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The premise of this book is that success lies in Plan B, the evolutionary descendant of your original plan, which is arrived at through a fusion of strategic planning and tactical execution. Adaptive management is the process of making real-time modifications to the original plan so that it survives and thrives as the business environment demands. Because things happen so quickly these days and we can’t accurately predict how the world will unfold, we have to devise plans that are constructed with the idea that they are made to evolve; that they must be fluid, not written in concrete.

The process of adaptive management is based on the scientific method, in which we develop a clear hypothesis about our business and how we should be developing it, then use that to construct a game plan that aligns our strategy and tactics and articulates clear objectives and metrics so that we can test the hypothesis as we execute and identify the ways in which we should be making changes. This approach allows us to revise plans in real time and give our line managers the ability to improvise intelligently when the forecast is wrong. There are eleven principles of adaptive management that allow us to do so, and the rest of this book is about this process and these eleven key principles.

The first is The Principle of Problems. It tells us that a business model is the solution to a hierarchy of problems. The more problems you need to solve, the more complex your plan must be. Your strategy should be based on a primary problem and your hypothesis for solving it. For Wal-Mart, keeping low prices low is the problem and its business model is designed to solve it. For Polaroid, instant photography was the problem and analog film was the solution. And for H&R Block, preparing your taxes so that you get the maximum refund is the problem and a staff of a hundred thousand tax preparers is the solution.

The second principle is a corollary of the first. It’s called The Principle of Solutions. Tactics are the things we do to solve our problems. The principle says that the effectiveness of these tactics will naturally degrade over time, so adaptive management is the constant search for new and improved solutions to our problems, new and improved tactics. Each tactic, in turn, will create a new set of problems and thus create a new set of solutions. For example, if direct mail is the solution (tactic) to your sales problem, this creates a whole new set of problems: What list should we mail to, what offer should we make, what package should we send, when should we send it?

The Principle of Force says that we need to choose our competitors carefully and compete in a place where we have superior forces. For example, in the beginning, Facebook chose to compete only at colleges and not to battle with Myspace as an open social network until it had the firepower to do so.

The fourth is The Principle of Concurrent Thinking. Which comes first, strategy or tactics? Should the development of a plan be a top-down process (strategy first) or a bottom-up process (tactics first)? The answer to this age-old question is that it should be both. Concurrent thinking is the ability to perceive things from the top down (strategically) and, at the same time, see how things fit together from the bottom up (tactically). That’s how we create strategic alignment, a fusion of strategy and tactics.

The fifth is The Principle of Cascading Objectives. We must turn our strategy into a set of specific objectives and metrics associated with them. Since our model comprises a hierarchy of problems, our objectives will conform to that hierarchy. I refer to this as “cascading objectives.” Robert E. Lee’s objective of taking Little Round Top at Gettysburg cascaded from the objective of breaking the Union line at Cemetery Ridge since Little Round Top provided a sniper vantage point that could protect the Union line.

The sixth, The Principle of Paper Plans, states that the plan itself is worthless. The act of planning is important, not the plan, because it educates you and your field managers and allows you to make intelligent adjustments during the implementation. In today’s world, paper plans become obsolete the moment you print them.

The seventh is The Principle of Multiple Futures. It’s impossible to predict the future in the long term, because business operates in a chaotic environment in which there are multiple competitors and multiple customers, all interacting in ways that are impossible to quantify. So instead of trying to predict a single outcome, the adaptive manager considers multiple scenarios, which allows him to construct an inventory of solutions and gives him the insight and intelligence to make real-time adjustments to his plan. It’s because of multiple futures that we have the need for adaptive management in the first place.

The eighth, The Principle of Doubt, says that suspicion is the driver of the evolution of a business model and adaptive managers need to doubt their own forecasts and business models. That’s the only way we can ensure intelligent adjustments. Intel president Andy Grove put it best when he said, “Only the paranoid survive.” Don’t be fooled by the power of positive thinking; it needs to be tempered with negative thinking.

The ninth is The Principle of Correlation and Causation. A strategy must be based on a hypothesis for solving a problem. The hypothesis is based on cause and effect. In other words, we develop tactics that drive a certain effect. We use correlation to measure the results, but we need to be careful because we can be misled by lurking variables and faulty data. Correlation doesn’t always mean causation.

The tenth one, The Principle of Alterations, tells us that there are two subprinciples that a business model uses to evolve from Plan A to Plan B. The first is The Principle of Strategic Alterations, and it’s being followed when we use our existing tactics to solve a new problem. Arm & Hammer recommending using baking soda to absorb refrigerator odors is a form of strategic evolution. The second is The Principle of Tactical Alterations, and it’s being followed when we come up with a new tactic to solve an existing problem, like Gillette adding more blades to its razors.

The eleventh principle is The Principle of Strategic Debate. Most large organizations demand blind adherence to the corporate mission statement and corporate plan. This kills the ability to evolve by creating corporate rigidity. Instead, adaptive managers encourage dissension and debate, which in turn creates a culture intent on improvement.

Adaptive management is both a way of thinking—a psychology—and a way of doing—a series of processes and procedures. “Everyone’s got a plan,” Mike Tyson once said, “until they get punched in the face.” Our goal is to make smart decisions even after we’ve been hit in the face. No doubt Facebook has been punched a few times and had to make adjustments to its model. Later, we’ll explore how the kid who hadn’t slept in days rolled with these punches, counterpunched, and was able to come out on top by making modifications to his original plan.

But first it’s important to stress that the need to adapt doesn’t mean that having a well-constructed original plan isn’t important. Having the right type of Plan A is critical, because, if crafted appropriately, it provides the seeds of evolutionary growth. This is the subject of our first chapter.

© 2011 David Kord Murray