Annual Planning Is Killing Your Growth

It’s annual planning season and I have budgeting on my mind.  Therefore, a thought provoking post from the folks at First Round Review discussing the unique approach to planning and budgeting that Dave Brussin implemented at Monetate:

Annual Planning is Killing Your Growth – Try This Plan Instead

The first part of the article is a lengthy rant on all that is broken in the annual planning cycle. Some of it is endemic to the annual cycle and some can be fixed regardless of the cadence, a fact that weakens the overall argument/pitch.

Nonetheless, the counter-plan is very interesting:

  1. Find a group of comparable companies that are viewed as successful
  2. Time-normalize their financials based on maturity (“year X after IPO” and/or “$80M-$100M in revenue year”)
  3. Look at key business metrics and identify best, poor and average performance (as well as spread) + analyze what moves/outcomes enabled companies to reach “best” performance
  4. Use those numbers as guidelines for a quarter-by-quarter 3-year plan (12 quarters) for your company adjusting them in places where you think you’re smarter than them. Where you don’t – if their numbers are different than what you’re planning – they probably know something you don’t…
  5. Treat every quarter like the end of a 12-month year (trailing 4-quarters). Compare and analyze the results
  6. Rinse and Repeat

The key benefits in this approach that resonate with are:

  • “Smoother” planning – rather than more aggressive course-correction every 12 months
  • Longer-term thinking – making decisions in the next quarter in the context of the next 12 quarters rather than the next 1-3 quarter
  • Quicker feedback loop – a “year” comparable every quarter
  • Better chances of identifying the unknown-unknowns by using other successful companies’ behaviors as guidelines (evens if you don’t fully understand them yet) – rather than being trapped in your own paradigm and limited perspective.
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Annual Planning Is Killing Your Growth

“It’s not agile” and the “building a home” parable

As Martin Fowler observed almost a decade ago, “Agile” is a term that went through semantic diffusion rather quickly.

Perhaps as a result, one of the areas that seem to draw a lot of resistance from teams who perceive themselves to be “agile”, is around any sort of up-front planning.

As if just-in-time planning is synonymous with only deciding what you’re going to build in the next 2-4 weeks at the beginning of the iteration, and any planning beyond that time horizon is “waste”. Nothing can be farther from the truth.

Mike Cottmeyer of LeadingAgile is one of the true thought-leaders on applying agile principles at scale and his blog posts are almost always well worth the read. This one deals with the topic mentioned at the beginning of the post:

Should you use Agile to build your next home?

Mike uses a very powerful thought experiment to get his point across: what would building a house based on the common misconceptions of what agile is look like vs. building it based on what agile really means? Attempting to summarize the parable will not do it justice, so I’ll only repeat Mike’s conclusion, in his own words:

“Just like you wouldn’t build a house with an open ended scope, your stakeholders don’t want to commit to an open ended software project. We have to do enough work up front to put together a credible plan, mitigate risk, and understand costs. We have to estimate the work, set budgets, and make tradeoffs to ensure the product is done on time and on budget… No estimating, no planning, and not committing won’t be the answer for most organizations. It’s not a starting place anyone can live with.”

 

“It’s not agile” and the “building a home” parable