One of the key concepts from my first book, The Start-Up of You (which I wrote with Ben Casnocha) is the ABZ planning framework. While the book came out nearly a decade ago, in this 2020 year of extreme change and uncertainty, ABZ planning is more relevant than ever.
The core insight of the book is that, like entrepreneurs, companies and individuals need to develop the ability to adapt to changing circumstances. The ABZ planning framework offers a systematic approach to adaptation that allows you to pursue your stated goals, but also maintain the ability to quickly course-correct when external shocks or unexpected discoveries occur.
I discussed ABZ planning in detail on the Greymatter podcast, which you can listen to here.
Plan A is your investment thesis. Your Plan A should be a detailed plan that you set down in writing. For example, for a startup, you should spell out why you believe there is a need for your product or service, how you believe the market will respond, where it fits relative to competition or substitution, how you plan to reach your customers, who those early customers might be, what you’ll do to make it happen, and what kind of talent and other resources you will need to succeed.
But as the Prussian strategist Helmuth von Moltke the Elder famously said, “No plan survives contact with the enemy.” No start-up plan survives contact with execution, with the market, with investors, with employees, and with competitors. That’s why you need a Plan B, or rather, Plans B.
One of the common misconceptions is that people envision Plan A and Plan B as if they were detailed blueprints. If Plan A isn’t working, it’s time to break glass, pull out a stack of plans, and switch to Plan B. In the realm of entrepreneurship, this is a catastrophic mistake.
In reality, you should be constantly learning and adjusting as you execute. The goal is to continually improve your investment thesis, not stick with a static plan. To do this, you don’t need Plan B, you need Plans B. You’re asking yourself, on multiple parts of your plan, “What do I do if this doesn’t work?” You need to constantly measure whether your investment thesis is working, and if it isn’t, you need to have alternatives ready.
One great way to measure is using dashboards and data, but sometimes measuring consists of going around to your smartest friends and asking, “What do you think of this plan? What do you think could go wrong?” Their answers are also a way to increase or decrease your confidence in your investment thesis.
Sometimes, Plans B involve shifts to your goal. A classic example is when you shift from providing a service to providing the infrastructure for others to provide a service. Amazon Web Services might be the most valuable Plan B of all time, and creating it didn’t even require Amazon to give up its Plan A of being the everything store.
Alas, not all Plans B work out that well.
Let’s say you’ve been carefully adjusting and shifting between Plan Bs. You’ve been learning, you’ve been deploying, you’ve been executing. You’ve been trying to make this work. And yet, you’re no longer confident that it will.
When you find yourself in this state, it’s time to think about switching to Plan Z. Plan Z is your lifeboat plan, your, “this isn’t working, we need to really change something” plan.
Note that Plan Z isn’t, your “I’m totally out of cash, I’m bankrupt” plan. At that point, it’s pretty much too late to trigger any plan. Rather, you should invoke our Plan Z when no longer believe in your investment thesis, but you still have the assets and resources to successfully navigate a radical change.
The iconic emblem of Plan Z for Silicon Valley is the Game Neverending. We cover the story in the Masters of Scale Episode with Stewart Butterfield. Stewart and Caterina Fake set out to create a massively multiplayer online game. While the game didn’t catch on, one feature, photo sharing did, and Plan Z became Flickr, the first successful photo sharing service. After Flickr’s acquisition, Stewart returned to the Game Neverending by building a follow-up, Glitch…which also failed to catch on. So he shifted to another Plan Z, which was to build a team communications tool based on IRC. Today, we know Glitch by another name–Slack.
Done correctly, your Plan Z becomes your new Plan A.
Plan Z is a long shot or something you did not see when you began; otherwise it would have started as your Plan A! Often, Plan Z ends up being “shut the company down and hand money back to investors.” Of course, when Ev Williams decided his company Odeo’s podcasting product wasn’t going to succeed, he offered to return all their money to any investors who didn’t want to be part of his Plan Z of trying to figure out something else to do. As it turns out, the investors who stayed with Ev ended up being very happy when that something else turned out to be Twitter.
ABZ Planning in 2020
2020 is a year of extreme change and uncertainty.
