Active Business Planning In A Lean Startup - Entroids

1. Active Business Planning In A #LeanStartup By Chandra Gollapudi

2. Active Business Planning In A #LeanStartupHow to manage the iterative process of planning, validating, assumptions, & mitigating risks eBook Content • what is active business planning • business planning vs. plan • elements of a business plan • lean startup movement • agile business planning • introducing lean canvas • get most of your lean canvas

3. What Is Business Planning?The guiding beacon for your startup journey! Business planning should clarify and refine; • the value proposition • the strategy • the business model • the underlying risks and assumptions Value Proposition; This is the compelling reason a customer will buy your solution? Analyze the problem you are solving and assess who has the most urgent need and how badly they want to solve it. Use the customer persona template to delve deep into the psyche of your target customer and unravel your problem – solution fit. Strategy; This is the key part of planning and can be challenging for a startup. In simple terms, it is your blue print for the plan of attack. Strategy is considerably different according to the stage of your business. A new startup might focus on brand awareness and crossing the chasm rather than something like diversification. Strategy is typically longer term, coupled with a short term tactical plan. It is easy to get caught in the day to day chaos of startup life and lose focus on the long term strategy. Strategy Considerations; Things to consider include; • What is your addressable market? • What is your niche? • How will you address competition? • What is your core competence? • Who are your partners or collaborators? • What is your pricing model? Unique Value Proposition: A single, clear compelling message that states why you are different and worth buying Steve Blank The essence of strategy is choosing what not to do Michael E Porter

4. More On Active Business PlanningBusiness model is how to create, deliver and capture value Risks & Assumptions; A startup is a hypothesis and, thus has many inherent assumptions and risks. Identifying and creating an action plan to mitigate risks and verify assumptions is an important aspect of Active Business Planning. At every step in the planning process you should identify and prioritize the risks and assumptions. Later in this ebookwe will discuss using Business Model Canvas for this. Execution should actively test the assumptions and mitigate the risks. As you learn from this you readjust your plan and pivot if required. Since Business Plan is closely related to the planning. It warrants a discussion on the purpose and roles of the two. Business Model; Strategy determines WHAT to do. The business model determines HOW to do it. Strategy is the ‘plan’ and business model is the ‘tactics’. Your model details how to generate profits. There are two sides to a business model – the revenue aspect and the cost aspect. What Is Your Differentiation? On the cost side you should consider – supply chain, partners, quality, HR etc. On the revenue side you should consider– branding, marketing, channel partners, revenue streams, customer service etc. Companies operating in the same industry and market are likely to do similar functions. When a company does one thing uniquely different and better than its competition, they are using business model as competitive advantage or it can be a unique value proposition. STRATEGY Find synergy between your team and technology required to deliver the strategy (plan of attack) CREATE DELIVER CAPTURE COMPANY TECHNOLOGY

5. Business Plan vs. Business PlanningPlanning is more important than plan About The Plan; Planning is a cyclical process. However, the plan is like a balance sheet – a snap shot in time. An agile plan, like the business model canvas is highly recommended. It helps crystallize your model, value proposition (why should customers buy from you) and actions to validate your hypothesis. You may not need to do a formal written plan unless you plan to raise external finance. Steps In Writing The Plan; If you are writing a formal plan. Consider doing the a power point version first. This helps you visualize the plan for content and context rather quickly. If you are writing a formal plan, you should allocate most of your time on the Executive Summary, and it should be the last thing you write. Most readers will not get too far beyond that and your exhibits. Why Planning Is Essential? Business Planning is the link between strategy with the tactics. How you Plan? People have found creative ways to plan. Like the famous story about how Southwest airlines plan was crafted on a bar napkin. One prominent agile way to plan is the Business model Canvas. Business planning; • central to Strategy and Tactics • can be formal and informal • many new tools to accomplish planning business Plan • uses for one • many ways to do one “It’s Not enough to do your best ; you must know what to do, and then do your best” Edward Deming Everybody has a plan, until they are punched in the face Mike Tyson

