Business Planning

Not the most exciting or stimulating of titles for a blog (or, indeed, the most exciting activity for many business owners).  But perhaps that is because we have been getting it wrong.

 

That thought occurred to me whilst reading through ‘Obliquity’ by the economist John Kay.  He wrote the book in 2010, so many of you may already be very familiar with it and its overarching premise.  This is neatly summarised on the dust jacket  “Why our goals are best achieved indirectly”.

 

This book develops the idea that striving to directly achieve a goal is not the best way to achieve it and, indeed, is often likely to increase the chances that the goal itself won’t be reached (or retained).It seems Mr Kay knows a thing or two about the direct thinking which underlies most business plans –  he built a successful economics consultancy providing economic models to large businesses to help them plan for the future.  He is admirably honest about precisely what value his models actually generated for those clients….

 

Any of you with at least a passing interest in the great flowering of academic research and public discourse on happiness levels (and how we can increase our own) might have a sense of resonance about the obliquity idea.  There is much in the field of psychological research which confirms that the best way to achieve this hallowed state of happiness (let me confess, I am not a fan of the H word; I think the idea of striving for contentment is much more helpful and relevant to most of us) is by carrying out acts / activities and adopting patterns of thought which generate it as a by-product.  Think of the idea of ‘flow’ –  being engaged in a task which is stimulating (ie challenging, but manageably so) and this gives rise to a deep sense of engagement (almost entrancement) with the task at hand –  which makes us feel ‘happy’.

 

The book extends this to the realm of business and finance and uses examples such as ICI and Boeing (amongst others) to make the point that what made these businesses great wasn’t a focus upon ‘maximising shareholder value’ (how rare that glib phrase is these days) but upon creating chemicals which helped mankind and wonderful aircraft.  That was their very reason for being; their vision and their values.  And when they got that right – surprise, surprise –  they made profits.  Really quite sizeable ones.  Which meant that the earnings available for distribution as dividends to their shareholders or to reinvest in the business and hence increase its capital value were……well…. maximised.

 

Profit wasn’t the goal. Indeed, financial targets as such weren’t the goals –  but they were the ( very important) scorecard.

 

Now all this might sound a little odd coming from a  firm of accountants –  we do so love our spreadsheets and ascribing a monetary value to things (and people) so we can readily measure inputs and outputs.  Not for us Einstein’s observation that not everything which can be measured matters and not everything which matters can be measured.

 

But I think that there is something in this idea of obliquity and success (in conventional terms) being a by-product of getting other more fundamental aspects of the business right.

 

However, business plans are usually drafted for a purpose and that purpose is often connected with fundraising.  So you have to be mindful of what the people controlling the purse strings at the potential funder regard as the best way to achieve a goal –  going full tilt at it directly or adopting a more tangential, oblique approach…..

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