It Is Better To Be Lucky AND Good
Alan Shugart was right - planning makes you ready for your Lucky break
Welcome to the gazebo! Take a seat. I’m honored you’re here!
This Week’s Summary:
We rarely talk about luck and business planning but we should
You can’t control luck but you can be ready for when it happens
Without a plan your lucky moment could be lost
With a plan the sky could be the limit
Always look for a market where luck is on your side … then prepare
“Hey. You going to the IEEE 1 event tonight,” asked a work colleague? “It’s over in Sunnyvale. Alan Shugart is speaking. It should be cool.”
“Who,” I asked? I had been in the valley for just a few months and was still familiarizing myself with the area, companies, key players, and the culture. The culture was unique in my experience but that is a topic for another time.
Please remind me if I forget to write about this important cultural topic, especially given that Illinois, and Chicago specifically, want to be the Quantum Prairie. Creating the right community culture will be so important to its success. Now, back to my earlier Silicon Valley conversation …
“Shugart Associates? IBM? Seagate Technology? Surely you have heard of them,” he asked? “He founded two of them and was a key player in the development of some IBM hard drives.”
Alan Shugart photo from National Academy of Engineers. Bio.
“Oh, wow! I didn’t know! What’s he going to talk about?”
“Business planning.” I was working at that time as a product manager with product and some strategic planning responsibilities and thought it would be a good idea to learn more from someone who had been there. “Sure. What time are we going? What’s it cost?”
“It’s free,” he replied, “and a group of us are leaving for it around 4:30.” “Free! Smart guy! Nice. See you there.”
I expected Alan’s talk to be full of charts, data, detailed explanations, and such, but if memory serves me correctly he put one simple matrix on the screen and spent the rest of the time talking about it. The matrix had two sides: the bottom side was titled “Lucky” and had “No” on the left and “Yes” on the right. The left side was titled “Planned?” and at the bottom was written “No” and the top was written “Yes.” It looked something like this.
Image created by Ed Paulson based on talk by Alan Shugart.
Alan’s case for business planning was essentially this: Much of business success depends upon luck and if you are not lucky without a plan you could lose everything. I never forgot it. The implications of this simple statement were profound and disconcerting at the same time. His case was the following.
Starting at the lower left – No Plan and Not Lucky. I have seen this many times from people who one day got fed up with their corporate job and decided to quit their well-paid job and go off of their own. No plan. Marginal savings and implications from several colleagues that “if you go off on your own I would definitely consider using you as my consultant” or whatever. Their plan was simple – quit my job, call these people, get some work, and replace my salary with a raise in no time. Do you know anyone who tried this and had it succeed? I’ve known a few but not the majority.
They usually find out that the “offers” to use their services came from folks who didn’t want to discourage them or offend them, likely because of the role our unlucky person had in their prior company. When they started their own gig, they didn’t have that big company behind them anymore and weren’t so attractive. Their implied opportunities dried up. No luck and no plan for dealing with being unlucky creates a bad situation and many lose it all taking this approach.
Let’s move onto the lower right – No Plan and Lucky. Here you can do OK because the world around you will keep you alive with enough business to give you time to figure out how to deal with your success. More than one company has gone out of business by growing so fast that they could not keep up with the demand and remain financially solvent (this is usually a cash float/flow issue) or the quality of their offering suffered to the point that their reputation started to suffer along with sales. Without the plan they simply did not have the systems and people in place to capitalize on their luck. If they adopted the systems quickly and effectively enough to keep their early success alive they might have done OK, but their growth was limited by the lack of planning.
Looking at the upper left – Has a Plan but Not Lucky. You’ve written a plan and are up and running, but no matter what you do, nothing seems to bring in sales. The world outside of your own head just doesn’t see things that same way as you and business comes in dribbles instead of as a steady stream. Luck just seems to be against you. If you wrote a good plan you likely included metrics against which you will measure your progress. You also planned your cash reserves such that as you got more sales, you would need to draw less cash from your reserves.
