Thursday, January 27, 2011

Business Planning v. Business Discovery

He never risked sh#!,
He hoped and he wished it,
But it didn't fall in his lap,
So he ain't even here, he pretends
That airplanes in the night sky
Are like shooting stars.
- Eminem

For a majority of my undergrad career, I've turned in some pretty stellar plans. Marketing plans, operations plans, accounting plans.. name any part of the business and I've made a plan for it. I thought that this made me equipped to start a business so I ventured out into the elements, equipped with faux-optimism and faux-fearlessness, to start my first company, Dash & Cooper.

Let me just say that I was not equipped. The root cause for failure were twofold: I was scared out of my mind and all the plan development trickery I learned in my classes didn't help - in fact, it might have hurt me.

This is not to say that my education was useless; these classes laid a foundational understanding of basic business management concepts - many of which I use to optimize my metrics and provide the form of tracking my progress as I find product-market fit. What was useless was thinking that I was smart enough to know how the business was going to work and then take actions to accomplish that.

Unfortunately, common literature teaches this exact thing to nascent entrepreneurs.

To me, I see the following problem with writing plans: 1) they discount the value of customer feedback (rather than put a premium on it) 2) they typically assume that resources are not constrained or easily obtained 3) they assume that the business has already been running (as opposed to creating from scratch).

Thankfully I took Business Development this semester and it's not about writing a plan as an artifact to execute (erroneously) from. The class assumes that the plan is a catalytic byproduct of the pivoting that occurs as you race to find what your market wants - something that's called business discovery.

The big insight from the class last night is that business plans are mythical post-hoc documents that make logic out of the thrashing that occurs in the early days. It's a convenient narrative for founders and managers to say after the fact that they had a 'vision' and just 'got it done' when in reality, they happened to discover (often by accident) something new that was valued by others. Most human beings aren't that smart enough to have a 'vision' for Amazon.com, Groupon or Coca-Cola. These companies, as we know them today, began as something else and they pivoted back and forth until they found something that worked. THEN they scaled. They couldn't write a plan about what would happen, because no one knows how the market is going to respond to anything that you introduce to it.

There's nothing wrong with "Business Plans", they are a great byproduct that documents the experiments you are making to discover what's actually going to work. But to assume that you can write one and actually execute well is like driving backwards down the freeway and using your rear-view mirror to direct your actions: it's possible but increases the likelihood of crashing and burning.

To further my point, I recommend that you watch the following video about how the Groupon founder thrashed for 3 years before focusing on a small portion of his initial idea that would eventually become Groupon.


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