Would you rather have an A-team with a B-plan or a B-team with an A-plan?

From the desk of Miles Everson: Happy Tuesday, everyone! Welcome to today’s edition of “Return Driven Strategy (RDS).” For those of you who are not yet familiar with this, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these principles help businesses achieve their organizational objectives. Today, let's delve deeper into the 10th tenet of RDS (Balance Focus and Options) through the lens of a particular aspect of it. Are you ready? Continue reading below to know more!

Would you rather have an A-team with a B-plan or a B-team with an A-plan? In a past “Return Driven Strategy” article, we talked about how business success is almost NEVER a straight line and therefore, managers and firms should exhibit flexibility in their operations. However, one of the reasons why some firms fail to be flexible is because the management team has a misaligned view where they see flexibility as “having no focus.” … and as a result, they stick to the straight-line concept. The straight-line concept is an enticing one because it makes the job of the manager much easier as targets are set for the year and then met. However, low return businesses often exhibit an over-emphasis on rigid objective-setting that does not allow for flexibility. These firms think they’re setting targets and meeting them, even when larger, more important goals are squandered. Because of that, changes in the business environment are ignored, and business activities fail to adjust as necessary. The Best-laid Plans are Flexible but Still Focused Becoming comfortable with uncertainty can be difficult and might take time. However, looking at the higher tenets of Return Driven Strategy (RDS) can be a powerful guide. It’s true that goals are necessary… but achieving a project deadline, meeting earnings estimates, or hitting sales quotas will all prove immaterial to returns and wealth-creation if a business is unable to fulfill otherwise unmet customer needs. This is because success results if other risks are avoided and opportunities that allow a business to better innovate, brand, and deliver unique offerings that customers love are welcomed. Here’s a more concrete example to demonstrate our point… Many successful venture capital firms (VCs) have stated something similar to this: “I’d rather have an A-team with a B-plan than a B-team with an A-plan.” This goes to show that every successful VC firm and experienced leader knows that there is only one certainty about a business plan: Nothing predicted is certain. Down the road, things will go differently from what has been planned, no matter how much research has gone into the planning phase. That’s why an A-team manager should be a flexible one—someone who can adjust for those changes in the business plan—while still being highly motivated and focused on the goal of wealth-creation. In the end, options-thinking requires flexibility. … but what about failures? Flexibility means planning options into each business path that will allow the firm to be more nimble and agile. It also allows the firm to be set up to take advantage of unexpected opportunities. In light of that, failure needs to be seen as an acceptable part of every business that wants to succeed in the long term. However, failures need to occur at the RIGHT levels and at the RIGHT times, relative to the rest of the business. According to Professor Joel Litman and Dr. Mark L. Frigo in their book, “Driven”: “Flexibility implies preparation for and expectation that certain projects will not work, certain offerings will not sell, and certain business units will need to be divested. High-performing leaders know that failed projects, offerings, or business units don’t necessarily imply that it was a mistake to launch those initiatives. If risks are taken at the right levels and with the right level of monitoring, one would expect every successful company to be littered small tiny failures on the road to giant successes.” Having the Proper BALANCE One of the keys to leveraging the options and flexibility strategy despite the risk of failures is in balancing the amount of resources that go into new initiatives with resources that go towards existing ones. Professor Litman and Dr. Frigo say that successful firms should not have all of their initiatives focused on innovation or all focused on branding. In short, a balance is needed between initiatives that support the three competencies—innovation, branding, and execution. — In essence, the most successful economies succeed by being out-of-control in terms of central management, and yet thrive through flexibility. According to Professor Litman and Dr. Frigo, when companies are allowed to go bankrupt and new businesses are allowed to thrive organically, everyone prevails. Think about this: In the most successful economies, entire industries die regularly while new ones sprout up. Where once there was a dominant agricultural society, now there is technology. Where once there were horse-drawn buggies, now there are communication highways. What do these tell you? If successful countries thrive on uncertainty, so must companies that want to be successful! A firm that only controls risks but does not leverage opportunities through flexibility and portfolios of options won’t be able to achieve the highest levels of returns. If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you’ve found this week’s insights interesting and helpful. EXCITING NEWS AHEAD The world of work has shifted, and there’s no going back. The barriers to entry have never been lower for talented professionals to work independently, and today’s massive external workforce is hardly a pandemic-produced fad. Business owners can only survive in the new work landscape by partnering with this deep talent pool. With decades of experience in both small-business entrepreneurship and executive management at PwC, I truly believe that the future of work is independent. With that, I’m happy to share with you that my book, co-authored with Walter Scott Lamb, is now available for pre-order on Amazon! 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