credit or recognition, this is how we said we would measure our success. And we can build on that.”
John's story demonstrates just how powerful an honest projection, clearly communicated, can be. In the bleak financial atmosphere of the time, the temptation must have been to present a rosier picture, or even simply remain silent as others did. But John's CFO was exactly right: creating a plan for the future may mean acknowledging that the future will be worse before it gets better.
Furthermore, by communicating his vision of the future in this way, John avoided some of the biggest risk factors and bolstered his credibility. By giving conservative time and profitability estimates, he increased the chances that he would not go over his deadlines or miss his financial projections. Plus, when eBay performed better than expected, it was celebrated as an even greater success. That's good planning for uncertainty, in a nutshell: Acknowledge the risks and challenges. Lay out your plan. Don't underestimate the time and resources required, and then rally your troops to deliver.
John's story speaks to being thorough in your projections and helping people see the big picture. Keep remembering that any breakthrough change initiative will be full of uncertainty. To balance that, the initiative must offer significant benefits to the organization. It must provide a compelling return on the capital that is being invested. In other words, don't take on a bold, risky project with a $10 million investment for an estimated return of $12 million or even $15 million. For that level of investment you probably want to go into it expecting a $25–$30 million payback. Then, if you meet unexpected overruns in time and money, there is still a reasonable likelihood that your now $14 million project is still a worthwhile investment. This is why venture capitalists typically won't even look at projects with less than a 30 percent internal rate of return (IRR) and a better-than-four-times multiple on invested capital. They know that most surprises don't improve the economics of returns; instead, they depress them. You need to adopt a similar philosophy. You shouldn't even begin down the path of breakthrough change unless the potential ultimate success has a payback sufficient to justify the time, energy, resources, and risk.
Finally, remember that any breakthrough change is likely to require other resources in addition to capital. Even if these resources exist within the organization (for example, vacant facilities, spare work space, technical support, accounting), they must also be described and included in the budget.
People
People go hand in hand with more physical resources. Often the only way to combat a shortage of funds or labor is with an excess of passion. This goes back to finding your pioneers and getting them on board quickly. You need people who are committed, excited, and willing to put in the extra time and effort. You need to get twelve-hour days for the price of eight, seven-day weeks for the price of five. You need people who appreciate this project for its intrinsic value rather than solely for monetary compensation. Because the unfortunate fact is, success in breakthrough change initiatives doesn't usually produce economic windfalls for the employees involved. It can, however, produce great amounts of psychic income that will keep the team engaged.
The mission and people's connection to it can be enormous assets, whatever the financial budget—of the company or of its people. Along those lines, Renée James is fully aware that many people in her organization have achieved financial success and are far from being driven by a monthly paycheck. Instead what keeps them coming to work is the understanding that their company “can change the world—and that they have the possibility of changing the world every single day.” The impetus that the mission provides is powerful and compelling. The depth of the mission is also important, for as Terry Pearce frequently reminded me, “People will give effort for money but they will give their lives for meaning.”
Planning for Risks and the Inevitable Questions
It's true that breakthrough change takes time—and it takes even longer if things go wrong. As explained in Step Four, advance thinking and planning can help you navigate through a number of barriers, but not all. The planning process you undertake in Step Five is perhaps the best time to take a preventative look at risk factors, to analyze and attempt to mitigate them proactively. Risk factors can come from inside and outside the company. Regulatory changes or strategic moves by competitors can also put roadblocks in your path. These kinds of obstacles are generally harder to anticipate than the internal risks leaders face in bringing the initiative to the world (as described in Chapter 10).
The sheer number of outside complications that might influence your organization make it virtually impossible to develop enough Plan Bs to counter every vulnerability. But you must constantly be looking—and planning—ahead. You should expect your colleagues to ask you, “What might go wrong, and what will you do about it?” You must be prepared to answer these questions. You can have contingency plans ready for the most likely problems. Certainly many risks you simply can't control, but you have to demonstrate that you've thought about these issues and developed logical reactions.
As much as we try to identify and plan to deal with risk, there will always be uncertainty when we are breaking new ground. We must learn to live with it. Indeed our ability to lead and inspire when the outcome is not at all guaranteed is an important part of this process. Thinking about risks in advance, having contingency plans in place, and learning to expect the unexpected will be enormously helpful when you have to act fast, whether because of changes in the business, the market, or other circumstances.
Rudy Giuliani was mayor of New York during the 9/11 attacks. The city had experienced terrorist attacks in the past, though of course not on the same scale. And in a city the size of New York, so much can go wrong: the subways can stop working; the power grid can fail; hospitals can go dark; storms can create havoc. While the events of 9/11 had been unforeseen, many aspects of the after-effects of the attacks were foreseeable and plans had already been created to mitigate them. So the emergency plan that Giuliani and the city's leadership put together in the minutes and hours following the attack effectively consisted of stitching together various emergency plans for other contingencies—plans that had already been created and thought through. Thus the unthinkable results of 9/11 became somewhat manageable, because crisis plans on a smaller scale already existed.
Certainly, when compared to what Giuliani, his team, and all of New York faced in the aftermath of 9/11, leading breakthrough change seems considerably easier and less fraught. Yet advance planning is key, whatever the goal and whatever the future. We need to conduct assessments and create plans that will help get us from where we are to where we want to be, and be flexible enough to adapt along the way. We should also plan for a category of “unknown unknowns,” just as the engineers at NASA have for decades.
The most detailed of plans may need modification. And sometimes, as we'll see in the next chapter, a plan improves by being partitioned into smaller, more readily managed pieces in order to increase the likelihood of early success, test the process, and build commitment and momentum for more extensive changes.