LEAN BUSINESS PLANS
For Product CommercialisationAugust 2015
Quick, portable, visual business plans, updated regularly based on market feedback.
TRADITIONAL BUSINESS PLAN
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TRADITIONAL BUSINESS PLAN
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BACK OF NAPKINEfficient
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INEFFECTIVE EFFECTIVE
LESS TIME
MORE TIME
LEAN BUSINESS PLANEffectiveEfficient
Spring Issue 1 Melbourne Australia
Commerical Business Consulting
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Is this white paper for you?This white paper is for business leaders who understand the importance of planning but know that the traditional business planning process is broken.
You are looking to: • Reduce planning time, money and frustration, and improve quality
by eliminating forms of waste such as delays, reviews, rework, over-production and over-processing.
• Achieve this through familiar TQM concepts such as continual improvement, fact-based decision making, visualisation, and ‘just in time’.
Lean business plans are critical to successful product commercialisation in large or small organisations.
"Complexity is your enemy. Any fool can make something complicated. It is hard to make something simple." Sir Richard Branson
“Simplicity is the ultimate sophistication.” Leonardo da Vinci
Focus on what matters for transformational efficiency, effectiveness, engagement and results
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Market-Driven, Customer-Focused
Strategic Plan
Figure 1. Traditional business planning elements – more is not necessarily better!
The challenge of traditional business plans
Challenge 1: They take too long to write Figure 1 shows why it’s easy for business plans to contain too many pages. Most of these elements are a form of ‘waste’ - not a priority at the initial stages of product commercialisation.
Challenge 2: Nobody reads them Most people reading the business plan don’t go beyond the executive summary. The effectiveness of your communication and of the reader’s understanding decline exponentially after the first page.
Challenge 3: Nobody understands them After two weeks we tend to remember about 10% of what we’ve read. Our understanding of what we’ve read is even lower. Long business plans are likely to be even less effective than this.
Challenge 4: They’re usually out of date Because of key learnings during the early stages of product commercialisation, and regular changes in the external business environment, a business plan is often irrelevant shortly after it’s developed.
Challenge 5: The fallacy of the Perfect Business Plan It is not possible to figure out most of the unknowns of a business in advance, sitting at your desk.
Some people conclude from this that business plans aren’t worth the trouble. But they are.
“No one besides venture capitalists and the late Soviet Union requires five-year plans to forecast complete unknowns. The details in these plans are generally fiction, and dreaming them up is almost always a complete waste of time.” Steve Blank
Phases 1-3: Discovery and Assessment - Validation - Planning
Strategic Planning Framework:Who, What Where, When, Why, How
Phase 1: Discovery and Assessment
Assessment and
Exploration
Vision/Mission/StrategyGoalsMarket AssumptionsOperational StrategiesBusiness ModelsDistribution ConsiderationsFinancial StrategiesGo-to-Market OpportunitiesResource identificationNear-Term Needs Naming Corporate identify Legal considerations
Executive Coaching
Market Intelligence
SWOT
Industry & Market Assessment Industry growth & profitability Barriers to entry/exit Potential strategic partners, alliancesCompetitive Review Product Pricing MessagingCustomer ProfileCustomer SegmentationSales Process Consideration Available MarketRelative Position,Sustainable Points of Distinction
Secondary Research
StrengthsWeaknessesOpportunitiesThreatsKey Success FactorsCapabilities and Culture as a source for advantage (Skills, Processes, Values, Resources)Value Chain Analysis
SWOT Analysis
Phase 2: Validation Phase 3: Final Plan and implementation
Business Model / Value Proposition
CustomerValidation
Develop 3-year business and financial modelDevelop/articulate value proposition (messaging platform)Develop distribution/ pricing strategy
Strategic Framework
Value Proposition Distribution modelPricing Sales Approach
Business Plan /
Strategy
Vision/Mission/StrategyBusiness ModelDistribution Model/StrategyPricing Model Financial StrategyMarketing PlanSales ForecastResource PlanMetrics & Measurement (KPIs)Contingency Plan
Pricing Model
Sales Model
Brand Plan
Marketing Plan
Distribution Plan
Resource Plan
FocusedResources
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Why develop a Business Plan?
