Don’t Force It: Timing is Everything

Athletes will often hear their coaches tell them to “not force it.” This is pretty common and when mistakes happen on the field or court is usually because somebody “forced it.” Forcing it is trying to create something out of nothing or win the game in a single play. This may be a quarterback throwing a ball into triple coverage in the back off the end zone or a baseball player missing three straight pitches trying to hit a homerun when a single will do. Trying to do too much with what you have can be a fatal mistake in sports, life, or business.
When formulating a strategy for your business there are several routes you can take including cost-leadership, differentiation, and an integrated approach. Each of those have different drivers of success and business models will be developed to support your strategy, product, and function within your respective industry. But having a solid strategy and business model may not be enough; in business timing may be everything.
Strategic industry and market analysis involves feeling out the external environment for consumer attitudes, preferences, and demands. This is probably the hardest thing to gauge for a firm. It is easy to think a consumer could use something or even want something in the future but is now the right time? Right here is where the firm has to really keep itself from forcing it, because doing so could be a catastrophic mistake.
For example let’s look at the Palm Treo smartphone. First released in 2002 these were way ahead of their time with many features the original iPhone had upon its first release in 2007 and the Blackberry before that. Palm had a first-mover advantage and a relatively solid business model but didn’t survive until smartphones became main-stream. Now it is nearly impossible to find someone who does not have a smartphone. The funny thing about Palm is that they were not lacking in features but just seemed to have mistimed their introduction to market. Upon their release the smartphone was not something consumers were looking for. Blackberry and Apple eventually followed up with similar and improved upon products that left Palm behind when consumer demand grew.
This illustration shows that strategy, product, and business models can be for naught if the timing is not right and we force action before the market is ready for it. It is vital for entrepreneurs everywhere constantly be scanning in order to time the market just right going forward.

What is the Purpose of a Business?

What is the purpose of a business? This question has been asked over and over again with varying answers. If you are sitting in a business school lecture you may hear many say, “To make money.” While this answer is correct in its own way, it may not tell the whole story.
As part of a business plan, strategies and models are created. These nearly always include a value proposition. Value is defined by the consumer and it is the job of the business to create the value that consumers are seeking. Whether this is long-term or short-term is also determined by the consumer. So, it could also be concluded that the purpose of a business is to provide sustainable value to its intended customer. Achieving what Peter Drucker said, “To create and keep a customer”
Phillip B. Crosby, author and quality management expert, once said the following concerning a company’s purpose, “A company’s purpose is to give people worthwhile lives by providing the opportunity for meaningful work, a decent living, and an opportunity to make a contribution to others. In pursuit of this purpose, a company has to make money, it has to grow, and it has to be successful.”
Crosby also states that making money is crucial to a company’s purpose but does not list it as the foremost purpose of the company. Making money is the means to an end or so it seems by his remarks. The company is responsible for creating meaningful work that not only brings value to the consumer but to employees and partner companies. Obviously that cannot happen if the company is not growing or producing profit.
There are still many other opinions of what the purpose of business is but I think we can draw some major themes from the few we have already mentioned.
1. A business must be successful at generating profits
2. The purpose of a business spans far beyond the sole objective of making money
New businesses drive economic growth, increase quality of life, and spur innovation. As we all undertake new ventures it is important for our visions and missions see beyond the objective of making money. There is an interesting chain that exists in the few examples we have shared. Money cannot be made without providing a product or service that consumers value. Without money it is impossible to provide meaningful work and decent lives to those involved with the business. So is it is the purpose of a company to simply make money? Absolutely, without it cannot fill the other needs for which businesses exist and provide us with the products and services we value. At the end of the day, businesses drive our lives, just as we drive them.

