class7

Report
Business 16
Stanford Department of
Continuing Education
Class # 7, 11/9/09
Business Plan to Operating Plan
Business Plan
o Defines the Business & Strategy
o Overall goals
o Major milestones
o Overall headcount
o Overall spending plan
Operating Plan
o Defines Tactics
o How do I accomplish my strategy?
o Logistics
o Resources
o Critical paths
o Contingencies
o Sensitivity analysis
To start an Operating Plan
o Define milestones
o Back track events leading to milestones
o Define interdependencies
o Determine what resources are required
o Determine when resources are required
o Also known as GANTT charting
o Microsoft Project
Tweaking the Operating Plan
o Now comes the hard work
o Now you need to ask, “what happens if this
o
o
o
o
step takes 2 extra weeks?”
You need buy-in from your partners or the
people actually doing the work
You need to consider how much extra money
you will burn if you have a failure along the
way
You need to take into account that it takes a
long time to hire good people
You need to establish failure and success
criteria
Tweaking the Operating Plan
o You need to establish failure and success
contingencies
o If you have higher than expected demand, can
you grow fast enough to keep up (AOL, Google,
Facebook, Intuitive Surgical)
o If not you leave money on the table, and leave
room for a competitor
o If you have a failure, can you isolate the pathway
from other critical pathways (everybody else)
o Especially important when deploying expensive
assets, like sales people, clinical trials
o Fast action may save your company
Using the Operating Plan
o Weekly or regular meetings to compare progress with
the OP
o Track where you are
o Make sure you are measuring the right things
o Technical devt progress
o Sales
o Cash management
o Margin
o Focus on the things that can kill you first
o Failure analysis
o
o
o
o
o
Why are we failing?
Where are we consistently high or low?
Is there a pattern?
Do we understand the process?
Is it the plan or the people?
Using the Operating Plan
o A key is always buy-in on milestones
o It may become clear that certain milestones are
impossible
o
o
o
o
Bad economy?
Seasonal effects?
Adoption issues?
Management?
o Motivating people to stretch yet not demoralizing
them is the essence of management
o Don’t give up too easily
o You can often still hold people to overall goals
o Don’t be afraid to re-plan and change out irrelevant
milestones
o Keep your eyes on the prize
Using the Operating Plan
o The Operating Plan should rule the lives of
everybody not concerned with the strategic
direction
o It swaddles line employees and gives reassurance
that even in chaos there is order
o It defines what is really important
o It is often the source of evaluations for
compensation
o People will do what they are compensated for
o Compensation requires measurement
o Measurement leads to results
o You can’t change what you don’t understand
o It is defined by completion of projects, not their
beginning
The Operating Plan defines
when you need to raise money
o It shows you when you have achieved significant risk
reductions in the business (when it is attractive for
others to invest)
o Perceived risk reduction is risk reduction
o Comps are commonly known in every industry
o Don’t get trapped into a plan that has no real risk
reductions for long periods of time
o It tells you when you are going to need big infusions
of capital
o It tells you when you should consider mergers (before
embarking on big capital infusions) or other outside
help
o Execution or planning failures may force a Plan B
BUT Operating Plan Reality
Check):
o A great operating plan may only result in the
perfect execution of a stupid business plan
o You can still execute well and fail
o A good operating plan will still not tell you if it is a
good investment
Re-plan
o Don’t wait too long
o Make sure you get it right this time
o Be conservative
o Sandbag
o Make sure it is not an annual occurrence
o See previous class on hiring and firing

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