If there are no sales, then the cash reserve draws will need to continue at a much larger rate and over a longer period of time than initially planned. At some point the numbers will show you that you need to pull the plug on your business dream. It is a sad day, for sure, but WAY better than going bankrupt!
Finally, let’s move to the upper right – Has a Plan AND Got Lucky! Woo hoo! This is the best you can get. You not only got lucky, but were ready to take advantage of the luck and growth that usually comes along with it. The explosive startups we always hear about sit in this category. The plan indicated that the marketplace was there for a product or service just like the one being considered. Plus, the rollout of the product was done well, and the market acceptance was solid. Positive reviews and referrals came in and things continued to spiral upward in a good way, with your growth plan clicking along on track and the projected metrics were met or exceeded. In short, you were ready to be lucky and when it happened dug in and fostered your success.
Like I said, the matrix is simple, but the implications are profound. Alan was right. You lose nothing by planning and can lose everything if you don’t.
At the time, I didn’t believe that Luck could play such as big role, so I started asking folks who had been through several Silicon Valley startups about their views on Luck. It was sort of funny, actually. We could talk about all kinds of planning methods, and when I asked them how important Luck was to success, almost to a person, they would reflect, smile, and say, “Oh yeah. Nobody talks about it but Luck is super important. It helps everything.”
40 years and several companies of my own later, I can safely say that without Luck on my side, my business successes would have been seriously hampered.
A specific instance comes to mind when I was running my software training company in Austin, TX. I had just paid my payroll and was around $10,000 to the negative on my business checking account. I really didn’t know where I was going to get the money to cover the next month’s bills outside of my personal savings, which at the time was not large. I needed $10,000 cash ASAP or I might have to close up shop. Then the phone rang, and it was one of our established customers who had sent his office folks to us to learn how to use various office applications. “Hey Ed, I heard that you guys do C++ Training? Is that right?” We had just started doing that last month. “Yes, we do. What do you need?” “I’ve got team of about 12 engineers that need C++ training right away so I would like to get them into a class.” “We can help you with that next week if that would work,” I replied. “There’s a catch,” he said hesitantly. Oh oh, I thought. “My fiscal quarter ends today and if I don’t spend the money I will lose it. Can you come by and get the check today so that I can claim the expense in this quarter?” I couldn’t believe it! The fee for the training was around $13,000 which I had discounted to $11,000 because they were an existing customer.
Out of nowhere, this man was calling me up to give me $11,000 cash today, just when I needed it. Naturally, I drove over, picked up the check, and went straight to the bank. It would not be an exaggeration to say that this phone call literally saved me from closing my doors.
Let’s unpack this a little. Yes, this call was amazingly fortunate to me, but it was also based on having already provided excellent training to his folks previously which helped to develop a level of trust in his mind. We had also done the work to offer C++ training which at the time was technically advanced training. So, we had done the planning and taken the steps to take advantage of the lucky phone call. Then, fortunately, Luck stopped by. Some people would say that I “created my own luck” which I guess is true to an extent, but I really look at it more like we had done the preparation work and were lucky enough to have folks use us. Especially, on that day, at that time, for that amount of money! It still makes me smile and shake my head.
This is not a one-off story. There are many times in my life, and in those of my clients, when a story just like this one played out for them, and for almost exactly the amount of money they needed.
My “The Complete Idiot’s Guide To Starting Your Own Business” book is all about writing a business plan for a small business. It was a tremendous success and helped over 300,000 people around the world navigate the often complicated process of determining if their idea had a chance of succeeding and preparing them to take advantage of marketplace luck if and when it happened. We will take a look at some key concepts from the book next time.
Thank you as always for stopping by. Peace.
It means a great deal to me that you took time to stop by today and read this week’s newsletter. I hope you got value from it and if you did please comment and/or share the BizDoctor’s Gazebo with a colleague or friend. Ed
Institute of Electrical and Electronic Engineers
Hi Ed, GREAT STORY!! As you probably know, Lucy and I really loved Al. Other Seagate (Shugart Tech, at that time), maybe not as much. Keep up the good work! Dave