6. The Elements of Business PlanGuy Kawasaki’s suggested 10 point enchanting business plan Financial Projections; Focus more on your costs, burn rate and capital requirement. Revenue is just a wish at this time. Milestones; Show what you have accomplished so far and all the good things coming your way Summary & Status; Close strongly, tune message for the audience Underlying Magic; Your secret sauce. Why customers will cry for you and why nobody else can copy you Competition; Show who your major competitors are and how you will battle them. Use the Blue Ocean strategy canvas or any thing else to show differences between you and the competition. Team; Show more than one person dedicating their lives to make the venture a success Problem; State the problem you are solving. Is it financially attractive? Your Solution; What is your solution. Show any testimonials or validation by your customers. Why you? What is your unfair advantage? Business Model; How are you going to make money? Ten Elements of A Business Plan; • problem • your solution • business model • underlying magic • marketing & sales • competition • team • projections • milestones • summary & status Business Plan is a tool that may help you get funded and may help you get your team working as a team. But it is not an end in itself Guy Kawasaki

7. The Lean Startup MovementChanging how business planning is done Lean Startup Movement; Steve Blank’s book 4 Steps To Epiphany started the lean startup movement. Eric Ries in his book “Lean Startup” evangelized the concept. And the rest is history. There is now a Lean Startup Conference, several Lean startup meetups, workshops and tools. Lean Discovery Process Steve Blank reminded startups the importance of validating the solution early. He introduced the four step, ‘customer development’ process for testing the idea through customer discovery, customer validation, customer creation and company growth. This involves early and frequent testing of the hypothesis. Lean Influence On Business Planning Tech Startups were spoiled in the dotcom era. They only needed a idea to get funding. The bubble burst and the world needed to reset back to fundamentals. Lean Startup Movement does a great job at this. Eric Ries the use of ‘minimum viable product’ (MVP), which is core to continuous validation and pivoting. With MVP, you start testing the most important assumptions and the value proposition early in the product development cycle Lean What? • lean startup movement • lean discovery • lean influence on business planning Farming looks mighty easy when your plow is a pencil and you’re 1,000 miles from the corn field Dwight Esienhower

8. Agile Business PlanningMaking the business planning come to life with tasks and current actions Business Model How a startup creates, delivers and captures value Vs. Business Plan Statement of startup objectives, strategy and the tactics of achieving them. Business Model Canvas Created by Alex Osterwalder is the first visualization of a combination of the business model and plan. the ability to succinctly capture the business model on one page was powerful and widely accepted. Lean Canvas Ash Maurya adapted the business Model Canvas to the needs of technology startups. Both have become extremely popular tools used today. The lean canvas has a web based interface to make it easy to use on the go Introducing Agile Business Planning • business plan vs. business model • business model canvas • lean canvas

9. Introducing Business Planning CanvasCapturing the market and product requirements on one page Below is a very brief explanation of the different segments of a business planning canvas. This is a mix of both canvases to focus on planning. Problem How intense is the problem and how urgent is the need to fix it. Customer Segments Who is/are the customers and collaborators (other users). Identify the early adopters. Unique Value Proposition Why your solution is different and worth buying. Solution Features that address each problem stated. Channels Distribution and paths to reach customers. Cost Structure Identify costs, capital requirement, and your burn rate. Know breakeven point. Revenue Streams Pricing. Start with validating your premium pricing first. Estimate customer life time value Partners Capture key partners, collaborators, influencers. Unfair Advantage Why is it difficult for somebody else to copy. Key Omissions I replaced Key Metrics on Lean Canvas with Partners. Metrics is important but I wanted to focus on actionable, and lead indicative factors. And entroids.com framework has other ways to cover metrics. Nine Elements Of A Business Planning Canvas • problem • customer segments • unique value proposition • solution • channels • cost structure • revenue streams • partners • unfair advantage A business model describes the rationale of an organization creates, delivers and captures value Alex Osterwalder