Don’t Confuse Your Strategy with Your Business Model

If you want to read about business strategy you probably do not need to look very far. Vast amounts of articles, blogs, tweets, and books have been written about the topic, some credible and many not. As most of us have probably noticed, strategy has become a bit of a buzzword in recent years and throwing it into conversation suddenly makes your point credible and valid. It has become an excellent “name-drop” of sorts in business conversations.
So, what is strategy? How is it related to your business model?
A watered-down definition of business strategy is, the actions taken by a firm to gain and sustain greater performance than their competitors.
A business model defines how a firm intends to make money.
How do strategies and business models differ? First and foremost it is important to understand that strategy is relative. While a business model determines how a firm will make money, a business strategy determines how a firm will make more money than its competitors. In this sense a business model does not directly factor into responses for external factors and precede true strategic initiatives such as first-mover advantages, differentiation, and cost leadership. At the end of the day, the business model is a tactic or supporting player in an overall strategic initiative.
Netflix is a good example of the differences between business models and strategies. Netflix began in the late 90’s as a DVD rental company which would mail movies to your home for a flat rate each month. Their business model was built around high availability and low-cost distribution. Essentially they made money by increasing subscription sales and creating a better distribution method which was more convenient for movie renters. Now their strategy has evolved over years (as any strategy should) but let’s focus on their most recent strategic initiatives. As of late Netflix has been a leader in transition to instant streaming video, leading a strategy to be a first-mover and cost leader. But what is most fascinating is Netflix’s response to match such competitors as HBO. Netflix has begun to create its own original TV shows which are available as live-streaming and all episodes are available at once instead of releasing new episodes each week or so.
The business model has not changed. Netflix still is making money through subscriptions but how are they seeking superior performance to competitors? They have created a strategy of getting away from DVD rentals, focusing only on live-streaming capabilities, and innovating through technological advantages and superior content availability. This is represented by the move to make its own original TV shows and making itself available on multiple devices with higher quality software capabilities. What has not changed is its strategy to remain a leader in easy distribution.
Netflix exemplifies evolving strategies while maintaining a relatively constant business model. As stated before it is important to recognize the relationships that exist between business models and business strategies and that they are not the same thing. Confusing your business model you recently developed for a viable strategy can be disastrous for business but a great business model implemented as part of an overall strategy can lead to amazing results.

When Should I Update my Business Plan?

All over the internet, including our own previous blog posts, business plans are referred to as “living documents.” That is a document which is modified, updated, added to, or even changed entirely. A common reference that is considered a living document is the United States Constitution, which is constantly being interpreted and, more uncommonly, added to or changed. Business plans should be used the same way.
Business plans should be considered living for several reasons but I think the biggest reason is the fact that much of the business plan is a lot like a forecast. Anyone who has done any forecasting in their career knows one simple fact: Forecasts are always wrong. Does that fact make forecasting unnecessary and ineffective? Ask those people who create forecasts or managers who make decisions based upon forecasts and they will tell you, “Absolutely not.” Forecasts are essential and useful. So, without plugging the necessity of business plans too much; business plans, like forecasts, are useful and effective tools not only in the development stages, but also during the entire life cycle of the organization.
That leads us into our title question, when should we revisit and update our business plans? The simple answer would be always. It is probably unrealistic to expect that we will be formally revising our business plan always but we should have a systematic approach to this process. Find what works best for you and your start-up, whether it be yearly, monthly, or quarterly updates. The key is that the business plan is used as a strategic planning and performance measuring tool. A systematic approach and timeline to revisiting your business plan will help you accomplish those effective uses of your business plan.
There are times when the business plan should be revisited outside of the scheduled times. This can be due to external or internal factors. Examples include,

  • New competitors enter market or previous competitors begin to obtain greater market share
  • Changes in economic environment/government regulation
  • Changes in supplier or contracted agreements
  • Growth accelerating at higher than planned rate/increased staffing needs
  • Changes in major buyers
  • Expansion into new areas
  • Technology upgrades
    These are only a few of many potential scenarios where it would be wise to revisit and update your business plan. The point being is that the business plan should be considered living and be updated at least once a year or more. Also external or internal factors may dictate updating your plan at an even greater frequency. In a young start-up’s life this is fairly common.
    Constant changes do not negate the need for a business plan. They create the need for flexibility and business plans are as flexible as we make them. But be prudent to not over-do it when it comes to modifying a business plan. Doing so would actually negate the idea of having a plan to work against. Done properly, revisiting your business plan consistently and in key moments will help your business adapt and prosper throughout its life-cycle.

    What Are Investors Really Looking For?

    We all have ideas. Some of us are looking to take those ideas and create a business from them, and many of us finding ourselves sitting in front of investors trying to gain their support for our business ideas. The idea of this has become so common and popular that there are TV shows dedicated to entrepreneurs sitting in front of
    investors to pitch their ideas.
    While some ideas might be crazy and unprofitable, many are fantastic and have the potential to become a viable and successful business model. So why don’t we all get capital when we are looking for it? Is it because our idea is terrible?
    More often than we think it is not because of a bad idea but because of a lack of proof that our idea will be executed into a strong revenue model.

