Business Model : Horse | Business Plan : Cart

I just got some bad advice this week from a prospective mentor.

Their advice:  write a business plan.

On the surface this seems logical. Duh, you have to have a business plan.  But following that advice right now could mean the end of my startup venture.  Here’s why:

———-

My business is starting to get its own legs under it and I’m tightening my strategic focus.  Like most startups, there are still many gaps in my model and my business plan is a work in progress.  I decided it was time to tighten up my model and went to a local business development resource office that works to place new and prospective business owners with experienced business people from the community who volunteer their time as mentors.  Their advice:  write a business plan.

On the surface this seems logical. Duh, you have to have a business plan.  But following that advice right now could mean the end of my startup venture.  Here’s why:

 

A great business model tool:

A project team I was working on during my MSMIT graduate work at UVA were hard at work on an upcoming presentation when one of the brightest minds in the room, Stephen, pulled a book out his bag called Business Model Generation and said it was the best book ever on the subject.  It must have been about the time we were studying the classic HBR paper, Reinventing Your Business Model, because the ideas and language align nicely. Having come to trust my classmate’s insights, I bought it immediately.  Busy with grad school and my full-time job, I put it on a shelf and didn’t look at it again until I started my company.  The book is now dog-eared and bulging with bookmarks and related material.

Business Model Generation introduces the Business Model Canvas, a one-page document with nine blocks that provide a high-level view of your business model.   I won’t try to describe it here; the referenced Wikipedia article covers key points.  I did my first canvas for my business not too far out of the gate, and it immediately clarified for me what I knew, and most importantly, what I didn’t know about my business strategy.  It’s a great approach, not overly academic, and it has been working for me.

I mention this tool whenever I can bend someone’s ear to ask for advice or feedback on my business, and no one has heard of it (so far).  So when I went in to get help last week (I won’t mention the name of the organization), I wasn’t expecting the prospective mentor to dive in with me and embrace canvas method in our first meeting (although I brought my own white board and was ready if they were willing).  But I didn’t expect to be told to dive straight into developing a thorough business plan—complete with rigorous financial projections—as a first step.

Frustrated, I began doing a little searching. I knew the Business Model Canvas approach was a good one—Stephen said it was, and the HBR paper seemed to support it.

I came across an interview with Richard Randolph (PDF), who does a great job explaining the Business Model Canvas. But the interview did two more important things for me. It explained the relationship between the business model and the business plan, and it put the Business Model Canvas into a broader context with prominent ideas and thinkers.

 

There’s a difference between a business model and a business plan.

Here is Richard Randolph’s explanation of the difference between the Business Model Canvas and a full business plan:

“…the Business Model Canvas would be like taking the SST, Super Sonic Transport, across the country from say New York to Los Angeles at 60,000 feet. It’s a quick journey, you don’t get to see many details. A full business plan would be like taking the train, where you’re stopping at all the stops and you’re seeing all the landscape and every detail in each of the states you go through. It’s the level of detail that’s the big difference.”

According to Randolph, “you want to start with the canvas to give you that big picture overview so that as you develop the business plan you don’t get lost in the details.”  To borrow another metaphor from the interview, trying to write a business plan without first figuring out your business model would be like trying to put together a 1000-piece puzzle without the picture on the outside of the box.

Randolph goes on to say:

“I’ve found that most successful business plans take somewhere around 2 years to create from start to finish. You can’t wait that long. If we have a great idea and we want first mover advantage, we’ve got to get out there and try it.”

In other words, if you get lost in the details of a business plan too early, you lose.  This is especially true for my line of business. But what does he mean by “get out there and try it”?

 

Connections:

I love it when ideas connect. When I’m chasing one idea or problem and the answer is another idea I know or have been also pursuing, I can almost feel the new neural connections popping in my brain. It’s one of the best feelings, ever.

Back in the late 2000’s I did a brief survey of articles and current thinking around the idea of Lean IT. I now see how those concepts have had a profound impact on my thinking and made me an easy mark for anything with “lean” in the name or title. Case in point, I finally got around to buying a copy of The Lean Startup last week, which I’m sure I will regret not reading before my pivot to the cloud last fall.  So it was a thrilling surprise to learn almost familial connection between Eric Ries’ book and the Business Model Canvas.  I could feel those neurons sizzling.

After reading the interview, I ordered a copy of The Startup Owner’s Manual, another book in the same cluster of thought as The Lean Startup.  Skimming through the preview, it was reassuring to see direct references to the Business Model Canvas.  The explicit references to Agile methodologies—another strong interest of mine—though not surprising, further validated the connections.  Sizzle, sizzle!

As I said, when these kinds of serendipitous connections happen, it feels great.  But when more than one happens or the connection is especially profound or timely, the feeling approaches <insert your own superlative delight>.  It’s like the universe or providence puts up a big neon sign that says “This Way ->”.

 

A path to a plan:

I went into the prospective mentoring session last week hoping, even expecting, to come out feeling buoyed and energized by a new mentor relationship.  Instead, I felt a little confused and more or less insulted.  With more certainty in Business Model Canvas, and new understanding of how it fits with other respected ideas and methods, I feel like I can double down on the path I was on, which will lead me to a legitimate and successful business plan.

To technical newbies and other lonely startup owners, don’t underestimate the value of education, wherever it comes from.  I restart today on this “path to a plan” buoyed and energized by the community of thinkers and ideas that helped me dodge a bullet this week.  To old school thinkers and would-be mentors, please do yourself and everyone a favor and catch up on your reading as well.

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