How to Learn
From 10 Rules for Strategic Innovators: From Idea to Execution, Vijay Govindarajan and Chris Trimble, Harvard Business School Press, Boston, MA. 2005
Don’t try to mix oil and water. Hold separate meetings for evaluating the business performance of NewCo and CoreCo. These meetings must be handled very differently, and combining them can be impractical, if not destructive. Protect predictions. Ensure that executives involved in NewCo’s planning process understand the importance of improving predictions and are aware of how this learning process can go astray when predictions are ignored, are manipulated, or become rigid.
Avoid being defensive. Evaluate the leader of NewCo not on results but on his ability to learn and make good decisions. Though accountability to plans is an effective practice in mature businesses, it can be crippling in new high-potential businesses. If NewCo’s leader is held accountable to the business plan, he will become defensive once targets are missed—a highly likely outcome in any strategic experiment. He will have a hard time being open and candid and may even hide information, perhaps even taking the senior management team out of the learning process altogether.
Do less, faster. That is, simplify plans, but plan more often. Each cycle through the planning process creates a learning opportunity, so planning more frequently increases the learning rate. To make a higher frequency practical, plans must be simplified. Detailed plans (broken down by region, product line, sales channel, and so forth) are useful for mature businesses, but NewCo should focus on resolving critical unknowns, which can be accomplished at a more aggregate level.
Analyze through a new lens. Compare predicted and actual trends. Because strategic experiments are dynamic, rates of change are often more valuable information than current results.
Measure what you don’t know. Identify metrics that are most useful in resolving critical unknowns. These are usually nonfinancial measures and are rarely the most closely watched metrics at CoreCo.