    The Next Big Thing Is More Than a Good Idea

    Investors are looking for a return on their investment. Their decision is based not only if they think you’re product will sell but if you have a proven plan to sell it.
    This is where the routine business functions come in such as finance, marketing, sales, manufacturing, and others. Without these success is basically impossible. Not only should plans be made of how to start your business in these aspects but how these will run from a day-to-day operational standpoint down the road.

    Show Investors How Your Product Will Reach Consumers

    When we find ourselves in front of investors our first instinct is to spend all our time selling them on why people will buy our product. Is this a bad thing? No. Is it all we should cover? No way. Not only should we show them why people will buy it, but we should show them how our product will reach those consumers. Many sells pitches lack this very important element in the eyes of the investor.
    During this time explain to them your revenue model. Include channels through which people will buy your product such as personal stores, other retail outlets, or online. Include cost structures of procuring and shipping your goods and how your pricing strategy will still bring profit. To sum this up, investors need to know the why and how people will buy your product.
    As we started, we all have ideas which can turn into a profitable business. Initial failure does not necessarily mean we have a bad idea, it may just mean we need to refine how we execute. Taking the time to clearly outline an execution model will lead to more investors taking our ideas seriously and more consumers buying our products.

    Not Just About the “Like”

    “Social media are not the powerful and persuasive marketing force many companies hoped they would be…”

    Gallup Inc. summed up their recent report on social media and its influence on buyers’ decisions with those words. The report shows that 62% of consumers say social media has no effect at all on their purchasing decisions. That is staggering considering the amount of time and resources many companies, especially startups, are investing into social-media marketing campaigns. So what does this mean for companies going forward? Let’s dig into Gallup’s report a little further.

    Social Media Marketing Shouldn’t Be Just About the Numbers

    “Of the consumers who reported “liking” or following a company, 34% still said that social media had no influence on their purchasing behavior, while 53% said they had only some influence.”
    Many of us are probably guilty of simply seeking a substantial social media following by simply focusing on quantity. But just because somebody “likes” a Facebook page does not mean that they are more likely to purchase from that company. In fact, polls find that people are still more likely to seek advice from family, friends, and experts before they seek advice from a Facebook page. This isn’t all that shocking, but by simply focusing on the number of “likes” companies are missing the greatest potential social media has to becoming a force within marketing strategies.

    People Talk

    The old-fashioned tune still rings true, people talk. Conversations among friends and family are still the driving force in customer persuasion. Social media facilitates these types of conversations and provide an opportunity for companies to take part in the conversation. As Gallup says, “Yet, many companies continue to treat social media as a one-way communication vehicle and are largely focused on how they can use these sites to push their marketing agendas.”
    Social-media marketing should be a conversation that companies appear honest and informational without pushing an agenda too rigorously.

    The Need for More than Social Media

    One last interesting idea presented by Gallup is obvious, yet very important. Customer engagement needs to take place online and offline. Gallup states that time and time again that the success of customer engagement is determined by how well they “align all their touch points.” Customer purchases are still driven more by in-store displays and interactions than social media and will probably remain this way.
    A large part of marketing is creating an experience for the customer through your product and service. It still remains difficult to do so through social-media channels. As we shape our social-media strategies, we must understand that social media is only a small portion of an overall strategy that must include the creation of a customer experience. The priority must be quality over quantity so that our online and offline interactions match to create a single, memorable experience that users will share with their family, friends, and acquaintances. Possibly through social media outlets.

    Performance Measurement is Vital to a Meaningful Business Plan

    Hours and hours of time are invested in constructing business plans for start-ups all over the globe. Innumerable amounts of similar blogs and articles are written about the value of these business plans. And, yes there is value
    in them. Especially if they include well-defined performance milestones across business functions.

    A Common Planning Mistake

    A huge error made by many entrepreneurs is seeing their business plan as a one-time use only document. This is simply not true and here is one reason why: The plan should include financial forecasts and a business life-cycle timeline of some sort. Investors and lenders want to see this in order to determine their own Return on Investment. This is one area where the business plan becomes much more than a one-time use only document. While you may see those numbers only being important to obtaining that needed capital from investors, the opposite is true. Quality forecasts and timelines can be your own internal performance measurement baseline.
    This is how performance measurement works. First, a baseline must be created and then actual performance is measured against your “planned” performance. That creates the ability to have meaningful analysis and really flesh out why your start-up is on track, over-performing, or under-performing. A good baseline makes it easy to find focus areas later down the road. The more detail included in your own internal and original plan, the better.

