Discovery Driven Planning PDF

Preview

Summary

Download Discovery Driven Planning PDF

Description

1.

Explain the Discovery-Driven Planning process in terms that a 3rd grader could understand it and put it to use. Include a description of the steps teams should follow to apply this process to new opportunities. How does DDP differ from conventional planning? When is it appropriate to use conventional planning and when should companies use DDP? Have you ever had friends come over to your house to play? If so, then have you noticed that one friend might want to play video games but another might like to draw or color? If you tried to play things outside their interests then they might not want to. Why is that? It might be because your assumptions were mistaken with reality. You expected your friends to come and just play video games because that’s what most of your friends like to do, but the friend who likes to color might not be interested in your smash bros tournament due to her different interests, tastes, background, and viewpoints. This, in a nutshell, is what happens when a conventional planning method backfires on your unchecked assumptions. When you assume that all your friends prefer a certain activity, then everything you do after that point to act on your untested assumption creates an illusion of similarity. It also blocks from your mind unprecedented changes and overlooks important details that could shatter this illusion. To combat this, we use a method called Discovery-driven planning process. It works by going backward in cost records to see where the bottom line needs to be in order for your moment forward to make any sense. If the risk is too great and the payoff too low then why do it? First, you use a reverse income statement to correctly identify the required profits and work up to find the necessary costs to find the required revenues in order for the plan to work. Second, you have to look at the activities you must do in order to be profitable, do you have to sell a certain type of product? Then research your idea and see if it holds up to certain economic and social “tests”. If it passes, then you flush out flaws and improve the model before making investments in it. This will give it the best chance to succeed.

Third, make a list of every assumption you have and honestly ask if each one is flawed. The fourth, if they all fit in the reverse income statement, then it works, if not then scrap it and go on. Conventical planning rarely if ever works because the requirements for it to work are too specific and too large. It requires a similar situation as before in order to work and often leaves bugs in the plan without seriously considering their implications. Discovery-driven planning works because you first cleanse the inner vessel before you move on with your plan, it’s like removing the mote in your own eye before even touching the beam in another’s eye. 2.

Using the data from the case, create a reverse income statement for the Kevlar product line. (HINT: Refer to exhibits 3 and 8 for sales, earnings, and return on assets data for the fiber department and apply what you read on page 7 of Discovery-Driven Planning to get started.)  How much annual profit will Kevlar need to earn? They will need about $190 if the trend in exhibit 3 keeps up. 

How much revenue will Kevlar need to achieve in order to produce that much profit? So then the revenue they need to earn can’t be lower than $5000 if they are to earn another 10%



If Kevlar sells for 4 - 4.8 times the price of steel for tires, and steel costs $0.60 per pound (p. 5), what price will DuPont be able to get per pound of Kevlar? In theory, (this theory!) it should be around $2.40-$2.86 per pound if they go for 4 times the price of steel.



How many pounds of Kevlar tire cord will DuPont have to sell in order to reach the desired profit you calculated?

To reach the desired profit, we need to make $5000 and if we choose to sell at $2.40, then we must sell at a minimum 2084 pounds of Kevlar. 

If DuPont can get $10 - 15 per pound (p.5) of Kevlar in the aerospace applications, how many pounds will DuPont need to sell to reach the profit target? To reach the same goal with these new parameters, we would need to sell 500 pounds at minimum.



Create a list of all the assumptions that must prove to be true in order for Kevlar to reach its desired profit for the company. 1. Kevlar has to be more durable than steel 2. Our customers will prefer stronger stuff for their products 3. We should be able to continue making steady increasing sales each year 4. There aren’t any flaws in the Kevlar design that steal didn’t have. 5. Customers will see Kevlar as a perfect solution to a problem.

3.

Why do you think the executives of DuPont are targeting the tire cord market with this massive investment? It could be that targeting the tire industry might provide us with an opportunity to disrupt the regular steel frame that the tire industry is already used to. They think that if they can come up with something that can equally get the job done, then this would explain why the executives are pushing so hard to get it done. They might reason that since the previous work we did for other customers has worked before in the past then this shouldn’t be any different.

4.

If you were responsible for commercializing Kevlar, knowing only what Swank knew at the time of the case but you understood discovery-driven planning, what sort of project plan would you formulate and implement?

Knowing what I know about the discovery driven planning, I would use the theory as described. I would examine what my expectations are, do the reverse income statement, and either restate or discard the plan entirely. The theory suggests that the main reason big moves can fail even when previous moves have been successful is because there’s always a risk factor involved. There’s never a 100% risk free method but with a little planning and mature examination of your expectations, the risk can be planned for and even avoided. It’s all about caution when it comes to new...