active business planning in a lean startup - entroids
TRANSCRIPT
Active Business Planning In A #LeanStartupBy Chandra Gollapudi
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Active Business Planning In A #LeanStartupHow to manage the iterative process of planning, validating, assumptions, & mitigating risks
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eBook Content• what is active business
planning• business planning vs. plan• elements of a business plan• lean startup movement• agile business planning• introducing lean canvas• get most of your lean canvas
What Is Business Planning?The guiding beacon for your startup journey!
Business planning should clarify and refine;• the value
proposition• the strategy• the business model• the underlying risks
and assumptions
Value Proposition;This is the compelling reason a customer will buy your solution? Analyze the problem you are solving and assess who has the most urgent need and how badly they want to solve it. Use the customer persona template to delve deep into the psyche of your target customer and unravel your problem – solution fit.
Strategy;This is the key part of planning and can be challenging for a startup. In simple terms, it is your blue print for the plan of attack. Strategy is considerably different according to the stage of your business. A new startup might focus on brand awareness and crossing the chasm rather than something like diversification. Strategy is typically longer term, coupled with a short term tactical plan. It is easy to get caught in the day to day chaos of startup life and lose focus on the long term strategy.
Strategy Considerations;Things to consider include;• What is your addressable
market?• What is your niche?• How will you address
competition?• What is your core
competence?• Who are your partners or
collaborators?• What is your pricing model?
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Unique Value Proposition: A single, clear compelling message that states why you are different and worth buying Steve Blank
The essence of strategy ischoosing what not to do Michael E Porter
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Business Model;Strategy determines WHAT to do. The business model determines HOW to do it. Strategy is the ‘plan’ and business model is the ‘tactics’. Your model details how to generate profits. There are two sides to a business model – the revenue aspect and the cost aspect.
What Is Your Differentiation?On the cost side you should consider – supply chain, partners, quality, HR etc. On the revenue side you should consider– branding, marketing, channel partners, revenue streams, customer service etc. Companies operating in the same industry and market are likely to do similar functions. When a company does one thing uniquely different and better than its competition, they are using business model as competitive advantage or it can be a unique value proposition.
Risks & Assumptions;A startup is a hypothesis and, thus has many inherent assumptions and risks. Identifying and creating an action plan to mitigate risks and verify assumptions is an important aspect of Active Business Planning. At every step in the planning process you should identify and prioritize the risks and assumptions. Later in this ebook we will discuss using Business Model Canvas for this. Execution should actively test the assumptions and mitigate the risks. As you learn from this you readjust your plan and pivot if required. Since Business Plan is closely related to the planning. It warrants a discussion on the purpose and roles of the two.
More On Active Business PlanningBusiness model is how to create, deliver and capture value
STRATEGY
COMPANY TECHNOLOGY
CREA
TE
CAPTURE
DELIVER
Find synergy between your team and technology required to deliver the strategy (plan of attack)
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Business planning;• central to Strategy
and Tactics• can be formal and
informal• many new tools to
accomplish planning business Plan
• uses for one• many ways to do one
Why Planning Is Essential?Business Planning is the link between strategy with the tactics.
How you Plan?People have found creative ways to plan. Like the famous story about how Southwest airlines plan was crafted on a bar napkin. One prominent agile way to plan is the Business model Canvas.
About The Plan;Planning is a cyclical process. However, the plan is like a balance sheet – a snap shot in time. An agile plan, like the business model canvas is highly recommended. It helps crystallize your model, value proposition (why should customers buy from you) and actions to validate your hypothesis. You may not need to do a formal written plan unless you plan to raise external finance.
Steps In Writing The Plan;If you are writing a formal plan. Consider doing the a power point version first. This helps you visualize the plan for content and context rather quickly. If you are writing a formal plan, you should allocate most of your time on the Executive Summary, and it should be the last thing you write. Most readers will not get too far beyond that and your exhibits.
