Eric from SourceGear creaters of SourceGear Vault a Microsoft SourceSafe alternative regularly posts how-to’s about marketing for geeks. In his current post he is commenting law #17 from the book The 22 Immutable Laws of Marketing written by PR/Marketing guru Al Ries and Marketing guru Jack Trout.
Working in a small, but growing, company offering products to small business I read his posts with great interest. Eric has raised many good points about marketing in the software industry for small companies, but this post he did have some points I did not agree with.
<blockquote>What the authors are really saying is that long-range planning doesn’t work.</blockquote>
Hmm…really? All research shows that successful companies plan for the long-term. In fact, lack of planning is one of the most common reasons of failure for unsuccessful companies.
<blockquote>I suspect this chapter is a lot more necessary for people like Pepsi and Burger King. Those guys probably do get tempted to make long-term plans. But in software, things move so fast that most of us wouldn’t even think of trying to make any sort of detailed plan for a five year horizon.</blockquote>
No. Long-term planning is important for everyone, even down to the personal level. Where will you be in five years? Without planning you are unlike to reach your goals. Yes, the market and the environment changes constantly (see my post about Karaoke Capitalism), but that does not mean the changes are so radical that they make planning obsolete. I think Eric’s misunderstanding about planning is that he sees long-term planning as trying to foresee the future. Long-term planning is about setting goals and objectives based on the current situation and the most likely future development in the market. As the market changes in the future we must continually update the plan to make sure our plan is up-to date.
But why is planning important, even for small businesses? Except for the reasons stated above with reaching objectives and that it’s a characteristic of successful companies, it is important because it helps us understand the market, our customers, our competitors and our own company better. Knowing that and knowing where we are headed, we can make better decisions. If we do not plan and set objectives, then how can we know if we performed good or bad? If our research shows that we are capable of selling 500 software licenses this year and we plan for that, but end up selling 800, then that is good. But if we didn’t conduct that research and have no objectives, then we wouldn’t know that when we sold 300 licenses we did a really poor job. For a more longer term, planning is about setting goals. Do we want to be a small company with a handful clients so we can get enough money to pay rent and salaries? Well then we have to plan to make sure we keep our current customer base. Do we want to grow, maybe be listed on the NASDAQ in 5 years? Well then we need plan on how to reach that goal. We need to understand that to be listed on the NASDAQ our company must have a board of directors and a minimum net income of $750,000. We need to understand other key milestones in the process of reaching that goal. Knowing that we can say: well to reach objective 1 we need to focus our resources on X for now, but next year we need to focus on Y to reach objective 2. This will result in Z which will result in our company being on track with reaching the overall goal. This might sound less usefull for smaller companies with few resources and choices, but while this is very “big-picture” and strategic ways of thinking, it will result in actual tactical decisions like shall we implement XML support in our software, shall we advertise in the “Dog’s and folk’s” magazine or shall we hire the PR guy who looks and talks like a member of the Fab Five from the show Queer Eye for the Straight Guy. These might be day-to-day business decisions, and without long-term planning these decisions could be made incorrectly because we do not have that knowledge that we can gain from long-term planning.
Click here to read Eric’s article - Law #17: The Law of Unpredictability