Several years ago a popular lecture course developed by Stanford Professor John Krumboltz upset many ideas about business planning for startups. His subsequent bestseller, co-authored with Ryan Babineaux, Fail Fast, Fail Often, is based upon the lecture notes and conclusions they distilled from research into Silicon Valley entrepreneurs.
Professor Krumboltz is not a business professor. He is a Professor Emeritus in Stanford’s Graduate School of Education and the creator of the “happenstance” theory of learning underlying his book.
In his theory, indecision is a paralyzing outgrowth of sensible risk evaluation and overly conscientious planning. Developing or identifying activities with limited risks designed to explore options, creates a bias to action and allows acceptance of outcomes. Compiling both the anticipated and the surprising results, you progress in a direction or make a decision that may even be at odds with your initial ideas. “Failing fast or often” is about succeeding by learning from the results of incremental, but structured activity designed to test assumptions or unknowns. It is learning by doing when you don’t know what you’re doing.
His work supports new approaches to business planning such as the Lean Startup and Business Canvas. SCORE uses these models to assist clients as well as create more formalized business plans. But, the Lean Startup and Canvas models distill a business concept to a page, making it easier to create multiple plans for success, modify decisions as results dictate, and see the business as an integrated whole.
Both models divide the startup concept into a sheet with roughly nine segments of activity or planning. In a design session, you post notes to each segment of the “Canvas” sheet defining questions, hypothetical answers, test activities, results, and responsibilities. The model can be hung on a wall as a constant reminder of the business model and the state of its development. A few important concepts carry over across the models.
- Start with a customer need and visualize your ideal customer: Don’t start with a solution, like your desire to open a pizza place. Instead, identify a problem or unmet need and make sure it is a need large enough to support a business. The need, in this case, might be customer convenience, expanded food choice, or price. The need is not pizza. Pizza is your solution. However, if only a handful of people want pizza, you don’t have a market. Can you define your customers by interests, age, gender, income, lifestyle, or hobbies? Your ability to identify needs, the resources needed, and the means to deliver your solution, not just your solution (making pies), defines your brand and value.
- Start with your simplest solution: Testing for a need and your ability to satisfy it requires you to prototype your product or service. The website “Kick Starter” for example, is a classic testing ground for many product entrepreneurs and secondarily a funding source. Some service or product ideas might not be easy to test as a prototype, but be creative. Starting or even buying a shop with an untested idea or murky value proposition is the riskiest way to start a business. If you are experienced in making your product, you’re further along in prototyping, but remember your solution is not your business, you still need to test the other elements of your brand value. Franchisors, for example, will teach making their product to the franchisee but often make all other decisions. What does their approach tell you about their perception of business value?
- Set specific measurable goals or milestones: The entire “fail fast” concept is built upon the premise that your initial value will not be your final or the best one. Testing a simple idea rapidly validates the need, distribution, and promotion steps crucial to revising the weak parts of the brand value. Silicon Valley entrepreneurs even give away products to refine these elements. The “success” in small failures becomes concrete, uncluttered, action-oriented learning. The design of clear milestones for each element of the value chain, including distribution, promotion, and supplier quality with dates and quantities is as crucial as simplicity in prototyping your solution. Each iteration of your idea should be simple too. Thinking simple in all phases means fast and clear development of your idea.
- You are not your idea: The key to overcoming indecision or sticking with bad decisions is to avoid defining yourself by your job, business or idea. That’s not to say an entrepreneur cannot be passionate. Businesses fail without passion. But become passionate over the right elements. Use measurement and prototypes, visualize a holistic business model and anticipate revisions to balance the passion and the emotional separation required to rapidly discard destructive ideas and assimilate improvements.
- Don’t look for financing until you become a business: This approach seems backward to people who, having identified a solution, immediately jump into funding it. Ideally, a business with a solid value should be able to bootstrap or self-fund. Total self-funding might not be possible, but to the extent that resources can be borrowed or rented, partnerships or simple trials developed, inventory kept lean and cash sales made king, a bankable track record can be built with minimal funding and maximum creativity. “Failing often” becomes possible when you invest little or owe less.
For more information or free help in constructing and reviewing your business strategy, the Lehigh Valley SCORE Organization of experienced business mentors, a partner of the SBA, is available at https://lehighvalley.score.org. The website includes templates for constructing budgets cash flows, business canvases, and other elements of a business plan as well as contact data for your local chapter.