“It’s Not enough to do your best ; you must know what to do, and then do your best”Edward Deming
Everybody has a plan, until they are punched in the faceMike Tyson
Business Plan vs. Business PlanningPlanning is more important than plan
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Ten Elements of A Business Plan;1. problem2. your solution3. business model4. underlying magic5. marketing & sales6. competition7. team8. projections9. milestones10. summary & status
Problem;State the problem you are solving. Is it financially attractive?
Your Solution;What is your solution. Show any testimonials or validation by your customers. Why you? What is your unfair advantage?
Business Model;How are you going to make money?
Underlying Magic;Your secret sauce. Why customers will cry for you and why nobody else can copy you
Competition;Show who your major competitors are and how you will battle them. Use the Blue Ocean strategy canvas or any thing else to show differences between you and the competition.
Team;Show more than one person dedicating their lives to make the venture a success
Financial Projections;Focus more on your costs, burn rate and capital requirement. Revenue is just a wish at this time.
Milestones;Show what you have accomplished so far and all the good things coming your way
Summary & Status;Close strongly, tune message for the audience
The Elements of Business PlanGuy Kawasaki’s suggested 10 point enchanting business plan
Business Plan is a tool that may help you get funded and may help you get your team working as a team. But it is not an end in itselfGuy Kawasaki
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The Lean Startup MovementChanging how business planning is done
Lean What?• lean startup
movement• lean discovery• lean influence on
business planning
Lean Startup Movement;Steve Blank’s book 4 Steps To Epiphany started the lean startup movement. Eric Ries in his book “Lean Startup” evangelized the concept. And the rest is history. There is now a Lean Startup Conference, several Lean startup meetups, workshops and tools.
Lean Discovery ProcessSteve Blank reminded startups the importance of validating the solution early. He introduced the four step, ‘customer development’ process for testing the idea through customer discovery, customer validation, customer creation and company growth. This involves early and frequent testing of the hypothesis.
Lean Influence On Business PlanningTech Startups were spoiled in the dotcom era. They only needed a idea to get funding. The bubble burst and the world needed to reset back to fundamentals. Lean Startup Movement does a great job at this. Eric Ries the use of ‘minimum viable product’ (MVP), which is core to continuous validation and pivoting. With MVP, you start testing the most important assumptions and the value proposition early in the product development cycle
Farming looks mighty easy when your plow is apencil and you’re 1,000 miles from the corn fieldDwight Esienhower
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Agile Business PlanningMaking the business planning come to life with tasks and current actions
Introducing Agile Business Planning• business plan vs.
business model• business model
canvas• lean canvas
Business ModelHow a startup creates, delivers and captures value
Vs. Business PlanStatement of startup objectives, strategy and the tactics of achieving them.
Business Model CanvasCreated by Alex Osterwalder is the first visualization of a combination of the business model and plan. the ability to succinctly capture the business model on one page was powerful and widely accepted.
Lean CanvasAsh Maurya adapted the business Model Canvas to the needs of technology startups. Both have become extremely popular tools used today. The lean canvas has a web based interface to make it easy to use on the go
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Introducing Business Planning CanvasCapturing the market and product requirements on one page
Nine Elements Of A Business Planning Canvas1. problem2. customer
segments3. unique value
proposition4. solution5. channels6. cost structure7. revenue streams8. partners9. unfair advantage
Below is a very brief explanation of the different segments of a business planning canvas. This is a mix of both canvases to focus on planning.
ProblemHow intense is the problem and how urgent is the need to fix it.
Customer SegmentsWho is/are the customers and collaborators (other users). Identify the early adopters.
Unique Value PropositionWhy your solution is different and worth buying.
SolutionFeatures that address each problem stated.
ChannelsDistribution and paths to reach customers.
Cost StructureIdentify costs, capital requirement, and your burn rate. Know breakeven point.
Revenue StreamsPricing. Start with validating your premium pricing first. Estimate customer life time value
PartnersCapture key partners, collaborators, influencers.
Unfair AdvantageWhy is it difficult for somebody else to copy.
