Business plan (BP) in question! In quick succession at the end of 2012, two entrepreneurship experts – Steve Blank and Alexander Osterwalder – settled his account. It is not the right tool for startups. so what ? The business model, of course, if the distinction seems clear to some and experience in the field proves the opposite…
Business model: buzzword
Some entrepreneurs have instinctively understood that it is better to talk about BM than BP … The concept is growing, so take advantage of it! Still need to know why? Especially what do we put behind this expression?
During my many exchanges with entrepreneurs, I noticed that 9 times out of 10, when I was asked: “Can you tell me about your BM?”
The answer had to do with pricing, the pricing structure, and even the different ways of generating revenue. In short, sources of income!
Unrestricted business model:
If it is true that these are stakeholders in BM, they are only part of it. If it is only the financial part of the cash fund, then at least a cost structure should be added to it. And to be completely whole, BM’s interest is to give a global view of the way value is generated for customers and to ensure part of it. Therefore it addresses the strategic, marketing and financial aspects.
If the offering and its value proposition is at the heart of the BM, the management of the customer interface, resources, internal activities, and relationships with the existing (or to be established) ecosystem must also be considered.
So we are far from the questions – nonetheless important – about the reward for every click, every action or every sale that web start-ups ask themselves… and in some sense we engage in the discussion between BM and BP. Heavy focus on the financial part of BP is unacceptable in the case of startups.
For some, blood pressure is just a type of BM with more numbers! It is true that BM can and should appear within BP but the fundamental error is that it is not intended for the same use.
BM more suitable for startups?
BP is the company’s execution plan and in a certain way so BM. It seeks to determine as accurately as possible the company’s costs and revenues as well as aspects related to financing and cash flows. Very useful stuff indeed…but especially for well-committed companies that have already acquired proven knowledge of their environment.
But not for start-ups, especially in the early stages!
Startups are organizations that develop in a state of great uncertainty: uncertainty about the market and its potential, customer segments and needs as well as the characteristics of the offer (products or services). In this case, there is no need for an execution plan – BP – but rather a “pattern search pattern”.
Thus, it is up to the company to build a global model of creation and delivery, take advantage of and test the value as quickly as possible, in the field, leaving the offices and abandoning the magic formulas of spreadsheets.
If BP does not resist first dates with clients, BM feeds on them to develop. And it is indeed BM’s iterative function that makes it a suitable tool for start-ups rather than the linear, sequential aspect of BP.
Example of differences:
Here is an example relating to the market segment – the cornerstone of entrepreneurial success – through two different approaches. :
In the first case, an entrepreneur dedicates himself to developing an innovative solution for many years based on a revolutionary technology in the field of Internet browsing.
Its BP shows provisional income statement over 5 years to the nearest euro. After the first meetings with clients, his plans were profoundly revised: what he identified as a priority target – VSE / SMEs – did not match his offer. Suddenly, months of futile development and months of development will come to replay the show on the big accounts. When we know the importance of cash in startups…
On the other hand, a more pragmatic and less dogmatic approach: start a GIS specialist in SaaS mode.
It first identified a segment – public bodies -, that is, about 20,000 contacts in France alone. (at the time) potential. Thanks to the first reactions – and success – the company decided to focus on regions, departments, public institutions and urban planning agencies.
In total, the well-defined base target has been reduced to approximately 3,200 organizations where all efforts (marketing as well as technical developments) will be made with much greater opportunities for return on investment than at the beginning.
In the first case, an approach applicable to financially transforming the idea into becoming, a solution for formalization. As if everything was played up front and all that remains is …
On the other hand, questioning and questioning changes the business model while it is still searching for itself.
Suffice it to say that applying an active approach around BM requires careful preparation on the part of leaders, they cannot escape the dilemma of living wrong instead of dying believing they are right.