I believe that characters can develop as you go, but that it is very difficult to develop plot as you write. One of my writer friends (4 published books so far) has a mystery about half done, but she has stalled because "she doesn't know who did it." I think that trying to develop plot as she wrote is what caused her problem. Besides, it is much easier to develop red herrings and clues and the parallel timelines of subplots when the main plot is clear.
I'm not a big fan of extensive outlining, but one of the things I do have a firm grasp on before I start is how the book will start, how it will finish, several major events that will happen along the way. If you are feeling weak on plot, it is often because you don't have that in mind or you don't have enough interim events in the plot line planned out to keep the action/suspense/drive going as you explore characters. It's like going to college and not having a major--it may work out, but having a major/goal is more likely to get you somewhere useful/enjoyable/employable.
Just my two cents.
Donald J. Bingle
Author of Forced Conversion and GREENSWORDMember of the St. Charles Writers Group, the Science Fiction and Fantasy Writers of America, and the International Association of Media Tie-In Writers.
Forced Conversion (Five Star Publishing, 2004) ("Visceral, bloody -- and one hell of a page turner! Bingle tackles the philosophical issues surrounding uploaded consciousness in a fresh, exciting way. This is the debut of a major novelist -- don't miss it." Robert J. Sawyer, Hugo Award-winning author of Hominids)