by Prof. Nikolaus Franke
Prof. Nikolaus Franke, Head of WU Vienna's Institute for Entrepreneurship & Innovation and Academic Director of the WU Executive Academy's Professional MBA Entrepreneurship & Innovation, on the pragmatist Mike Tyson, the unplannability of the plannable and the flexibility of modern innovation management.
When a reporter asked the former heavyweight-boxing champion how he dealt with opponents who had analyzed his fighting style and developed a master plan to defeat him, Mike Tyson, who seemed invincible at the time, made a reply that sums up a fundamental principle of modern innovation management: “Everyone has a plan 'till they get punched in the mouth”.
It sounds like an entrepreneurial no-brainer: The further ahead you plan, the smarter your goals will be and the more efficiently you will be able to reach them. Long-term planning enables you to take into account more of the possible scenarios and “think backwards” from what you want to achieve. Keeping the “big picture” in mind helps you ensure that you do not get active just for the sake of it and prevents you from being sidetracked by inconsistent, small-scale action. Therefore, one of the basic principles of business administration has traditionally been to plan things as accurately and as far ahead as possible.
Mike Tyson's reply highlights a fundamental planning problem: You cannot possibly predict accurately how all the things your plan is based on will develop in the long run. Even when it comes to playing a game like chess with clearly defined pieces and simple rules, the number of possible scenarios soon becomes mind-boggling. While there are a manageable 400 possibilities for the first move (white and black), that number increases to more than 300 billion after the fourth move and to more than 1023, or 100,000 billion billons, for the tenth move—no one will ever be able to stay on top of so many scenarios.
The real world is far more complex than a game of chess. It is extremely fast-moving and developing in the most chaotic, turbulent, fickle and unpredictable of ways. So the further ahead you plan, the more likely it is that you make wrong assumptions, fail to identify opportunities and threats and take things in the wrong direction. Therefore, your carefully crafted long-term plan runs the risk of being dealt a nasty blow—by a technological breakthrough, a supply-side crisis, new market entrants, unexpected shifts in customer needs, the departure of a key employee, disruptions, sudden changes in legal requirements, a political crisis—and of becoming obsolete as a result. Of course, the problem lies not in making the plan but in sticking to it no matter what and having no alternatives available. The worst-case scenario is that you cling to your plan although the competition has you on the ropes and gives you a good beating. If this happens, you will inevitably be KO'd in the entrepreneurial arena.
The issue of limited plannability is particularly relevant when it comes to innovation—for two reasons:
Firstly, it is especially difficult to predict how things will turn out. Innovation is, by definition, about new things. It is not yet clear how goals can be reached. Often, they are not even known, or they have to be redefined in the course of the innovation journey. Also, unexpected opportunities may open up. Think, for instance, of YouTube, which started out as a video dating website. If its founders had stuck to their original plan, presumably someone else would have created the world's largest video platform. As you can see, it is a very good idea to constantly review and adjust your plan.
Secondly, planning things takes time—and time is at a premium, particularly in the context of innovation. The rule of thumb is: The sooner a product hits the market, the better. Losing time on elaborate long-term planning hurts.
In view of this, modern approaches to innovation management, like the “lean start-up concept” or “Scrum”, accept that there can never be such a thing as the perfect long-term master plan. Quintessentially, they focus on being open-minded about developments, ideas and opportunities wherever they emerge; experimenting with “bare-bones” prototypes, ideally simultaneously and in a broad-based manner; seeking market feedback on an ongoing basis; learning stuff quickly, and, above all else: implementing things immediately.
When it comes to being flexible and fast, small businesses are in a particularly favorable position. Unlike large, centrally organized companies, they are not hampered by bureaucratic inertia, coordination problems and all sorts of vested interests. So it comes as no surprise that many of the game-changing innovations in recent years - search engines (Google), social networks (Facebook), online shopping (Amazon), short messages (WhatsApp), etc. - have been brought about by start-ups. Big players are, thus, eager to copy and implement these very principles. The continuing innovativeness of businesses like Amazon or Apple is proof that it can be done.
The strategy and organization of innovation are aspects of the PMBA Entrepreneurship & Innovation program. Click here to get details on the curriculum.