Posted March 20th, 2012 by Nathan Furr with No Comments
They may not know it, but business plans have caused a lot of grief for entrepreneurs. Most new entrepreneurs believe their first step is to write a business plan and then their second step is to follow the plan. But the whole time they are wasting precious time while meanwhile most likely following their “plan” down the path to failure. To make matters worse, at universities we have reinforced this behavior by teaching business plans first, even though there is no solid academic evidence that business plans matter for success. So I say, burn your business plan. There is a far better way that is proving to dramatically increase success—and that is to start by validating your assumptions in the field, with customers.
Understanding the Difference Between Plan and Process
Now let’s be careful, I’m not saying business plans have no place in the universe, but I am saying they are a bad place to start. There is a much better process to follow and when you are done then, and only then, should you write a business plan. Until then, let’s get clear, rather than doing a business plan you should focus on a business model process. The key difference is quite simple: in a business plan you are trying to plan, inside the building, the optimal solution that you can go execute on. In a business model process you recognize that everything you know is a guess that has to be tested, outside the building, with the goal of learning.
The International Business Model Competition
To help teach this process, just this past month Steve Blank and Alex Osterwalder joined me at the International Business Model Competition which we created. We rewarded students for the process rather than the plan and the results were astounding. Check out the winner, XoomPark.
As they presented folks were saying “can we invest right now?” and unlike many business plan competition winners that fizzle out over the hype passes, these guys have already validated their ideas in the market—they will succeed.
Join the Business Model Competition
Next year we plan on holding the competition at Harvard and at Stanford the year after. Come join us. While the competition is open to students, you could come see what it is all about or if you are at a university, come submit or create your own competition. Let me know. We are changing the world and burning business plans, one competition at a time. There is a better way.
Originally posted on 2/24/2012 by Nathan Furr on the Forbes blog
Written by Nathan Furr