Business plan or business strategy?
This morning I came across an article by Marc Götz about the question whether Business plans are really always required. I am grateful to Marc to start a discussion about this topic – I believe far too much effort and time is invested into making glossy, fancy and incredibly detailed predictions about the businesses outlook, which in particular with start-ups, can (and usually does) change dramatically from the original idea until the launch of a product.
About 10 years ago I was sitting in a lecture on business administration at the University of St.Gallen and heard the mantra about the importance of business plans. In the subsequent seminar we’ve had to come up – in group work – with a business plan for a travel agency. Already, we made up some figures out of nothing and jotted them down, outlining the growth of the agency for the coming three years.
About 2 years ago, I was sitting once again in a seminar aiming to equip start-up-founders with skills, knowledge and, obviously, a business plan in order to attract first business angels and then VCs and finally master the IPO within 5 years’ time (or getting bought by a competitor).
Last week, while working long hours on a project for a major premium chocolate manufacturer, I got distracted by a few episodes of BBC2’s Dragon’s Den. In practically all the start-up presentations, one of the dragons would ask for the start-ups numbers and projections. While at times it was amusing to see the inability of the start-ups to calculate, over all they just presented rather random figures showing huge profit margins and a return of 100s of per cents within a few years.
Admittedly, one of these examples would have been sufficient to make my point, however when looking through blogs like Techcrunch or VentureBeat, shows like Dragon’s Den, or governmental start-up support programmes like Venture Plan, the focus seems to be rather blinkered – solely focused on venture capital and a quick exit. The current blogosphere and spirit seems to be focusing on the maximisation of the burning rate and the millions invested into questionable products, rather than providing entrepreneurs and start-ups with sound advice on how to create a product with no venture capital, with no fancy business plans, with no fancy offices or no head-count focused blog posts and achievement reports.
Here at Ludopoli, we’ve been working on the development of our own products for about 2 years now. Of course, with a team of 20 and an unlimited budget, we probably could have finished them in half the time, but at the same time we would have spent a considerable amount of time in talking to the investors, in worrying about the success of the product and in measuring our success in the accumulation of funding reports on CrunchBase.
We consciously chose another way to bring our products to market, based on a few questions we asked us very early on:
How important is the launch timeframe? Is there a specific window we need to have our products out in the market?
How important is it to us to control the future of our company?
What type of experience do we want? Do we want to have the experience of building something up from scratch or do we want to have the experience in working with investors? Do we want to have the reported experience of clients early on? Do we want to change the experience of our product / service during the development?
Who do we need feedback from? Our clients? Our Investors? Tech Blogs?
As you probably guessed, our answers to the questions above were rather obvious. We don’t deem it of utmost importance to enter the market as quickly as possible. We want to steer the company ourselves and we want to be able to learn from mistakes and get better at what we do through working with clients and, thus, actually the users of our products, even before we have the product ready.
But most importantly, we want to have and we need feedback from our clients on the work we do, the quality we deliver, the issues they face with our products – overall, the experience they had with us. If we focused only on a business plan and a pre-programmed strategy with a detailed timeline, if we had investors on board, if we had not complete control, we could not develop our products WITH our clients but only FOR our clients without knowing whether they would appreciate them.
I believe that the current start-up scene, the Mountain View and Silicon Valley inspired ethos should be revisited, not declaring it as unnecessary, but rather showing it as one way, amongst many in creating a product and a company. However, with attempts like "Geeks on a Plane", I get the feeling that these evangelists see the above-mentioned Silicon Valley spirit as the non plus ultra and that any other strategy is use- and pointless, in such a way even that it is reminiscent of some colonial spirit.
I believe time is ripe for another kind of get-together, a space for exchange outside the hyper-competitive TechCrunch meetups, far away from investors and business plans, but close to clients and sustainable business that is built on re-investing the money generated and not the money of investors and angels.