“Unless you’re a fortune-teller, long-term business planning is a fantasy”


Originally published on Netimperative.

Now that we have a Conservative and Liberal Democrat coalition Government, tough economic times are ahead not least because of their deficit reduction plans. £6 billion cuts in public services will no doubt add further hardship to many technology and service companies who already suffer from decreased investment from their services.

So how can businesses who produce products and services ride out this tricky financial period? What must executives do to ensure they can steer their companies into calmer waters? Should they base their futures on short-term cut-backs instead of long-term investment strategies?

I put these questions to David Heinemeier Hansson, a young self-confident Dane in town to promote his new book ReWork: Change The Way You Work Forever (Vermilion: 2010). It is co-authored with Jason Fried, who are both big names in the nebulous world of web 2.0.

Starting out in Chicago 1999 as a web design company, Fried hired Hansson in 2003 to create the popular online project management tool BaseCamp. In ten years, the company boasts 3 million people using its suite of tools along with their blog Signal vs. Noise commanding big daily audiences. Hansson also created the widely used open-source web framework Ruby on Rails that powers many technology services including Twitter.

ReWork has found a large audience with it being ranked high among the business best seller lists with praise from Newsweek, Fast Company and the Washington Post. Even top business leaders like Tom Peters, author of In Search of Excellence, rate it. ReWork reads like a manifesto. It shoots down formulaic management practice that puts process ahead of ideas. For that alone it is refreshing and we need more such polemics.

Hansson said to me that many people are reading it because it confirms peoples’ experience of work where “they don’t get enough done and end up not able to accomplish anything.” Therefore at one level the book keys into a widening sense of frustration with work. It leaves few pillars of business practice untouched. It attacks meeting culture calling it ‘toxic’. Business planning gets lambasted. ‘Unless you’re a fortune-teller, long-term business planning is a fantasy’. Fried and Hansson argue there are too many unknowns: market conditions, competitors, customers, the economy. To them planning is just guesswork that is not particularly suited to an ‘improvised’ world where ‘Plans let the past drive the future’.

Much of ReWork is an instinctive reaction against the overwhelming management culture that ends up stifling creativity. There are lessons to be learned here. Many companies are driven to over engineer how ideas are formed by being too prescriptive, insisting on too many rules and etiquette. Here ReWork does offer simple but good advice: trust your own instincts to make something right for you first. Or as they put it: start by ‘scratching your own itch’.

They suggest ‘start getting into the habit of saying no—even to many of your best ideas. Use the power of no to get your priorities straight.’ Or if you do have to listen to your customers’ feedback, they insist on a radical (and some would say blasphemous) approach: don’t write any of it down! ‘Listen, but then forget what people said. Seriously.’ Instead they argue that the stuff that matters will eventually make itself known.

When it comes to the competition, they are equally forthright: ‘focus on your competitors too much and you wind up diluting your own vision… you become reactionary instead of visionary. You wind up offering your competitor’s products with a different coat of paint.’

In the heat of battle many businesses forget all this—especially in these hard economic times we are in now. It is all too easy to end up being the same as everyone else: asking the same group of customers the same set of questions. Sadly there are few examples of businesses who refute this customer-is-right mantra and insist that ideas must come before customers’ needs. Apple’s CEO Steve Jobs is one famous exception to the rule rejecting focus groups preferring his own instincts: be influenced by the audience, but not lead by them.

But for all the useful attacks on management-speak and conventions, Fried and Hansson’s own ideas are not ambitious enough. For them, to succeed, businesses must be frugal, cutting out waste, running things on a lean footing and making a virtue out of constraints that ‘are advantages in disguise’.

As Hansson said to me: “all my best ideas, creativity and innovations have come about because of having to deal with intense constraints, because I was forced to do more with less.” But we need to be careful about this: one way to break out of external constraints is to invest. But in the book they reject external investment (even though Jeff Bezos, CEO of Amazon is an investor in 37Signals) arguing you end up playing to someone else’s tune. That is true—but having first established strong ideas should keep shareholders at bay.

Indeed many companies have inadvertently found themselves in a similar situation and have not consciously invested in new ideas and have had to rely upon building internal processes or extending existing customer relationships in the hope that it will see them through—eventually.
Hansson continued to suggest to me that “sometimes we need big investments, but most of the time we can get by with efficiencies in what we already know and use in our daily lives… by solving simple problems with simple solutions.” Hence in ReWork Fried and Hansson go on to offer an altogether simpler solution: beat the competition by ‘underdoing’ them.

‘Do less than your competitors to beat them. Solve the simple problems and leave the hairy, difficult, nasty problems to the competition. Instead of one-upping, try one-downing. Instead of outdoing, try underdoing.’ But in a climate of fiscal tightening, ReWork ends up helping those that can only see the answer in streamlining business operations than of finding new ways to expand with new productive ideas.

Luckily however there are some companies that do otherwise—driven out of their own necessity. In South Korea for example, mobile phone producer Samsung is putting together a $20.6 billion investment plan to beat the competition. As its chairman Lee Kun-Lee said: “When other global companies hesitate, we must move ahead decisively to take this opportunity, and this will also benefit the country’s economy.”

Only when we are prepared to take on board equally ambitious investment plans will Fried and Hansson’s positive sense of self-belief combine to make the best business case.