Startup founders will almost inevitably be asked for a detailed business plan by potential investors. But a precisely defined structure is not necessarily the best way to embark on a new venture, according to Carl Schramm, writing for Harvard Business Review.
A university professor teaching innovation, Schramm has studied the paths of global entrepreneurs and discovered that some of the most successful started out with products or services developed and delivered without the confines of a business plan.
NO-PLAN SUCCESS STORIES
Citing contemporary companies like Apple, Cisco, Facebook, Google, Nike, Uber and Yahoo as convincing modern examples of no-plan success, he questions the premise that the launching of any enterprise should follow a strict design.
What’s more, a product need not be developed to perceived perfection. Software company founder Eric Ries, author of The Lean Startup, and Steve Blank and Bob Dorf, writers of The Startup Owner’s Manual, both advise launching a fledgling product as early as possible to invite customer input.
GOING AGAINST THE GRAIN
Schramm’s firm belief is that entrepreneurs learn by real experiences. This attitude goes against the grain of common academic entrepreneurship teaching, which tasks students to write formulaic startup plans for companies that will never exist.
Startups with a business plan are no less risky than those without one when they can offer no guarantee of favourable future outcomes.
Research by Anthony K Tijan and by Julian Lange and colleagues suggests that plans make no statistical difference in a startup’s success, which might explain why only a few winners of business-plan competitions ever actually start companies.
TRIAL AND ERROR
Even more modern business-plan strategies still rely on well-defined frameworks to shape new ventures, while Schramm insists that trial and error is the only way to test the market and shape your new enterprise.
“According to phenomenology, people learn about the world through their experiences of it. Rather than analyse past data, they create new data of their own, and on the basis of what they discover they engage in new experiences, building up an understanding of their world as they proceed.”
Michael Levin, founder of globally successful metal merchants Titan Steel, diversified into a new B2B company. Starting out with a detailed plan to satisfy his venture investors, he decided to deviate from it when things began to flounder.
“He met such stiff resistance that he decided to buy out the investors to rescue his company,” writes Schramm.
So, how do you switch your mindset if you want to get started without a business plan? Here are Schramm’s key pointers:
- Accept that starting a business is full of risk and it’s down to you to manage it.
- Expect to be making decisions in uncertain situations and understand there can be no guarantee of success.
- Unpredictable questions, opportunities and dangers will arise. Realise that you will learn from them as you go along.
Having a detailed business framework may be the established norm, but that doesn’t mean you can’t break away from it.