To start a business, entrepreneurs used to have to conform to what they ultimately contradicted, and write out a path that the business was going to follow. Seemingly parallel with the rapid pivoting of technology, startups are facing an increase in competitive behavior due to ease of entry into most industries. This causes business plans to face inevitable inertia. Various groups of serial entrepreneurs, investors and startups are arguing that the constant changes that startups face today almost nullifies the cogency of a standard business plan (see the links at the end of this blog). The important constant is within the business model, not the plan.
The biggest difference between the standard business plan and what is being referred to as “lean startup methodology” is that standard plans call for months of investigation, while alternate business canvases call for months of testing. Normally, budding entrepreneurs would spend days on end researching market sizes, competitive threats, and existing technologies to illustrate the most promising route to engaging end-users and scalability.
New models are being exhausted to fill the gap between rising competitive threats and expediting the external validation of a business concept. Rather than creating a hypothetical description of the business model and its fate, these new models are targeting the customer first. Pivots are inevitable. Taking the business model directly to the customer for testing allows business pivots to serve the customer, which will ultimately create value and drive sales.
The problem, value proposition, solution, channels, revenue model, market, external risks, and key performance indicators consume the majority of the company’s concentration while creating a business model with lean startup methodologies. Instead of writing 100+ pages describing the contents of these sections, it is recommended that the sections be outlined on a canvas and given more of a holistic review. Being able to see the sections laid out on one canvas, quite literally allows the management team to make more informed and connected decisions that are driven by the customer.
There are still certain elements of the standard written business plan that should remain intact. To secure funds in a more traditional sense, lenders will want to see a thoughtful plan that outlines, at least three years out, the financial and strategic roadmap to paying back the initial investment with return. There are also certain stories that companies need to continue to convey using some of the elements of a traditional business plan. Many would argue that the success of a business lies more with the team and the company “story” than with the viability of the concept.
Regardless of what models will arise in the future, the entrepreneurial landscape has outlined the important considerations as the time, go-to-market strategy, and customer validation. The infusion of these elements and a great startup team will eliminate many concerns or questions about validity while executing a startup.
Business model canvas resources:
Content created by Joe Scanlin, State of Ingenuity SourceLink.
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