Hold, Hold, Plan, Plan, Too Late: The High Cost of Hesitation
“Companies whose investment processes demand quantification of market sizes and financial returns before they can enter a market get paralysed or make serious mistakes when faced with disruptive technologies. They demand market data when none exists and make judgments based on financial projections when neither revenues nor costs can be known. Using planning and marketing techniques that were developed to manage sustaining technologies in the very different context of disruptive ones is an exercise in flapping wings.” — Clayton Christensen
On December 28, 1978, United Flight 173 neared Portland, when the plane encountered an unexpected problem with a landing gear indicator light. Instead of rushing the landing, the captain chose to enter a holding pattern to fully assess the situation. This careful approach allowed the crew time to perform thorough checks and discuss contingency plans extensively.
In the cockpit, the atmosphere was intense but controlled. The crew took time to consult the aircraft’s detailed manual, debating the implications of various gauges and readings, confirming that the landing gear was indeed down and locked. Throughout this process, the captain kept a calm demeanour, emphasising the need to focus on preparing for a rough landing rather than panicking.
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As they orbited, the team prioritised safety over haste. They allowed other aircraft to land first, repeatedly yielding the right-of-way to ensure no rush could complicate their landing. This level of meticulousness extended to preparing the cabin; flight attendants briefed passengers on emergency procedures and the brace position, while the flight engineer made more rounds through the cabin to reassure passengers.
In addition to their safety checks, the crew managed internal communications with precision. Discussions about the placement of flight attendants and post-landing procedures were detailed, considering even the minutiae such as the positioning of books in the cockpit to avoid disarray and ensuring all crew members knew their roles in case of an emergency landing.
Their meticulous planning, though undertaken with the best intentions, consumed more time and resources than expected, leading to a critical oversight. It ran out of fuel! The aircraft crash-landed, shattering two unoccupied homes. Tragically, ten people lost their lives, and twenty-four were seriously injured. United 173 crashed despite having an hour of spare fuel, no incapacitating technical issues, and clear protocols for dealing with a landing gear failure.
A few months after the crash of United Flight 173, the National Transportation Safety Board (NTSB) report revealed that the aircraft could have landed safely within 30 to 40 minutes after the landing gear malfunction was detected. The accident was mainly attributed to the captain’s excessive focus on the malfunction, which overshadowed the critical task of fuel monitoring. This oversight exemplifies a key principle articulated by Peter Drucker: “Management is doing things right; leadership is doing the right things.” In this case, while the captain managed the immediate technical issue correctly, his leadership faltered in prioritising overall safety, failing to address the essential matter of the aircraft’s dwindling fuel supply.
The tragic tale of United Flight 173 vividly illustrates the perils of over-planning. In large or even moderately sized bureaucratic organisations, this narrative might resonate deeply. Such environments often require that even the most brilliant ideas navigate through complex layers of approval, buy-ins, and both political inclusions and exclusions. Reaching the finish line is both arduous and rare. Often, by the time an idea is implemented, it’s been so diluted and altered that it’s merely a shadow of its original vision — worn down, mentally bruising its proponents. The slow process can lead to organisational tragedy, crushed morale and the loss of many brilliant people.
Just as with Flight 173, where meticulous attention to a minor issue led to an unforeseen disaster, excessive planning in business can divert focus from critical priorities, leading to missed opportunities and even catastrophic failures.
“There is at least one point in the history of any company when you have to change dramatically to rise to the next performance level. Miss the moment and you start to decline.” — Andy Grove
The analogy of Flight 173’s ordeal underscores the paralysis that can grip companies obsessed with planning in environments where swift action is required. The aircraft’s crew, while aiming to ensure a safe landing amid minor mechanical issues, overlooked their dwindling fuel — a mistake paralleled by businesses that miss transformative opportunities due to slow decision-making processes. By the time consensus is reached and a strategy executed, it may be irrelevant, as competitors who prioritise speed and flexibility have already moved ahead.
Strategic planning, a concept refined from the 1960s through the 1990s, typically involves rigorous market research and pristine planning, meticulously gaining buy-in at every level of the hierarchy. Questions like “Have you shown this to Jeff?”, “What did Mary say?” or “What did Ops think?” often slow the process dramatically. By the time everyone has given their input, the original concept is barely recognisable. Meanwhile, an agile competitor might have already launched a more appealing version of the idea, quickly captured market share and established themselves as the preferred supplier for this innovative product.
In the business world, when facing disruptive innovations and competitors can access funding, audience, and tools very quickly, traditional methods of strategic planning and careful execution are more a hindrance than a help. Most executives have been trained to manage innovation within a context where analysis and slow, deliberate planning are feasible. However, today, this approach can lead to missed opportunities and strategic missteps.
In a stellar episode of The Innovation Show, Sven Smit, Chairman of McKinsey Global Institute told us. “Not moving is probably the riskiest strategy of all.” You not only risk stagnation but you miss an added reward that is completely inaccessible to non-movers: growth capital. It mostly flows to the winners, condemning many laggards to playing along. We continue to see many management teams stuck in a “wait and see” mindset, not moving quickly enough to confront and ride the ever-shifting tide of global economic forces. Remember video retailer Blockbuster, proud owner of more than 9,000 stores and employer of more than 84,000 people in 2004? It failed to respond to digital subscription services like Netflix and eventually filed for bankruptcy in 2010. He concludes that “You can’t hide from disruptive risk.”
Antidotes for Risk-Aversion
To address the challenges in highly uncertain environments, companies can learn from the suite of plays as introduced by our guest on The Innovation Show, Rita McGrath. In her 1996 book, “The Entrepreneurial Mindset, Strategies for Continuously Creating Opportunity in an Age of Uncertainty”, Rita introduces real options reasoning as a method to manage entrepreneurial investments effectively. This approach involves making strategic investments with a limited downside to gauge the potential of an idea before committing further resources. It allows businesses to explore many opportunities without exhausting their resources or locking themselves into a path prematurely. It limits the fear response by compartmentalising potential (and probable) downsides.
Real options reasoning encourages the development of a diverse portfolio of projects, categorising them into positioning, scouting, and stepping-stone options:
1. Positioning Options: These options allow companies to keep flexibility and wait for clarity before making significant commitments. They are minimal investments that keep firms poised to capitalise on uncertain future events.
2. Scouting Options: These are exploratory investments intended to test new markets or technologies. They extend a company’s existing competencies into new areas, helping to find promising markets through small-scale experiments.
3. Stepping-Stone Options: These involve sequential, staged investments that help companies gradually discover and develop new competencies for highly uncertain markets. Each investment builds on the earlier one, allowing firms to adjust their strategies based on learned insights and emerging market conditions.
By incorporating these types of strategic options into their investment portfolios, companies can navigate uncertain landscapes more effectively, seizing opportunities without being hindered by the excessive costs or rigid commitments typical of traditional investment approaches. This strategy enables businesses to adapt and grow in the face of disruptive changes and new market realities.
As is often the case, the strategy is held back by human frailties such as fear, dissonance, and a host of cognitive biases. I leave you this week with the words of my fellow countryman, Dr. Michael J. Ryan when speaking about emergency response. “If you need to be right before you move, you will never win. Perfection is the enemy of the good when it comes to emergency management. Speed trumps perfection. And the problem in society we have at the moment is everyone is afraid of making a mistake. Everyone is afraid of the consequences of error. But the greatest error is not to move. The greatest error is to be paralysed by the fear of failure.”
Thanks for Reading