    Keys to a Good Baseline

    First and foremost a good baseline requires specific milestones both financially and chronologically. These will be different for each business depending on your industry and business model. Milestones may include breaking even, staffing upgrades, product development, market expansion, conversion rates, capital investments, and many more. Most importantly, no matter your industry, is to create specific, measurable, and meaningful milestones. They should be driving factors in business development and success. Be careful not to get bogged down by performance indicators that have no meaning or are not driving your business. Such things may be variables in other, more important milestones.

    Performance Milestones Help Us Make Informed Decisions

    Strong performance milestones with a plan built around them will aid you in knowing how to allocate resources and budget to individual areas within your company. When things go good or bad this will help you make more informed decisions about how to reallocate resources and budget because of the framework in place that tells you what is important and where over-performance and under-performance are taking place.

    The Extra Work is Worth It

    Anyone who has created a business plan before understands that creating quality forecasts and timelines is difficult and time consuming. Often a rough forecast seems sufficient. And honestly, in the short-run, will probably get you what you are looking for. But in the long-run the extra effort is extremely worth it as your company matures and begins to grow. Time and money will be saved because a framework is already in place for recognizing progress and problem areas. Starting from scratch months or years down the road can be even more costly than doing it at inception.
    As you begin your business plan, see it as a long-term investment and take the time to establish meaningful and measurable performance milestones. The milestones you create and the performance measurements taken from them are going to bring true value to your business plan and bring true ROI for the time and money spent on constructing your plan.

    5 Reasons Why You Should Write a Business Plan

    Many people choose not to write a business plan before starting their business. Some believe that a business plan isn’t necessary for new business owners unless they are seeking outside funding while others think it is too time consuming. Each has their reason but truly they are missing out on a valuable resource going forward.
    Truthfully, the value of the business plan is as high as the creator chooses for it to be. It can either offer a huge upside or it can just be a means to an end. The choice is up to you. Here are five benefits a good business
    plan can offer.

    Easy to follow and measurable objectives.

    It is commonly accepted that goals lead to success. Use your business plan to clearly define key business measures and then objectively choose quantifiable measures. These will help you prioritize your work and gauge success in the future.

    You’ll be able to track your progress better.

    This is a continuation of the number one. After creating objective business measures, use them to your advantage. This is where the business plan really gains value. The more these goals are revisited, measured, reworked, and adapted the more your business will grow. Track your progress from the beginning through your business plan.

    More accurate forecasts.

    Admittedly, most forecasts are wrong. We know that, you know that, everyone knows that, but that doesn’t mean that they should be useless. There is a reason that nearly all corporations spend valuable time and money on creating forecasts yearly, monthly, and weekly in order to promote efficiency. They know it will help them in key business processes. By taking the time to create the most accurate forecasts possible you are only helping your business be more efficient in the future. Don’t bog yourself by overshooting your costs or by committing other financial mistakes simply because you didn’t want to spend the time on a better forecast.

    Increased ability to adapt strategy as your business grows.

    We already talked about tracking progress and setting measurable objectives and the importance of them. The truth is you’re business landscape could completely change from what you had originally envisioned. This is often attributed at being one of the greatest weaknesses of the business plan but, in fact, should be one of its greatest strengths. A good, workable business plan will help you recognize this change sooner, allowing you to make strategic adjustments as your business grows. Remember, a business plan isn’t necessarily set in stone.

    Better understanding of internal business processes and external factors.

    The business plan is a learning tool. Done correctly it will walk you through your business model and all the intricacies of doing business. At the end of the day, you should understand your business, your market, and yourself better than anyone out there. Your business plan will help you achieve this. You will come to understand your strengths and weaknesses, your competitor’s strength and weaknesses, and you will understand who benefits from your success. These are all powerful things to know when deciding how to market, innovate, and grow your business.

    A business plan will help you and your business going forward. As stated before, the choice is yours as to how much value or upside it will provide you as you seek to take your great idea and turn it into something special.

