To paraphrase one of boxer Mike Tyson's most famous sayings "Everyone has a strategy until they get punched in the mouth." But, contrary to Tyson's catchphrase, strategy does matter.
What is the difference between strategy and plans? Can you pivot, while still remaining true to your company's strategy? How important is timing and should strategy drive pace and milestones? How much planning is enough? Which part(s) of a business model are most often neglected by first-time entrepreneurs? Do investors care about strategy?
Share your experience as an entrepreneur, building or being part of a winning STRATEGY - what worked and didn't work? And what would you do differently?
With the widespread adoption of the lean startup methodology, there is a very strong bias towards speed. This bias has carried over into former baseline expectations for launching new businesses, starting with the business plan.
Whereas in the past, a business plan was an essential starting point for any new venture, it's now in vogue to skip doing a business plan, instead just going straight to activities to acquire customers.
While I agree with the notion of forgoing a time-intensive, formal business plan for the sake of having book-length document, I greatly disagree with forgoing the activity of planning itself. In fact, urging new ventures to avoid planning does a massive disservice to them for several reasons.
First, even a modest amount of planning benefits the team and key stakeholders by making sure that everyone understands what and how much they are trying to accomplish, by when, and who is responsible for which key activities.
Second, by committing to some target amount of results by a certain time, there is the opportunity to measure progress, improve estimating skills, and examine variances - these are essential elements of learning, which is critical in the early stages of a new venture.
Third, we are starting to see lawsuits in the crowdfunding space -- which is a new financing alternative opened up in just the past couple of years -- being litigated against companies that raise money but cannot deliver. I predict that we are going to see some significant fraud and customer damage lawsuits filed by customers against companies that encounter design, production, and/or delivery problems, exacerbated by their absence of a plan.
By spending even a modest amount of time creating a bare-bones or dehydrated plan, a new venture stands to benefit in each of these ways.
Disruptive Innovation and Entrepreneurial Opportunities in U.S. Healthcare
Despite accounting for more than one sixth of the U.S. economy, healthcare has never been notable as an innovation ecosystem. Populated by slow moving insurers, providers, institutional systems and often-archaic technology, healthcare seldom displayed evidence of disruptive innovation by entrepreneurs, investors and change agents. But that is now changing.
Three major forces are the primary stimulants in this change and are attracting entrepreneurs and investors, as well as creating disruptive business models:
1) Changes in Medicare, with programs like Medicare Advantage, are shifting hospitals and insurers away from the traditional fee-for-service business model, and causing a cascade of new patient–centric business models based in keeping people healthy and increasing efficiency. A focus on entrepreneurial engagement in wellness and self-managed care is resulting in a proliferation of health apps and sensors. The result is explosive growth in digital health companies and businesses, some engaged with hospitals and insurers, and others creating new sources of competition for existing business models. This past year (2014) was a record-breaker in venture funding for digital health companies. Venture investments surpassed $4.1B, nearly the total of all three prior years combined. This represents a 125% year-over-year growth in funding compared to 2013.
2) The Affordable Care Act, by increasing the numbers of insured individuals in a system already hampered by shortages of providers, is putting disruptive pressure on health care systems. A tenet of disruptive innovation is that it is difficult for an institution or system to disrupt itself. One response, and an entirely new business model with lower cost providers, is “minute clinics” staffed by nurse practitioners now proliferating in grocery stores and pharmacies. As employers face expanding health care costs, demand will increase for alternative models of health insurance. Some companies will provide their own health care services, again relying increasingly on lower paid staff and services, including trained health coaches and community health workers. One result may be increased dis-aggregation in the insurance industry opening opportunities for new and disruptive entrepreneurial ventures providing health services for employers, as well as new forms of coverage.
3) Advances in the power and availability of big data analytical tools and the exponential increase in the quantity and quality of health-care data offers expanding entrepreneurial opportunities. The rising demand for applications and tools to solve problems in population health is stimulating the emergence of value-based business models by startups with products and services that would not have been viable a few years ago.
Be aware that the common thread across these three forces is that they will not transform healthcare on their own. The opportunity and the challenge rest with existing and new healthcare players, policy innovators and entrepreneurs to seize these and other disruptions to make healthcare accessible and affordable across all sectors of our economy.
Most successful serial entrepreneurs grow to realize it’s the journey – not the destination -- that matters.
Here’s a little discussed fact – the vast majority of startups that eventually succeed, do so in a market or with a business model that is very different from that with which they started. In other words, they evolved into something successful along the way. I cannot overemphasize the truth and importance of this fact; because knowing it to be true changes why and how we should act.
Once you embrace the idea that whatever vision you originally created for your company may not be the one that carries you to success, then the easier it becomes to guide your company toward a productive destination.