“If you don’t know where you are going, you’ll end up someplace else.”Yogi Berra
“In preparing for battle I have always found that plans are useless, but planning is indispensable.”Dwight D. Eisenhower
Product Commercialisation is a game of stages. Each stage has different priorities. You need to plan what you need to do to make the jump to the next stage, to ultimately achieve what is known in the venture capital industry as a ‘Unicorn’ valuation.
Opportunity 1: Think strategically Planning forces you to think about the key elements required to create a sustainable business.
Opportunity 2: Create goals Evidence shows that organisations perform better setting goals and priorities, making employees accountable and establishing a performance culture. Planning sets out clearly how you will meet your goals, and therefore whether they are feasible, and forces you to commit to a course of action.
Opportunity 3: Eliminate waste If you don’t plan what to do next, you will take unnecessary, unfocused, and inefficient steps. For unstructured activities, 80% of the effort gives less than 20% of the valuable outcome.
Opportunity 4: Communicate A plan communicates the focus of the organisation’s energy and resources to the team.
Opportunity 5: Prioritize your financial needsCompanies can grow themselves profitably into insolvency, because profit is not cash. It’s easier to adjust your plan to avoid or deal with a coming crisis, than to deal with it unexpectedly.
Figure 2: Business Planning Stages. Where are you now? Where do you want to get to?
The path of the Unicorn
Customer discovery Lean Business Plan Don't build until you know customers will pay
Test riskiest parts of planMetrics that matter
FFF, bootstrap
Customer validationGet noticed Get traction Lean Business Plan, Key partnershipsAgile developmentMetrics that matter
Angels, grants
Raise money when you canRefresh brand Strategic partnerships Metrics that matter Cash flowReview org. structure
VC, Corporates, grants
Create systems and processesCultivate leaders, empower employees Balanced scorecardReview org. structure7S, requisite organisationCash flow
Banks, IPO, trade saleFinance:
Priorities:
Learn new skills at each summit
$0
Inception
$1m+
Prototype
$10m+
Roll out
$100m+
Rapid Growth$1bn+
Shar
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alue
Stage of maturity
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½ dayLean Business Planning Workshop
Why a workshop?Because we remember 90% of what we do, see, hear and say, but only 10% of what we read.
Before the workshopInvite subject matter experts.
Send key stakeholders:
• Agenda
• Lean Business Plan Template (tailored to your situation)
• Homework: think about the business and obtain low hanging customer data
On the day1. Run through Lean Business Plan structure
2. Tailor key elements to unique circumstances of your business
3. Proceed in a logical sequence — start with the customer problem, proposed solution etc
4. Complete and publish broadly
5. Schedule the first review before you finish
Business planning effectivenessOnce a year Jobs took his… employees on a retreat... Jobs would stand in front of a whiteboard (he loved whiteboards because… they engendered focus) and ask, “What are the ten things we should be doing next?” People would fight to get their suggestions on the list. Jobs would write them down, and then cross off the ones he decreed dumb. After much jockeying, the group would come up with a list of ten. Then Jobs would slash the bottom seven and announce, “We can only do three.” (Walter Isaacson, Steve Jobs)
Focus Simplicity is hard. We can do so many things with our abilities that we frequently end up spreading ourselves thin. The key to success is to focus on completing fewer high priority actions really well. This is what being lean is all about – eliminate clutter, make hard choices and then execute. Evidence suggests that this approach dramatically improves product commercialisation success rates.
Lean process My recommended model is adapted from the Deming cycle, used successfully for decades in the context of TQM (Figure 3). The fundamentals are to increase the rate of customer feedback, eliminate waste and deliver value early and often. Key forms of waste in business planning are delays, reviews, rework, over-production and over-processing. You should focus on only what’s needed, when it’s needed, in the right amount.
Lean Business Planning involves documenting your plan quickly, on one page. Then identify the riskiest parts and design tests, executed as part of the ‘Do’ step, to de-risk product commercialisation as quickly and cheaply as possible. By measuring and assessing the results of your experiments (‘Check’) you can then quickly decide on the type of adjustment required before you repeat this loop.
The biggest risk that you face is that the core assumptions in your one page plan are incorrect. Do your customers have the problem that you think? Is your solution something they are prepared to pay for? Do the channels you imagine to reach these customers work? You must test these assumptions quickly, starting with the ones that are most critical to the success of your business.