Key OmissionsI replaced Key Metrics on Lean Canvas with Partners. Metrics is important but I wanted to focus on actionable, and lead indicative factors. And entroids.com framework has other ways to cover metrics.
A business model describes the rationale of an organization creates, delivers and captures valueAlex Osterwalder
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Using The Business Planning CanvasHow to get most out of your business planning canvas
Getting Best Of Canvas • pre- canvas work• post-canvas work
Pre-WorkA Good understanding of product and market is important. Here is a list of essential tasks and some tools you can use;
1. Customer Discovery2. Competitive Advantage:
The Strategy Canvas from The Book “Blue Ocean Strategy”
3. Core Competency: Knowing what to focus your resources on and what to partner or outsource
Post - WorkThis is very impactful to your team performance and progress. Planning is wasteful it you do not drill down to actionable tasks aligned to your strategic needs. It involves fleshing out the underlying assumptions and risks. Understanding their relative importance and defining actionable tasks and experiments to validate and test these.
http://www.theinnovativemanager.com/blue-ocean-strategy/
http://entroids.com/Blog/?p=185
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Putting The Canvas To WorkDrive meaningful actions that test your business hypothesis
Business Planning Cycle• capturing
assumptions• taking actions• cycle of revelation
Capturing AssumptionsEvery item on the canvas should be screaming “validate”. Questions to ask while completing the canvas to help flesh out the assumptions are;• How so?• So what?• Where is the proof?
Taking ActionThe next step in the process is to prioritize your risks and assumptions and create experiments and tasks to mitigate your risks and test your assumptions. You could use a simple ‘to do’ list, or automated software like Entroids.com
Cycle Of RevelationYou should instill in your team the discipline of executing these experiments and feeding back the learning to make adjustments to your product and plans. The success and failure of a team is dependent largely on the ability of the team to accomplish this.
“Successful teams get into the habit of executing the business planning cycle. Use automation and productivity tools to your advantage to get more done faster & better”
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Success = Planning + ExecutionExecution is the art of getting things done
Key Concepts For Success• perfect execution• strategic execution• the science of
startups
Perfect ExecutionThe best selling book by Larry Bossidy and Ram Charan has the title “Execution – The discipline of getting things done”. Perfect execution is an extension to this definition. Startup life is chaotic and its easy to get caught in the whirlwind of daily firefighting and lose focus on more important things. Keeping focus of the team and the habit of getting important things done is the core of Perfect Execution.
Strategic ExecutionKey to success is simplifying strategy to tactical activities that result in achieving the goals; and keeping the team focused and getting these tasks done. The activities of the team will be in flux depending on circumstances. Keeping team tasks nimble and aligned to strategic needs it the ultimate challenge. It is the key differentiator for winning execution.
The Science Of StartupsI wish we could say there is a formula for success. Next best thing is to use productivity tools that keep your team tasks aligned to the strategic needs. One simple and effective tool to use is the “A3 Management Process” popularized by Toyota. At Entroids.com, we understand the need for speed and consistency in getting results. It is one way to automate productivity and promote team accountability.
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”Sun Tzu
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Thank YouPlease help improve and develop this E-book to the voice of Startups
About the eBookI hope you enjoyed reading this mini ebook as much I enjoyed writing it. This is a small step in the journey of studying the secrets of success in execution. Please let me know what you think of this ebook and of the www.entroids.com . I hope to improve this book with your comments and experiences.
About Entroids.com@entroids is striving to understand the hidden art of startup execution. Our first step is to automate startup activities for faster results and enhanced team performance.
About the AuthorEngineer turned marketer by day and avid wine sipper in the evening. I love home improvement and back yard projects. Wish I learn to finish more than I start. But that is exactly what I am focusing on these days. After more than 20 years of experience in marine, automotive, & electrical equipment spanning operations, product management and marketing; it is time to turn my energy to entrepreneurship. The trenches of startup world seems home to me. I have diverse experience in new product development, product management and Lean manufacturing that I am ready to put to good use. I am the co-founder of Entroids a “strategic project management” platform that helps startups get better results faster.