The Importance of a Plan B

In the volatile world of startups, the path you start on is rarely the one that leads to success. A company's core business model can become unviable overnight due to market crashes, disruptive competitors, or unforeseen events.

This is why one of the most critical responsibilities of a CEO is to always be thinking about a Plan B.

The "What If We Went Bankrupt?" Question:

A powerful mental exercise for developing a Plan B is to ask the question: "What would I do if the company went bankrupt tomorrow?"

This question forces you to look at your business from a different perspective and identify its most valuable, salvageable assets. In the case of Loudcloud, the answer was not the services business itself, but the underlying software (Opsware) that powered it.

Asking this question led to the realization that the most valuable part of the company could be extracted and become the foundation of a new, more viable business.

Executing the Pivot:

• Start in Secret: Developing a Plan B, especially one that involves a major pivot, must often be done in secret with a very small, trusted team. Announcing it too early would demoralize the employees working on the core business and destroy its remaining value.
• Requires Wartime Leadership: Executing a pivot from a failing business model is a wartime activity. The CEO must make hard, unilateral decisions based on the complete, and often grim, picture that only they possess.

Having a Plan B is not a sign of weakness or a lack of commitment to Plan A. It is a sign of a mature, strategic leader who understands that survival is the ultimate goal and is prepared to make difficult choices to ensure it.

Tags: #leadership #strategy #pivot #crisis-management #planning #startups #wartime-ceo