Figure 3: Lean Business Planning adaptation of the Deming cycle
Testrisklestparts
Measureand assessresults
Documentplan on a page
Persevereor pivot
Plan
Adjust
Do
Check
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Element Lean Business Planning Traditional Business Planning
Strategy • Customer discovery: search for a business model that works
• Hypothesis-driven
• Execute Business Plan• Implementation-driven
Product development
• Agile development• Build product iteratively and incrementally
with regular customer input
• Linear, stage gated to completion, and only then prepare for market
Organisation • Hire for learning, nimbleness, speed • Departments by function• Hire for experience and ability to execute
Scorecard • Metrics that matter• Customer acquisition cost, lifetime
customer value, churn
• Accounting• P&L, balance sheet, cash flow• Balanced Scorecard
Culture • Failure expected – iterate or pivot• Culture of risk management• ‘Pull the Andon cord’, don’t build
something nobody wants
• Low tolerance for failure• Culture of risk-aversion
Speed • Rapid• Operate on good-enough data
• Measured• Operate on complete data
Customer value It’s best to understand this reality as quickly as possible – customers don’t care about your idea. Customer interviews should test key elements of your business model, including product features, pricing, distribution channels, and customer acquisition strategies. The more customers you talk to, the better. Customer discovery stages include interview (no solution), explore (possible solution), pitch, Minimum Viable Product (e.g. ‘concierge test’), prototype, demonstration.
Solving real customer problems is ultimately the only source of sustainable value creation. The customer should determine exactly what you build, and you need to be ruthless about not wasting time or money unnecessarily building features that nobody wants.
What is a Lean Business Plan?An A3 plan that communicates in a highly visual, understandable format how your company creates value for itself and its customers. Some of the following, adapted to your circumstances, will be relevant: Customer Problem, Customer Solution, Value Proposition, Competitive Advantage, Customer Segments, Channels to Market, Key Metrics, Key Partners, Revenue Streams, Cost Structure, Brand, Team, Vision etc.
So how long does a Lean Business Plan take? No more than half a day. Follow up sessions will go deeper into specific areas (delivered in a ‘just in time’ basis) but rather than engaging in months of planning and research, accept that all you have on day one is a series of untested hypotheses.
Finally, doing this quickly doesn’t mean sacrificing quality. You save time and money by eliminating unnecessary processes and steps, and leveraging off partners, but you must still achieve excellence in all areas that a customer values.
“A Minimum Viable Product allows a team to collect the maximum amount of validated learning about customers with the least effort.”Eric Rees
References / further readingW E Deming, Total Quality Management
Steve Blank, “Why the Lean Start-Up changes everything”, Harvard Business Review, May 2013
Eric Ries, The Lean Start-up
About the AuthorMike has a passion for nudging CleanTech products along the pathway to success. He provides B2B advice for products and projects that matter. Practical product commercialisation, strategic and implementation advice, and execution of high value investment, strategic partnering or grant opportunities to create lasting value. Value for shareholders and for broader stakeholders.
At a Citigroup venture start-up Mike successfully commercialised a trade finance product, as a founding member growing it to 120 people in New York and London and raising $US90m (trade sale exit). It has now settled over $10bn. Most recently for a concentrating solar product, Mike achieved 11MW in sales orders, an MOU signing with China Three Gorges for ~$A1bn, broadcast on international Chinese television, successful investment rounds, numerous national radio, television and newspaper media publications and global industry publications, won the Global CleanTech Cluster Association business plan award in Switzerland for the world’s best business plan and pitch and the Australian Technology competition Clean Energy Award.
Mike has multiple successful experiences with Federal and State Government grants totalling tens of millions of dollars, and multiple successful $50m+ complex tenders and contract closure.
Testimonials
“Mike is very strong commercially and his strategic marketing, business planning and grant application capability have led to many great outcomes for RayGen. He has a depth of product commercialisation knowledge and experience and excellent communication and relationship building skills. I always enjoy working with Mike.”
John Lasich, Chief Technology Officer, RayGen.
“Mike is a personable, results-driven professional who provides practical commercial advice that delivers real value. I encourage you to workshop the Lean Business Planning process.”
Robert Walsh, CEO, IronLink, Industrial Practitioners.
If this paper resonates with you then call or email Mike Hodgkinson to set up a time to discuss a Lean Business Plan workshop.
Does this speak to you?
M +61 400 186 069 www.caduceus.biz email: [email protected]
M +61 400 186 069 www.caduceus.biz email: [email protected]