As a Judge for the Ernst and Young “Entrepreneur of Year” awards program for over 15 years, I’ve had the opportunity to visit most of the hottest startups in Central Texas and spend hours with the entrepreneurs that built them. Almost without exception, every CEO and Founder I interview tells me a similar story, going something like this: "I started there, but these things happened, so I turned that way and ended up here."
And while “here” is a very good place, it is often nowhere near where “there” was. Simply put, no matter how much time, energy, and research you expend in vetting your initial idea, factors like dynamic market conditions, economic climates, technological developments and a myriad of others will dramatically change the landscape over time.
Successful entrepreneurs learn to sense these changes and constantly evolve their business models to take advantage of them. Doing so requires two key attributes: (1) a team that can respond quickly and effectively and (2) a leader that can communicate change and organize and motivate action.
You don’t have to have all the answers or a clear and perfect vision of the future. But you must be highly attuned to ever-changing market conditions and opportunities. And then, you must be willing and able to reset you aspirations, realign your resources and goals, and drive your team in a new direction.
You've probably heard an investor or advisor say "Don't waste time on a business plan"? I’m afraid this modern mantra is doing unintended damage. It’s leaving the impression on first-time entrepreneurs that they don’t need a plan of any sort. What I think these advisors and investors are really saying is that the 30-40 page written business plans of yesteryear that include long-range financial projections, exit strategies and extensive market research aren’t going to be taken seriously, so don’t waste your time creating such a document. They are also trying to tell entrepreneurs that they barely know if they’re going to make it another 9 months, so why spend too much time thinking about 5 years from now? The investors and advisors are right but the entrepreneurs aren’t usually hearing it that way.
Here’s an idea to explore. In order to get funded you’re going to have to come up with your “story”, which includes all of the content that’s typically included in a pitch deck and more. The pitch deck is in presentation format but it essentially follows an abbreviated outline of the old-day business plans. So if you have a solid pitch deck you’re already half way there. And, by the way, you do need a plan.
After pitching at a demo day or similar event, you then go into the mode of repeating the same pitch and Q&A ping-pong dozens of times with individual investors. They are looking to fill in the blanks that you weren’t able to cover in your 10 PowerPoint slides. So guess what happens? You answer the same 10-15 questions over and over and over until you already know what question the investor is going to ask after hearing just the first 3 words out of their mouth. You spend 75% of every investor meeting on repeat questions.
Why not spend the time to take the content you created for the pitch deck and add to it the other things you discovered 90% of the investors also want to know and create a ____ document? I’m not even going to give the document a name. It’s just something that forces you to plan, at least a little. And it will save you a ton of time repeating yourself. You might instead just insert additional slides to each section of your pitch deck to provide the extra needed detail or place some of the slides in a Backup section. This newly expanded document essentially becomes your substitute for a “business plan”. With this, after a successful first meeting with an investor prospect you can email the document to them so they can consume additional details you weren’t able to cover in your initial meeting. I'm not suggesting that every investor is going to read the document but even if only a third of them do after a successful first meeting it can increase your odds of getting them excited enough to invest.
The important thing is to think through the next level of detail for the various things included in your pitch deck. It is just good business sense. Forget the 5-year financial projections and detailed exit strategies. But at least think through the next 12-18 months of establishing or scaling your business and hitting certain milestones. Doing this requires you to agree on various assumptions and envision important milestones along the way to success. Basically, it forces you to think about a lot more than just building a cool product that solves an interesting problem. Like former US President Dwight D. Eisenhower once said “Plans are nothing; planning is everything.” Show the investors, your advisors and your employees that you have a plan.
What happens when your business begins grow? Growth is a great thing! More users, more revenue, more everything. By all means, step on the gas and use that momentum. Here is the thing, what got you to this point as a scrappy startup where everyone did a little bit (or a lot of) everything wont get you to the next level. Underlying the the killer product strategy and user acquisition plan there better be more.
As un sexy as it sounds, someone needs to think about and drive process into the organization to support growth and minimize pain. Don't misunderstand this to mean create corporate level bureaucracy. This is the opposite of what you need to create. I like to think about it in terms of stage appropriate process. Kind of like developmental milestones for kids, at about this age (phase of start-up) the business should be able to do this (have these sorts of processes in place).
Think about this in terms of people, processes, and systems. It is also helpful to think of understanding the process needs in terms of product and customer journey. By understanding the end to end you should be able to identify who is responsible for what, what processes support the people in performing their role and what systems are required? This as a fact finding mission. You arent intended to solve anything at this point just gather the facts. You may also want to limit the time you spend on this to just 2-3hrs. Before addressing the gaps (you will have lots of them) you should spend some time as a leadership team defining priorities and force ranking them. Pick the top 2 and work on them. Remember to include the team that will be responsible for executing in the development and implementation of the process.
Startups move fast which is why we like them so expect new gaps and take time to identify any new gaps and force rank frequently. Always keep the end in mind...this is about reducing error, working more efficiently, and saving pain as you grow and scale the business. If you are creating anything that doesn't address those goals...stop.