10. Using The Business Planning CanvasHow to get most out of your business planning canvas Post - Work This is very impactful to your team performance and progress. Planning is wasteful it you do not drill down to actionable tasks aligned to your strategic needs. It involves fleshing out the underlying assumptions and risks. Understanding their relative importance and defining actionable tasks and experiments to validate and test these. Pre-Work A Good understanding of product and market is important. Here is a list of essential tasks and some tools you can use; Getting Best Of Canvas • pre- canvas work • post-canvas work • Customer Discovery • Competitive Advantage: The Strategy Canvas from The Book “Blue Ocean Strategy” • Core Competency: Knowing what to focus your resources on and what to partner or outsource 1 http://entroids.com/Blog/?p=185 3 2 http://www.theinnovativemanager.com/blue-ocean-strategy/

11. Putting The Canvas To WorkDrive meaningful actions that test your business hypothesis Capturing Assumptions Every item on the canvas should be screaming “validate”. Questions to ask while completing the canvas to help flesh out the assumptions are; • How so? • So what? • Where is the proof? Taking Action The next step in the process is to prioritize your risks and assumptions and create experiments and tasks to mitigate your risks and test your assumptions. You could use a simple ‘to do’ list, or automated software like Entroids.com Cycle Of Revelation You should instill in your team the discipline of executing these experiments and feeding back the learning to make adjustments to your product and plans. The success and failure of a team is dependent largely on the ability of the team to accomplish this. Business Planning Cycle • capturing assumptions • taking actions • cycle of revelation “Successful teams get into the habit of executing the business planning cycle. Use automation and productivity tools to your advantage to get more done faster & better”

12. Success = Planning + ExecutionExecution is the art of getting things done Perfect Execution The best selling book by Larry Bossidyand Ram Charanhas the title “Execution – The discipline of getting things done”. Perfect execution is an extension to this definition. Startup life is chaotic and its easy to get caught in the whirlwind of daily firefighting and lose focus on more important things. Keeping focus of the team and the habit of getting important things done is the core of Perfect Execution. Strategic Execution Key to success is simplifying strategy to tactical activities that result in achieving the goals; and keeping the team focused and getting these tasks done. The activities of the team will be in flux depending on circumstances. Keeping team tasks nimble and aligned to strategic needs it the ultimate challenge. It is the key differentiator for winning execution. The Science Of Startups I wish we could say there is a formula for success. Next best thing is to use productivity tools that keep your team tasks aligned to the strategic needs. One simple and effective tool to use is the “A3 Management Process” popularized by Toyota. At Entroids.com, we understand the need for speed and consistency in getting results. It is one way to automate productivity and promote team accountability. Key Concepts For Success • perfect execution • strategic execution • the science of startups Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” Sun Tzu

13. Thank YouPlease help improve and develop this E-book to the voice of Startups About the eBook I hope you enjoyed reading this mini ebook as much I enjoyed writing it. This is a small step in the journey of studying the secrets of success in execution. Please let me know what you think of this ebookand of the www.entroids.com . I hope to improve this book with your comments and experiences. About Entroids.com @entroids is striving to understand the hidden art of startup execution. Our first step is to automate startup activities for faster results and enhanced team performance. About the Author Engineer turned marketer by day and avid wine sipper in the evening. I love home improvement and back yard projects. Wish I learn to finish more than I start. But that is exactly what I am focusing on these days. After more than 20 years of experience in marine, automotive, & electrical equipment spanning operations, product management and marketing; it is time to turn my energy to entrepreneurship. The trenches of startup world seems home to me. I have diverse experience in new product development, product management and Lean manufacturing that I am ready to put to good use. I am the co-founder of Entroids a “strategic project management” platform that helps startups get better results faster. chandrag@entroids.com