We are living through the most disruptive period in our history. One only needs to consider companies like AirBNB, uBer, WhatsApp and Tesla to understand how quickly established companies can become disrupted by new entrants into the market.
In today’s digitally enabled business economy, tried and tested approaches to business strategy and planning are simply not designed to compete with new market pressures, increasing disruptive competition and a customer which is becoming increasingly harder to reach.
The New (Current) Reality
No business is immune. Take the advertising industry for example, since the 1970’s it was on a linear trajectory, but in the early 2000’s digitization and connected online networks suddenly exploded the number of possible distribution channels and which today has shifted the media industry off its linear trajectory and onto an exponential one.
There are three key drivers of the evolution of media.
- Consumer pull: Consumers, and particularly Generation C, are already fully adapted to the digital environment.
- Technology push: Digital technology continues to penetrate all aspects of our lives. We are after all living in the fourth industrial revolution. Tech has never been more affordable, but the capabilities of our technology (take cloud computing for example) has exponentially increased.
- Economic benefits: The economic benefits to be captured through digitization are real. The freelancing market in the UK contributed GBP 109 billion to the UK’s GDP last year, that is more than the entire automotive industry combined. The ability to scale at a fraction of the cost has seen a wave of capital being poured into new digitization technologies, and the public markets reward early movers with unprecedented valuations.
These three drivers have essentially made the concept of a business plan defunct and here’s why…
The Business Plan Is Dead
Business plans are often cited as the first thing an entrepreneur should write for a startup, but no business plan has ever survived the realities of the market.
I recently interviewed Craig Mullett, the President of the Branison group about this exact fact. Craig has invested in hundreds of startups and went so far as saying: “If a startup has more than one tab on the spreadsheet for its planned commercial model it’s way too much.”
The current business environment is changing so rapidly that even established businesses are suffering from ever increasing changing market conditions and as a result these dynamics are putting proven business models under increasing pressure and duress. This manifests in things like declining revenues, loss of market share and increasingly, exposure to new disruptive competitors that are not constrained by organizational inertia and arthritic corporate structures.
A startup is well positioned to take advantage of this for several reasons, but by the time a business plan has been written for a market that market in most cases has changed to such a degree that the assumptions and strategy defined in the business plan has already become irrelevant.
Why Startups Need a Business Case
The highly-regarded entrepreneur Brad Feld has this to say:
Today, it’s clear to me that business plans for startup companies are a historical artifact that represented the best approach at the time to define a business for potential investors. In the past decade, we’ve shifted from a “tell me about it” approach (the business plan) to a “show me” approach (the Lean Startup). Rather than write long exhaustive documents, entrepreneurs can rapidly prototype their product and get immediate user and market feedback.
Agility and the adoption of lean product development methods has all but replaced the need for a 30-page business plan. From an investors perspective, the key requirement of a business case is to table a view on a potential market opportunity at a product level. Ideally, a problem or opportunity that is sizable and lucrative and based on that problem/opportunity it needs to define and demonstrate how a single action and strategy will solve that problem.
The business case should also predict cash flow results and the non-financial impacts that follow from the action and the execution of the strategy. A business case, unlocks the ability of an entrepreneur to get to market quickly and to disrupt the speed and frequency at which value is created.
The StratLab For Startups
With the business plan being past its prime, Digital Kungfu has developed a unique methodology that incorporates the best of aspects of a business plan while speeding up the process for a startup to disrupt established markets.
Our process, forces entrepreneurs to think through critical assumptions and strategic drivers about their business and helps them to identify the key strategic elements necessary to achieve success. The StratLab workshop (Click here for full info) helps entrepreneurs gain a basic understanding of what they are getting into before the rubber hits the road and empowers them with an innovative paradigm of thinking and a new way to articulate the value that a startup will create in any market.
The business environment is constantly changing. The startups that will succeed are the ones who have a clear strategy that is designed to make them #1 in their market and which positions them for exponential growth in the future.