The Perils of Planning

CNN+ and the reality of risk in the digital era

Feb 07, 2024

One of the goals of my work is to help companies understand the risk of applying traditional planning processes as they embark on digital transformation.

This surprises many leaders.

After all, planning is commonly seen as a way to reduce risk. But a reliance on planning actually increases the risks to your firm, under conditions of uncertainty.

To understand why, let’s take a look at what we typically see when managing new ventures through traditional planning.

And, for a real-life case study, let’s see how this worked at CNN when that legacy news business considered a transformative digital strategy.

CNN’s approach to planning turned an important strategic opportunity into a costly, embarrassing failure—the kind of failure which makes it hard for any leader to press for further digital innovations.

Uncertainty in the Digital Era

The defining characteristic of the digital era is uncertainty. New technologies and new entrants are reshaping every industry at an accelerating pace.

For businesses hoping to keep up, every new strategy faces countless unknowns—Is your technology ready? What will it cost to operate? Will the customer adopt your solution? Will your lawyers ever approve it?

The harsh truth is that most digital strategies that look good on a whiteboard turn out to be unworkable in the real world.

The response of most established businesses is to try to manage this uncertainty through planning. In doing so, they fall back on methods designed for consistency and control, like Six Sigma or Total Quality Management.

Traditional planning may work when dealing with well-known problems in your core business—that is, when managing under relative certainty.

But it fails dramatically when tackling the uncertainty of digital change.

Traditional Planning in Four Steps

What do I mean by “traditional planning”?

We can observe four steps in the planning process of most companies: gather third-party data, write a detailed business plan, make an expert decision, then focus on execution. I abbreviate these as: STUDY > PLAN > DECIDE > BUILD.

Let’s take a look at each step.

STUDY (gather third-party data)

Faced with the unknown, managers are taught to gather preexisting data, often with the help of large consulting firms. They look to competitors for benchmarking and search for established case studies that might provide them with best practices.

While this is useful when facing a known problem that others have already solved, it can be a fatal distraction when pursuing innovation in a rapidly changing marketplace.

PLAN (write a detailed business plan)

Next, traditional managers apply their best analysis to write a business case full of detailed steps and projections on future outcomes.

A major decision can lead to multiple detailed business cases—each one spelling out the implications of a different course of action over years to come.

But when you are pursuing new ventures or new business models, a business plan is a work of pure fiction! (My friend Bob Dorf always said that business plan writing should be moved from the business school to the creative writing department.)

DECIDE (make an expert decision)

Having analyzed the options, a decision must now be made about what course of action to take. Traditional practice is to rely on the opinions of experts—those with the most seniority and experience.

When the future looks a lot like the past, the intuition of experienced leaders may prove an excellent guide. But when dealing with great uncertainty, expert opinion based on past experience can be highly misleading.

In Silicon Valley, traditional decision-making is called management by the “HIPPO”—the highest-paid person’s opinion.

BUILD (focus on execution)

After a course of action has been chosen, the enterprise becomes entirely focused on execution. “You scope it, we build it!” is the mantra of traditional IT and operations teams.

Companies begin making large investments that lock them into a multiyear plan for a particular solution.

Instead of starting small and proceeding with humility about whether a planned innovation is the right one, companies rush to start building at scale.

Where Planning Led CNN

This approach to planning, taught for decades in business schools, fails dramatically when managing uncertainty in the digital era.

The failure of CNN+, launched in 2022 as a new digital business model for news, offers a textbook case study.

In it, we can see all four stages of traditional planning at work:

STUDY

CNN began planning its digital transformation by surveying the booming market for streaming video, with the help of consulting firm McKinsey.

Netflix and Amazon Prime continued to dominate streaming, with hundreds of millions of customers, but Disney+ had recently launched and gained 10 million subscribers on its first day. Meanwhile, CNN’s sister network HBO was making a big push for streaming as well.

PLAN

CNN laid out a plan to launch a paid subscription news service with many of the same celebrity broadcasters as its TV channel (although contracts with cable companies prohibited streaming their live TV content).

CNN and McKinsey projected that the service would attract 2 million subscribers in its first year, and at least 15 million within four years.

DECIDE

The decision to move forward with CNN+ came straight from the top.

CNN president Jeff Zucker saw in it the future of news and a new era for the company.

His boss Jason Kilar proclaimed, “In my opinion, CNN+ is likely to be as important to the mission of CNN as the linear channel service has been these past 42 years. It would be hard to overstate how important this moment is for CNN.”

Not everyone agreed, but as one CNN insider put it, “They wanted to launch it.”

BUILD

With the most-senior executives’ decision to move ahead, the company went all in on execution.

$300 million was spent before launch day. Hundreds of employees were hired. Contracts were signed for name-brand anchors such as NPR’s Audie Cornish and Fox News’s Chris Wallace.

Plans were made to spend over $1 billion in the first four years to grow the service.

The $300 Million Question

No doubt CNN+ was a bold and innovative idea for a new digital business model.

But the biggest uncertainty it faced was this: Did anyone want to pay $5.99 a month to stream news? By one estimate, CNN+ joined more than 300 other unique streaming services operating in the United States, yet the average household paid for only four of them.

At a minimum, it would have been useful to know what percentage of CNN’s current viewers were interested in paying for a streaming version of the brand (10 percent? 5 percent? less?).

But rather than conduct a test to find out, the company plowed ahead with its plan.

As it turned out, uptake by CNN’s existing customers was small. In its first weeks, CNN+ was watched by fewer than 10,000 people per day—about 1 percent of the TV audience.

Less than a month after launching, it was announced that CNN+ would shut down. Its corporate parent, Warner Bros. Discovery, concluded that customers simply didn’t want to pay for another streaming service, let alone one focused on news but lacking their favorite prime-time CNN shows.

Say goodbye to $300 million.

How to Avoid CNN’s Fate

CNN’s leaders were actually focused on a great strategic question. Pursuing some kind of streaming service (paid or ad-supported, standalone or in a bundle, targeting TV viewers or a new segment) was a vital strategic opportunity for CNN to explore.

The problem with CNN+ was in how the effort was managed, with blind faith in a traditional planning process.

To put it differently, the problem was not that CNN+ failed, but that it cost $300 million to fail!

The key hypothesis of its expected business model (how many of CNN’s cable viewers would try a paid streaming service) could have been tested with 30 days and $30,000.

A Different Kind of Management

In “The Digital Transformation Roadmap” I explain how to avoid the perils of planning by applying a different management approach.

This starts with managing new ventures through iterative experimentation. I introduce a framework called the Four Stages of Validation to test the assumptions behind any business model (see this previous article).

I introduce a visual tool, the “Rogers Growth Navigator,” to guide experimentation of any new business innovation.

And I explain how to manage investment through iterative funding, allocating resources quickly and flexibly while using smart shutdowns to avoid wasteful disasters.

Giving up on traditional planning does NOT mean “anything goes.” It means applying a very different management approach, one that we now have decades of evidence and experience to back up.

NEW BOOK:

“THE DIGITAL TRANSFORMATION ROADMAP: Rebuild Your Organization for Continuous Change”

ORDER NOW:

Hardcover: https://amzn.to/41U85dl
Kindle: https://amzn.to/3OWD437
Audiobook: https://bit.ly/DXR-Audiobook
Bulk orders up to 60% off: https://bit.ly/DXR-bulk-orders