'Learn Cheap and Fast'

In times of uncertainty, don’t panic and don’t lose your head.

“A lot of [business] strategy today is about learning,” says Rita Gunther McGrath, Columbia Business School professor, in an interview with Knowledge@Wharton. “It’s not about sustainable competitive advantage. Think of strategy as a very dynamic entity.”

McGrath and Ian MacMillan, University of Pennsylvania Wharton School’s professor of innovation and entrepreneurship, describe how firms approach growth in ways that hurt them. CEOs need to stop talking about how failure is bad. It’s not failure that companies need to avoid, they say, but rather “failing expensively.”

Other messages on growth and planning:

• Discovery-driven planning is a plan to learn, MacMillan says. That’s because in uncertain environments, you don’t have knowledge. Rather, “you have to make assumptions. “The key issue is to know from the start that the plan is wrong,” he continues. “So how do I plan in such a way that I come out with the right solution but not necessarily know what it is at the outset? “What you really want to do is learn cheap and learn fast,” MacMillan says, “and if it’s wrong, you want to do something else, or you want to redirect [efforts, resources, etc.]”
• The concept of discipline becomes more important than ever in a severe downturn, McGrath maintains. And it gets more attractive when you have fewer resources. Organizations will spend less energy on projects that aren’t going to be successful. “You’re also going to see more discipline around shutting down things that need to get shut down.”

McGrath and MacMillan co-wrote “Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity.”

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