Discovery-driven planning

Discovery-driven planning is a planning technique first introduced in a Harvard Business Review article by Rita Gunther McGrath and Ian C. MacMillan in 1995[1].

Gunther and Macmillan argue that it is unhelpful to judge a plan's correctness by how close outcomes come to projections when operating in arenas with significant amounts of uncertainty.

Discovery-driven planning assumes that plan parameters may change as new information is revealed. As opposed to conventional planning where projects are funded upfront, discovery-driven planning releases funding based on the accomplishment of key milestones. Additional funding is made available predicated on reasonable expectations for future success.[2]

Gunther and Macmillan also argue that conventional project management tools such as stage-gate models are not well suited for the uncertainty of innovation-oriented projects.[3][4]

Discovery-driven planning has been widely used in entrepreneurship curricula and has been cited by Steve Blank as a foundational idea in the lean startup methodology.[5] While the Lean Startup Method is perhaps more suited for start-up ventures, discovery-driven planning may be better suited to potential innovation in larger corporations, where each innovation must achieve significant profits to be material to the corporation's growth.[6]

Five disciplines

A discovery-driven plan incorporates five disciplines or plan elements:

  1. Definition of success for the plan or initiative, including a "reverse" income statement
  2. Benchmarking against market and competitive parameters
  3. Specification of operational requirements
  4. Documentation of assumptions
  5. Specification of key checkpoints

Using discovery-driven planning, it is often possible to iterate the ideas in a plan, encouraging experimentation at lowest possible cost. The methodology is consistent with the application of real options reasoning to business planning, in which ventures are considered "real" options. A real option is a small investment made today which buys the right, but not the obligation to make further investments.[7][8][9]

See also

References

  1. ^ McGrath, R. G. & MacMillan, I. C. 1995. Discovery-driven planning. Harvard Business Review, 73(4): 44–54.
  2. ^ Block, Z. & MacMillan, I. C. 1985. Milestones for successful venture planning. Harvard Business Review, 63(5): 84–90.
  3. ^ Rajesh, S. & Zafar, I. 2008. Stage-gate controls, learning failure, and adverse effect on novel new products. Journal of Marketing, 72(1): 118. JSTOR 30162204
  4. ^ Christensen, C., Kaufman, S., & Shih, W. 2008. Innovation killers: how financial tools destroy your capacity to do new things. Harvard Business Review, 86(1): 98–105, 137.
  5. ^ Blank, S. 2013. Why the lean start-up changes everything. Harvard Business Review, 91(5): 63–72.
  6. ^ McGrath, R. G. 2024. Who Learns Fastest, Wins: Lean Startup and Discovery Driven Growth. Journal of Management, 50(8): 3162-3182.
  7. ^ McGrath, R. G. 1997. A real options logic for initiating technology positioning investments. Academy of Management Review, 22(4): 974–996. JSTOR 259251
  8. ^ van Putten, A. B. & MacMillan, I. C. 2004. Making real options really work. Harvard Business Review, 82(12): 134.
  9. ^ Dixit, A. K. & Pindyck, R. S. 1994. Investment under uncertainty. Princeton: Princeton University Press.
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