Almost all of us had a very different Plan A for what we were going to do in 2020 than how things have turned out to be. I’m reminded of that scene in the classic movie The Princess Bride, where the Sicilian Vizzini (played by playwright Wallace Shawn) keeps saying, “Inconceivable,” as things keep happening that he doesn’t think could happen. Finally, Inigo Montoya (played by Mandy Patinkin) comments, “You keep using that word. I do not think it means what you think it means.”
So many inconceivable things have happened this year. I don’t think that there’s ever been a year where so many different exogenous elements, from a global pandemic, to massive wildfires, to social unrest due to systematic injustice, to a presidential election, have come together at one time.
When Ben and I wrote about ABZ Planning in The Startup of You, we didn’t presume a world of constant seismic change.
In a practical sense, businesses need a fairly high degree of predictability in order to invest in the future. You won’t hire and train an employee if you don’t expect them to be working for you a year from now. Shocks occur, but generally speaking, they are rare and contained.
For example, a platform shift like from desktop to mobile, or a market shift, like the opening of a major new global market, are specific and focused changes, rather than scrambling the entire business landscape.
In contrast, 2020 has compressed decades of change into a handful of months. Suddenly, you probably have to be much more thoughtful about which of your long-held assumptions and beliefs about the world actually are true.
The key is to regularly assess the changes that have occurred and incorporate them into your investment thesis. This makes planning more difficult, but it beats not having a plan.
To assess what has changed, you can use both data and judgment. For example, one of the main ways I’m tracking the pandemic is to rely on friends with more expertise and greater focus. For example, one of the people whom I trust most on vaccines is Bill Gates. If I have to ask one person, “What’s going on?” Bill is my go-to expert. He’s rendering amazing leadership to the world with all of his foundation’s work around vaccines and therapeutics. Based on the information we have right now, it’s possible we’ll have a scalable vaccine deploying next year, which means I can make a more educated decision about how much risk to take on and when.
No matter what you do, you can’t eliminate all risk. Business doesn’t work if you presume the worst case for everything. If we presume the worst case for everything, entrepreneurs would never get started. So you have to presume some level of risk, and you should be asking, “How do I actively and intelligently manage that risk?”
This can feel uncomfortable. That’s why relatively few people become entrepreneurs; starting a company means you’ll be taking risks and you will not be able to fully control the outcome. That’s also why I believe entrepreneurs can be heroes; we need people willing to take the risks needed to build new businesses, create new jobs, and launch new products and services.
One of the great examples of entrepreneurial ABZ planning this year is Airbnb, a company in an industry which has been decimated by the pandemic, but which has undergone a remarkable turnaround because of the fact that it’s adaptable (like many startups). Adaptability is probably even more important than fixed assets during these rapidly-changing times.
In Blitzscaling, Chris Yeh and I wrote about the power of networks and marketplaces to drive growth and competitive advantage. But one of their underappreciated powers is the way they can provide adaptability. If you think of Airbnb’s network of hosts as entrepreneurial nodes, they represent a powerful and creative group that can rapidly test a wide array of possible adaptations to the pandemic, and then spread the successful adaptations to the rest of the group’s members. As a result, Airbnb rapidly shifted to the “Plans B” of longer-term stays and driveable travel, rather than pre-pandemic short-term stays and air travel.
I’ve even applied ABZ planning in my own life. In February, Chris and I finalized our Plan A for our writing activities in 2020. We were going to write the “Blitzscaling Playbook” to give practical, concrete blitzscaling advice to entrepreneurs, things like laying out how to globalize a business.
That changed when the pandemic hit. While some businesses have been accelerated by the pandemic, many more are struggling. What we realized is that there’s a set of different topics, which touch on the blitzscaling universe, but are not pure blitzscaling, which are highly relevant during the “Age of the Inconceivable”.
This discussion of ABZ planning is a great example. Because ABZ planning is an important framework for intelligent risk management, it is even more useful during 2020. We’ll still publish the Blitzscaling Playbook eventually, but for now there are plenty of even more urgent topics to cover.
It is usually difficult to give up your Plan A. It’s something that you invested in, possibly even cherished. But guess what? The world has changed. And we’re not going to be able to wish the world back the way it was. So the best thing any of us can do is to say, “Well, what can we do now that will have the greatest positive impact on people’s lives?” Whether that leads you to adopt Plans B or Plan Z, I wish you luck and success. I label this the Age of the Inconceivable in homage to both the Princess Bride and Joshua Cooper Ramo’s excellent book, The Age of the Unthinkable.