    How to Simplify Your Technical Business Plan

    When Less Can Become More

    A common mistake made by entrepreneurs creating a business plan is to make their plan too technical. What do we mean by too technical? Simply by including too much jargon and details about the specifics of the product or service being created.
    Now this may seem a little contradictory since essentially what you are pitching is your product/service and that is what makes you different from competitors in some sense. But as in all things, there is a time and a place for all things. These technical details and jargon can be shown later on in the process. Too correct this commonly made mistake entrepreneurs need to recognize their audience, acknowledge the purpose of their business plan, and change their focus.

    Audience and Purpose

    The business plan, especially for startups in manufacturing or other industrial startups where technical details are prevalent, is written to obtain capital and support. The readers are business professionals, investors, lenders, etc. who are focused on profitability and potential. These people do not want to see necessarily see how your technology works but instead want to see how it;

  • Solves a consumer pain
  • Exceeds competing products or processes
  • Is defendable in terms of patents, market entry, etc.
  • Can be produced in a timely and cost-effective manner
    As you write your business plan, skip the technical details of how it works and focus on answering these questions. Record those technical details in other documents to show investors as the process is carried out.

    Change of Focus

    It is a general rule of thumb that a good business plan is anywhere from 20-30 pages long. That is not necessarily a ton of space to include all the competitive advantages and product descriptions of your business. Writing a business plan becomes an analysis of determining truly vital information and non-vital information. The more technical information included essentially means there will be less room for other strategies and plans that investors really want to see within the business plan. This includes

  • A Target Market Analysis
  • Marketing and Sales Strategies
  • Budget Planning
    Investors want to know who is going to buy your product, how you plan on selling it to them, who is already buying this product, and even how you plan on delivering the product to the target market. For investors, answering these questions is just as important as explaining how the product works. Even if the product works and blows all the competition out of the water in terms of usability, if you can’t get anyone to buy it, then they won’t fund it.

    The Lean and Mean Plan

    Know your audience. Know why you’re writing the plan and focus on that. At the end of the day a few blanket statements can cover a solid business plan strategy. Focus on your competitive advantages that your audience wants to see by writing objectively, clearly, and concisely. This will produce a shorter document where truly less is more.

    Is My Business Plan Permanent?

    The Business Plan versus the Business Model Canvas

    The recent push for the Business Model Canvas has sparked a debate questioning the need for the business plan for today’s new start-ups. The argument lies in how a start-up is structured versus a large company and in the flexibility of the business plan versus the business model canvas.

  • A start-up is defined as an organization in search of a repeatable & scalable business model.
  • A large company is defined as an organization which executes a repeatable & scalable business model.
    Taking these definitions into account and studying them lead to the business model canvas and the lean business model canvas which are centered on noting core organizational functions which build a minimum viable product. Once this minimum viable product is built a repeated process is followed of putting a product into the market, receiving feedback, rebuilding, and then repeating the process until a scalable and repeatable business model is found. This approach is heralded for its flexibility and promotion of innovation in the uncertain world of a start-up.
    Ultimately, the business model canvas is an effective tool for entrepreneurs searching for a successful business model and a way to monetize their ideas.
    So, where does that leave the business plan?
    The business plan is a document that has become standard for anyone searching to start a new business. It is most often is used as a document presented to lenders and investors as a way to gain needed funding. As well, the business plan is a thorough analysis of business processes including the business model, target market, cost structure, staffing decisions, future strategy, and of course deliverables such as products/services. No doubt a business plan can be a tedious process but indeed helps one to understand his or her potential business.
    Like a business model canvas, the business plan is a tool to help entrepreneurs get their business up and running.

    Is the Business Model Canvas a Replacement of the Business Plan?

    As stated, both are tools with similar purposes. Many see the business model canvas as a superior tool because of its flexibility in the search of a business model which ultimately is the goal of a start-up. But is the business plan permanent? No, and it should not be considered as such. The business plan is a workable document that should be revisited, corrected, and changed as deemed necessary throughout the life of the business.
    Anyone who has created a business plan and has thrown it out as soon as the business catches steam or begins to fail is not using it correctly. The business plan should be treated as flexible, workable, learning-tool just like the business model canvas. Those who have used it successfully have been the ones who reworked their plan and adapted as their business matured and grew over time.
    Both are valuable to entrepreneurs. The business model canvas will help find a business model around which to build a company. A business plan will help in the understanding of how to build a company around that business model. The business model is ultimately part of the business plan and cannot replace it.
    Successful entrepreneurs will let the market drive their products and will plan accordingly as their company grows and matures.