Successful small businesses are discovered not planned. Inquisitive and agile entrepreneurs can uncover new business opportunities by searching and engaging with customers, not by formulating elaborate and fully-specified desk-researched business plans.
This may seem to be at odds with the conventional wisdom of the importance of robust business plans. But, in fact, the perfect business plan is proving elusive in today’s environment of rapid change, disruptive innovation and more intensive and extensive global competition.
An approach, termed the ‘lean start-up’, is proving more likely to produce viable business enterprises more quickly, delivering better business offerings of more value to customers.
In this lean start-up approach, lengthy and orderly business master plans give way to pivotal business experiments and reality testing with customers.
US entrepreneur and academic, Steve Blank, in the May 2013 Harvard Business Review provides an overview of lean start-up techniques and what distinguishes them from traditional business planning. He characterises the lean start-up methodology as follows:
“It favours experimentation over elaborate planning, customer feedback over intuition, and iterative design over ‘big design up front’ development…….
Instead of executing business plans, operating in stealth mode, and releasing fully functional prototypes, young ventures [using lean start-up methods] are testing hypotheses, gathering early and frequent customer feedback, and showing ‘minimum viable products’ to prospects…….Using customers’ input to revise their assumptions,…lean start-ups practice agile development…developing the product iteratively and incrementally.”
In short, rather than starting with the implementation of a comprehensively researched business plan, these new entrepreneurs systematically search for their workable business model, ie how as a company they can create value for themselves and their customers.
Firstly, these entrepreneurs set out their ‘good guesses’, the untested hypotheses about their business idea. Next, they test these with customers, asking for feedback on all elements of the business idea—product features, pricing, customer expectations, delivery channels, distribution and the like. They respond to this feedback and produce ‘no frills’ offerings with only the critical features. They test these again with customers, redesign and then repeat until the offering is refined enough to sell.
In designing and re-designing their business offerings, these entrepreneurs quickly pivot away from ideas that don’t work. This process of discovery allows enterprises to improve their chance of success by the principles of failing fast and continually learning. It also makes the introduction of innovations less risky.
The lean start-up approach is showing itself to be equally powerful for mainstream small businesses and for new initiatives in large corporations, as it is for young high tech ventures.
Steve Blank, ‘Why the Lean Start-Up Changes Everything’, Harvard Business Review, May 2013, pp65-72.
See the Enterprise Workshop for local lean start-up style programs, EW Pivot Program and EW Planning Program at www.enterpriseworkshop.com.au. Note: Narelle Kennedy is a director of the Enterprise Workshop.