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] and subsequently referenced in a number of books and articles ^[2]. Its main thesis is that when one is operating in arenas with significant amounts of uncertainty, that a different approach than is normally used in conventional planning applies. In conventional planning, the correctness of a plan is generally judged by how close projections come to outcomes. In Discovery Driven Planning, it is assumed that plan parameters may change because new information is revealed, therefore the plan is subject to change. With conventional planning, it is considered appropriate to fund the entire project as the expectation is that one can predict a positive outcome. In discovery driven planning, funds are released based on the accomplishment of key milestones or checkpoints, at which point additional funding can be made available predicated on reasonable expectations for future success ^[3]. Conventional project management tools, such as stage-gate models or the use of financial tools to assess innovation have been found to be flawed in that they are not well suited for the uncertainty of innovation-oriented projects ^{[4] [5]}

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 methodoloy 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 ^{[6] [7] [8]}.

See also

• Assumption-based planning
• Christensen, C. M. 1997. The innovator's dilemma: When new technologies cause great firms to fail. Boston, Mass.: Harvard Business School Press.
• 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.
• McGrath, R. G. & MacMillan, I. C. 2000. The entrepreneurial mindset : strategies for continuously creating opportunity in an age of uncertainty. Boston, Mass.: Harvard Business School Press.
• McGrath, R. G. & MacMillan, I. C. 2009. Discovery Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity. Boston: Harvard Business Publishing.
• McGrath, R. G. & MacMillan, I. C. 1995. Discovery Driven Planning. Harvard Business Review, 73(4): 44–54.

External links

• Web site with additional reference material

References

1. ^ McGrath, R. G. & MacMillan, I. C. 1995. Discovery Driven Planning. Harvard Business Review, 73(4): 44–54
2. ^ McGrath, R. G. & MacMillan, I. C. 2009. Discovery Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity. Boston: Harvard Business Publishing; Christensen, C. M. 1997. The innovator's dilemma: When new technologies cause great firms to fail. Boston, Mass.: Harvard Business School Press
3. ^ Block, Z. & MacMillan, I. C. 1985. Milestones for successful venture planning. Harvard Business Review, 63(5): 84–90
4. ^ Rajesh, S. & Zafar, I. 2008. Stage-Gate Controls, Learning Failure, and Adverse Effect on Novel New Products. Journal of Marketing, 72(1): 118.
5. ^ 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
6. ^ McGrath, R. G. 1997. A real options logic for initiating technology positioning investments. Academy of Management Review, 22(4): 974–996
7. ^ van Putten, A. B. & MacMillan, I. C. 2004. Making Real Options Really Work. Harvard Business Review, 82(12): 134
8. ^ Dixit, A. K. & Pindyck, R. S. 1994. Investment Under Uncertainty. Princeton, New Jersey: Princeton University Press