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The Best Laid Plans of Mice and Men — Part I

In this new series, we examine the consequences of poor planning.
Michael McTague, Ph.D., Executive Vice President, Able Global Partners in New York, serves clients in a variety of industries that seek capital for expansion, acquisition, consolidation or re-financing.
Michael McTague, Ph.D., Executive Vice President, Able Global Partners in New York, serves clients in a variety of industries that seek capital for expansion, acquisition, consolidation or re-financing.

Image source: TikTok

May 2022 — Myth Buster

The absence of coronavirus testing kits and the US exit from Afghanistan filled the twenty-four hour news channels for twenty-five hours per day recently. Even President Biden's close allies had unpleasant things to say. It is not our purpose to discuss the rightness or wrongness of political events, but the theme that relates most closely to our interests is poor planning.

It is fair to say that, in the United States, widespread reactions are easier to create and measure in the age of day and night television news. News is frequently mixed with opinion, which increases the support for or criticism of events. Opinion is so dominant that Pew Research uses a special way to measure it: News Coverage Index Methodology. The Rand Corporation has also weighed in on the subject with a study entitled "Facts Versus Opinions." Walter Cronkite would be shocked.

Freeing the hostages from the embassy in Tehran in the early eighties and the US exit from Vietnam were not smooth either. In those days, however, news coverage was not so in-your-face. In terms of planning, a couple of business lessons can be learned from recent events.

Ready, Fire, Aim

First is the danger of taking action without having a plan in place. Having no plan does not sound wise. Equally problematic is reacting to the situation with no roadmap. The Afghanistan exodus appears to fall into the second category. Joy at the rapid coronavirus testing breakthrough should have been followed by a plan to manufacture tests and distribute the vaccine quickly. There may have been plans sitting on the shelf for Afghanistan, but the decision was to pull out right away. In such situations, all the thinking and detailed planning goes down the drain.

In the financial world, future years of budget plans turn meaningless when a sudden decision — sell the plant, dump the business, buy that expensive property — grabs hold of top management. In the heat of the moment, no one is allowed to ask if the organization can afford the decision.

Why did Prudential ( PRU ) get involved with Bache? Who said stocks and insurance are basically the same? Why did General Motors ( GM ) and Ford ( F ) manufacture so many little knockoffs of their big brands, which sapped product identity and opened the door to stiff Japanese competition? Why did Coke ( KO ) abandon the original Coca Cola formula temporarily? Didn't the big cell phone makers have a plan to catch up to Apple's ( AAPL ) iPhone? Didn't they think that someone would combine telephone and Internet – and maybe add a camera and calculator? The Myth Buster's experience with smaller companies shows similar emotional reactions to business shocks. The chaos that ensues would not have taken place if planners bore down, made excellent plans and anticipated disasters.

Plan? What Plan?

A second lesson is that even proper planning does not always sink in with those who must carry out the plan. This means that detailed roadmaps are devised and when a major problem occurs, senior executives act from instinct or impulse and rarely return to the plan that was worked out carefully, reviewed, approved — and that top managers swore they would use. This problem is akin to companies affirming that they follow a strategy, but instead leaping at any opportunity to grab revenue — not profit, just revenue. Here, we delve into how managers really act and think even when they speak otherwise.

Among the worst historical examples is the reaction of the cell phone makers to Apple's iPhone. Nokia ( NOK ), LG Electronics, Motorola and others had no reaction. They faded slowly after their contracts with huge telephone service providers ran out. These once proud companies evidently had no plan in place to adjust their outdated technology and go head-to-head with mighty Apple. Like some boxers down for the count, they never got back into the fight. The American exit from Afghanistan shows that while the public reaction turned sour quickly, the decision makers never changed course. They stuck with the decision, which was apparently not a plan at all.

This approach is actually fairly common. When digital technology cut into Blockbuster's () once massive market presence, the video rental giant shrank faster than an overweight jetsetter on a crash diet. As Starbucks ( SBUX ) expanded faster than poison ivy, America's coffee giants — Chock Full O' Nuts, Peet's, Maxwell House and others — watched and smiled wanly. They didn't even launch an aggressive marketing campaign to remind customers they still existed. The Myth Buster wonders how Meta Platforms ( FB ) is planning to deal with TikTok, which has been the most downloaded app for three years running. Will we be subjected to more chatter about Meta's wonderful algorithms? Will that stop TikTok? 

Plan A Failed. Let's Try Plan B

The "plan" to free the hostages in Tehran in 1980 also fell apart. Flying helicopters over Tehran never materialized. When that plan flopped, there was also no "Plan B" to use a cliché, no effort to improve the plan, no alternate. Carter might have had a second term if there had been a successful outcome on his watch. Instead, the hostages were released just as Reagan was taking office. From national issues to corporate strategy, it seems that managers are frequently satisfied by getting knocked down and staying down.

This first entry in the series that takes its title from Robbie Burns shows that the great Scot's insight applies very widely. As disappointing as it may be, many organizations never garner the will to fight back. The next entry will look at other aspects of this pervasive corporate flaw. 

Michael McTague, Ph.D. is Executive Vice President at Able Global Partners, a private equity firm in New York.


Equities News Contributor: Michael McTague, Ph.D.

Source: Equities News

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