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Seizing the White Space: Business Model Innovation for Growth and Renewal

In: Business and Management

Submitted By xiaoluolaw
Words 965
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Discovery Driven Planning

Proprietary Material
© K.E. Homa

So, what’s the problem?
• When evaluating the financial attractiveness of
‘opportunities’, most companies do detailed financial projections going out 3, 5, or 10 years ... or more.
• The financial projections are usually driven by ‘point estimates’ of demand (or sales) that are built on layers of assumptions and, thus, are difficult to forecast with any reasonable degree of precision.
• So, the financial projections themselves – while confidence building (perhaps) – are always imprecise
… and often flat-out wrong !

Discovery Driven Planning to the rescue …

Classic publication: 1995 … frequent re-publication and referrals

Discovery Driven Planning
Basic Premises
• Developing a forecast is harder than validating or refuting one (i.e. “over or under” likelihood)
So, work backwards … determine how much you to have to sell to meet financial hurdles … and then ask yourself: “Can we do it ?”
• Over time, learning occurs (i.e. “discovery”) and assumptions can be validated, refined, or refuted.
So, start with ‘what you know’, keep a list of what you don’t know, and refine your estimates when you know more Discovery Driven Planning
Basic Premises
• Developing a forecast is harder than validating or refuting one (i.e. “over or under” likelihood)
So, work backwards … determine how much you to have to sell to meet financial hurdles … and then ask yourself: “Can we do it ?”
• Over time, learning occurs (i.e. “discovery”) and assumptions can be validated, refined, or refuted.
So, start with ‘what you know’, keep a list of what you don’t know, and refine your estimates when you know more Discovery Driven Planning
The Process
• Specify required profitability
Various metrics available to choose from 

Financial Metrics
• DCF, NPV
• ROI, EVA
• B-E, Payback...

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