Launching a new enterprise—whether it’s a tech start-up, a small business, or an initiative within a large corporation—has always been a hit-or-miss proposition.
According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as hard as you can. And somewhere in this sequence of events, you’ll probably suffer a fatal setback.
The odds are not with you: As new research by Harvard Business School’s Shikhar Ghosh shows, 75% of all start-ups fail.
But recently an important countervailing force has emerged, one that can make the process of starting a company less risky. It’s a methodology called the “sustainable start-up,” and it favors innovation and experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development.
Although the methodology is just a few years old, its concepts—such as “minimum viable product” and “pivoting”—have quickly taken root in the start-up world, and business schools have already begun adapting their curricula to teach them.
The sustainable start-up movement hasn’t gone totally mainstream, however, and we have yet to feel its full impact. In many ways it is roughly where the big data movement was five years ago—consisting mainly of a buzzword that’s not yet widely understood, whose implications companies are just beginning to grasp. But as its practices spread, they’re turning the conventional wisdom about entrepreneurship on its head.
New ventures of all kinds are attempting to improve their chances of success by following its principles of failing fast and continually learning. And despite the methodology’s name, in the long term some of its biggest payoffs may be gained by the large companies that embrace it.
In this article I’ll offer a brief overview of start-up techniques and how they’ve evolved. Most important, I’ll explain how, in combination with other business trends, they could ignite a new entrepreneurial economy.
According to conventional wisdom, the first thing every founder must do is create a business plan—a static document that describes the size of an opportunity, the problem to be solved, and the solution that the new venture will provide. Typically it includes a five-year forecast for income, profits, and cash flow. A business plan is essentially a research exercise written in isolation at a desk before an entrepreneur has even begun to build a product. The assumption is that it’s possible to figure out most of the unknowns of a business in advance, before you raise money and actually execute the idea.
Once an entrepreneur with a convincing business plan obtains money from investors, he or she begins developing the product in a similarly insular fashion. Developers invest thousands of man-hours to get it ready for launch, with little if any customer input.
Only after building and launching the product does the venture get substantial feedback from customers—when the sales force attempts to sell it. And too often, after months or even years of development, entrepreneurs learn the hard way that customers do not need or want most of the product’s features.
After decades of messaging for hundred’s of start-ups and 3 years of struggling to define my own plan, I now learned at least a few things:
1. Business plans rarely survive first contact with customers. As a boxer named Tyson once said about his opponents’ pre-fight strategies: “Everybody has a plan until they get punched in the mouth.”
A creative early engagement startup approach can work, if it dramatically accelerates a kind of natural-selection process (a la Darwinian evolution) in a company. Processes, features and ideas that have merit are kept, while those that do not become extinct. Evolution happens when there is a rapid birth-and-death rate, and a rapid rate of small mutations.
What is different in this case is that the “mutations” are based upon thought and hypothesis rather than being random.
Other natural concepts also apply, such as the extinction of a native species (e.g. a horse-and-buggy) caused by the introduction of an invasive species (e.g. an automobile).The question you need to ask is: When two species are evolving at different rates, which one will be more likely to dominate?
2. If your concept is truly game-changing it is probably still evolving and the market is unprepared, and the idea development shifting constantly(like flowing water) – therefore, it is very difficult to ever go into final form around your plan until marketplace demand kicks in. At some point in the journey, there will be a “moment in time”, that the shift happens and your efforts can now shift quickly from patience and hard work into a active “go to market” mode.
A have “no fear attitude” will then become the difference between a successful venture and one that fails.
“A wise saying to remember in this process is, everyone has that moment of pure luck, it is being prepared for that moment that makes the difference between a lucky and unlucky person”
2. Also to consider, the spike in sustainable start-ups has been influenced by some things that are in fact new. Exposure for your idea has become part of its process, things like web/social media and crowd funding. In addition to new funding mechanisms these phenomena give developers a way to lay claim to their ideas publicly, so they worry less about plagiarism (despite recent patent law changes) and thereby are less inclined to develop products in a black hole. Becoming the voice for your idea and putting yourself out there first could make or break your business in the digital age. having an idea the first is not a guarantee of success. The traction on a new idea depends on lot of things among them, Timing, Resonance, Channel (i.e. open source or not?). One other lens to consider here, why so much emphasis on process?? Where is the human element. Start-ups don’t fail, founders of those start-ups fail.
The importance of the innovation economy and shift in mindset to a rapid test/fail concept seems like it should be infused into a variety of educational curriculum. Echoing the research I have done, innovating in all industries- even governmental, educational and medical institutions might lead to societal gains.
Models exist a long time before academics get hold of them and package them. It’s almost the packaging that breaks the model because the same model can’t fit every business. Imagine if we all had the same wife, husband, partner…it wouldn’t work.
3. I also believe that a innovative startup model and demands of the marketplace, minimize the product development time, cost related to it goes down and probably customer satisfaction goes up. In many cases you are practically developing a product hand on hand with the customer.
The speed at what we are advancing through life does not give you much time for investigation. It is invention, production, marketing and sales almost at the same time in a cross vertical model – sustainability is supported by removing the overlap and running lean. Thinking of many times I have heard managers and analysts associated with venture capitalists, venture capital investors, lines of investment programs all questioning the learning ability of an entrepreneur.
And this is precisely what sustainable start up is all about: learning and the capability of learn.
Some good tactics to employ, which for me just reinforces the need for evolving as you create a business plan. Lots of semantics here, but after being ground floor in 20 years of startups, continuing to build marketing and community models, the hardest lesson learned is there’s no substitute for creating a strong business and evolving marketing plan tht takes advantage of the relevance of the market and news cycles.
Call it a business model, a business plan, a framework, an outline, a guide, but if there is no plan, I might as well go out and play tennis without a net. Good exercise maybe, but no idea of how to improve my game.
I tell entrepreneurs I advise, that by definition, the business plan is going to be wrong, but it’s not the numbers that count at the startup stage, it is the
-the power of the strategic thinking
-the customer testing
-the messaging bounce into the marketplace*
-research of the desired customer, data and the modeling behind the assumptions
All of this needs to be written down and agreed to among the team. Last I looked, it still sounds like a business plan, let’s just keep it in flexible”draft form” for a bit longer in our process.
Through my many years helping to launch start ups, I know that a innovative sustainable start up plan works, and it works amazingly well.
In summary, let me stress this point one more time- while there is so much emphasis on process??
It’s a strong belief system, innovative thinking and the human element.
Start-ups don’t fail, founders of those start-ups fail.
*More on my bounce suggestion http://www.youtube.com/watch?v=EiSZXqzrwrs&feature=c4-overview&list=UUJN…