Jumat, 14 Juli 2017 - 07:19:38

Why you shouldn’t stick to your business plan in the fast-moving startup world

    Michael B. Bara Hits : 28560    

techinasia


“The world has a way of undermining complex plans. This is particularly true in fast-moving environments. A fast-moving environment can evolve more quickly than a complex plan can be adapted to it. By the time you have adapted, the target has changed.” –Carl von Clausewitz

So you have raised funds, built your startup team, and set into motion the business idea that has been keeping you up all these nights. What comes next?

It is often counterintuitive but the important next step for a startup founder is to forget everything you know about your startup. Forget the unbridled optimism that has gotten you this far and guided you in pitching to your seed investors. Forget the business plan that you had so meticulously crafted. Because in a startup journey, nothing quite happens the way you expect.

Startups and wars

The clear lesson from Clausewitz on war can also be applied to the startup context. By tying yourself too tightly with the plan that you have from the start, you lose the flexibility to respond to market opportunities and challenges.

Helmuth von Moltke the Elder also observed that no plan of operations extends with any certainty beyond the first contact with the main hostile force. The tactical result of an engagement forms the base for new strategic decisions, as victory or defeat in a battle changes the situation which no human acumen is able to see beyond the first battle.

Running a startup is very much like trying to win a war, and launching it is only the first battle, especially if your business aims to be disruptive. Its launch changes market conditions, and the market’s reactions are variables that are not easily predicted when preparing the business plan.

Jack Welch, former CEO of General Electric, similarly subscribed to such a philosophy in leading the company, that is to see strategy as the evolution of a central idea through continually changing circumstances.

So, what guides the startup in the absence of a plan? First is the philosophy, unique selling points, and execution path of the startup distilled in the broadest manner, and second is seizing unforeseen opportunities as they arise.

Defining the central idea of your startup

The best way to define your central idea is to summarize your startup concept in one sentence. The beauty lies in the simplicity of that one central idea.

In my own one-sentence central idea, I explained that my startup allows retailers to offer a commission to users to refer their friends and fans as customers.

The rest of the pitch is simply about the details that expand the central idea:

  • The benefit to retailers is that they are rewarded upon customer spending they reward upon customer spending (which disrupts the current advertising model of paying upfront fees without actual customer conversion), and the growth in the customer base (instead of other platforms’ focus on users’ own spending)
  • The benefit to users is that they earn from word-of-mouth referrals and social media sharing, which are activities that they already engage in (and from which social media platforms are deriving advertising fees)

The central idea helps map out details such as the benefits to both sides of the platform and the gaps in the current market that the startup aims to solve. It is, however, also sufficiently concise that it retains flexibility for the business model to change should market conditions change.

The central idea also appeals to investors. If private car hires are successful because they leverage on idle assets that users have and the problem of not having enough taxis on the roads when people need them, why not pay for word-of-mouth referrals where the idle asset is the social media presence and the problem is having not enough advertising solutions that reward sales conversions?

Safeguarding against unforeseen circumstances

Have a realistic idea of the flaws your central idea might have and the solutions to address them.

A startup that claims to have no flaws cannot be credible because the founders are not able to see where the risks and threats are. As Clausewitz noted, the enemy of a good plan is the dream of a perfect plan. Where there are these blind spots, it is very easy to be trapped in unbridled optimism and squander precious opportunities, be it well-meaning advice or partnerships critical to the survival of your startup.

The enemy of a good plan is the dream of a perfect plan.

One of the things I had to address in my startup is knowing that, as a founder, while I have a clear idea of my company’s direction, I also have to recognize that I am not an expert in all the critical areas for the growth of my company. I also have to ask myself seriously whether the market is ready for my platform. How do I grow this new category and actively condition the behavior of retailers and merchants to use our app when no one else is currently doing this in the market?

The key to preparation for unforeseen circumstances lies in finding the right people to fill in those gaps, so that when the opportunities come, the company will have a better chance at knowing how to react and reacting nimbly.

Not blindly following the buzz

When you are defining a central idea, it is very easy to fall into the trap of defining yourself along the flavor of the month just because you think it is what the investors, employees, and customers want to hear. For example, “gig economy” and “sharing economy” are buzzwords. But do they capture the essence of what your startup is about? It is perhaps more important to coin a new buzzword that captures your essence than to use terms that are not appropriate.

For my startup, how about a “ripple or multiplier economy”? After all, for startups, it is the next new wave and opportunity that matter. Once a concept has become a buzzword, you’ll need to ask yourself whether the opportunity has already peaked and the space is starting to become overcrowded.

Implementing the central idea

Finally, when it comes to implementation, it is important to make sure that the entire startup team understands the central idea. I was surprised to learn that a senior executive in our company had misrepresented what our startup is about to a customer. This can easily happen because, as founders, we are the ones who talk about the company’s vision most of the time. But how often do we get our own employees and senior executives to repeat the vision back to us in their own words to ensure that they truly understand what the startup is about?

Another lesson from Clausewitz is that the more a general is accustomed to place heavy demands on his soldiers, the more he can depend on their response.

The executives represent the company and the experience has taught me to never assume that just because someone has heard the central idea 100 times, that person is able to internalize it correctly. Make sure that the people who represent you on a day-to-day basis are able to do so in a fairly accurate manner. Otherwise, you risk undermining your startup from the inside, when there are already so many challenges in ensuring the survival of your company.


    Category : Teknologi    
    Tags        : #teknologi    
    Sumber  : techinasia


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