How to plan without a Business Plan
The first step in any venture used to be writing a business plan. But now that you think about it, do you know anyone who followed exactly the business plan as it was written? Probably no, because of the reality on the field. New ventures often take place under high uncertainty. Therefore, systematically testing ideas to learn what works and what doesn’t is a far better approach than writing a plan.
Business plan give the impression that the major task is the execution. Yet ideas dramatically change from inception to market readiness and often die along the way. You need to experiment, learn, and adapt to manage this change and progressively reduce risk and uncertainty. This process of experimentation, which we will explore on the following pages, is known as customer development and lean start-up.
«Provide evidence showing that your customers care about how your products and services kill pains and create gains.
Experiments’ basis
Make sure your experiments allow you to understand which aspects of your products and services customers appreciate, so that you can avoid offering anything unnecessary. In other words, remove any features or efforts that don’t contribute directly to the learning you seek. Always make sure you aim to find the simplest, quickest, and cheapest way to test a pain reliever or gain creator before you start prototyping products and services.
10 Testing Principles
Apply these 10 principles when you start testing your value proposition ideas with a series of experiments. A good experimentation process produces evidence of what works and what doesn’t. It also will enable you to adapt and change your value propositions and business models and systematically reduce risk and uncertainty.
Realize that evidence trumps opinion.
Whatever you, your boss, your investors, or anybody else thinks is trumped by (market) evidence.
2. Learn faster and reduce risk by embracing failure.
Testing ideas comes with failure. Yet failing cheaply and quickly leads to more learning, which reduces risk.
3. Test early; refine later.
Gather insights with early and cheap experiments before thinking through or describing your ideas in detail.
4. Experiments ≠ reality.
Remember that experiments are a lens through which you try to understand reality. They are a great indicator, but they differ from reality.
5. Balance learning and vision.
Integrate test outcomes without turning your back on your vision.
6. Identify idea killers.
Begin with testing the most important assumptions: those that could blow up your idea.
7. Understand customers first.
Test customer jobs, pains, and gains before testing what you could offer them.
8. Make it measurable.
Good tests lead to measurable learning that gives you actionable insights.
9. Accept that not all facts are equal.
Interviewees might tell you one thing and do another. Consider the reliability of your evidence.
10. Test irreversible decisions twice as much.
Make sure that decisions that have an irreversible impact are particularly well informed.
Product development : business plan vs experimentation
image credit : How to Create Products and Services Customers Want (Strategyzer)
3 steps to create your products through experiments
Conceptual Prototypes
Design rapid conceptual prototypes to shape your ideas, figure out what could work, and identify which hypotheses need to be true to succeed. Use these prototypes as a tangible way to clearly map, track, iterate, and share your ideas and hypotheses.
Hypotheses
Design and build experiments to test the hypotheses that need to be true for your idea to succeed. Start with the most critical hypotheses that could kill your idea.
Products and services
Build so-called MVPs to test your value propositions. These are prototypes with a minimum feature set specifically designed to learn rather than to sell.
Manage the results of your experiments
After experimenting, each hypothesis, you are going to use the results to further develop your product. The results are going to help you have a better understanding of what your customers really want to spend money on…Supporting your decision with measurable data is drastically going to decrease the risks.
Invalidated hypothesis
Get back to your hypothesis board, find new alternative segments, value propositions, or business models to make your ideas work. In other words, when you have invalidated customer interest for the way you intend to create value with your product, then search for new potential customers, value propositions, and business models.
Inconclusive results
Seek confirmation
Design and conduct further tests when quick and early experiments based on a small amount of data indicate the need for drastic actions. For example, if interviews with potential customers show a strong interest for a service that requires heavy investments to launch, follow-up with research and experiments that produce more reliable data validating customer interest.
Deepen your understanding
Design and conduct further tests to understand why a trend is taking place once you discovered that it is taking place. It is going to help have a deeper understanding of the purchase triggers. Don’t forget that, your business should show profitable probabilities if yo want to attract investments.
Validated
Expand to next building block
Move on to test your next important hypothesis when you are satisfied with your insights and the data reliability. For example, when you have validated customer interest for a product, follow-up with experiments that validate the willingness of channel partners to stock and promote your product.
Execute
When you are satisfied with the quality of your insights and the reliability of the data, you may directly start executing based on your findings. For example, when you have learned and validated exactly what it takes to get channel partners interested in reselling your value proposition, start scaling up sales efforts by hiring salespeople or designing dedicated marketing material.
“ The only thing standing between you and finding out what customers and partners really want is the consistency and speed with which you and your team can propel yourself through the design/build, measure, learn cycle. This is called cycle time.
You don’t need 37 years to start your business
Quickly shape your ideas to share, challenge, or iterate them and to generate hypotheses to test. Quickly gain first market insights. Keep the effort in-house so learning remain fresh and relevant and so you can move fast and act upon insights. Use the whole range of experiments from the experiment library. Start with quick ones when uncertainty is high. Continue with more reliable, slower ones, when you have evidence about the right direction.
Business plans are usually static, so write it one only when you have clear evidence and for the execution phase. Also don’t forget that external Market studies are often costly and slow. They are not an optimal search tool because they don’t allow you to adapt to circumstances rapidly. They make most sense in the context of incremental changes to a value proposition.
A pilot study is often the default way to test an idea inside a corporation. However, they should be preceded by quicker and cheaper learning tools, because most pilots are based on relatively refined value propositions that involve substantial time and cost.
Credit Source: The lean start-up Osterwalder, Alexander. Value Proposition Design
