Think about the business model first!

The Business Plan (BP) a model questioned! At the end of 2012, two business experts – Steve Blank and Alexander Osterwalder – settled his account in quick succession. It is not the right tool for start-ups. And then ? The Business Model (BM), of course! If the distinction seems clear to some, experience in the field proves the opposite…

Business model: a buzzword

Some entrepreneurs have instinctively understood that it is better to talk about BM than about BP… The concept is emerging, so take advantage! Still need to know why? And above all what to put behind this expression?
During my numerous exchanges with entrepreneurs, I noticed that 9 times out of 10 when asked, “Can you tell me about your BM? †
The answer was about pricing, pricing structure, and even different ways of generating revenue. In short, sources of income!

The business model is not so restrictive:

If it is true that these are stakeholders in the BM, they are only part of it. For the financial part of the BM alone, we must in any case add the cost structure. And to be completely complete, the importance of the BM is to provide a global vision of how value can be generated for the customers and some of it can be guaranteed. It therefore deals with strategic, marketing and financial aspects.

If the offering and its value proposition are indeed the core of the BM, then the management of the customer interface, internal resources and activities and relationships with the existing (or yet to be created) ecosystem must also be considered.

We are therefore far from the – nevertheless important – questions about compensation per click, per action or per sale that web start-ups ask themselves… And it is somewhat in the same vein that we enter the discussion between BM and BP. The ultra-focus on the financial part of the BP is not permissible for start-ups.

For some, the BP is just some sort of BM with more numbers! It is true that the BM can and should appear within a BP, but the fundamental flaw is that they are not intended for the same use.

The BM more suitable for start-ups?

The BP is the implementation plan of the company and, in a sense, of the BM. It strives to define the company’s costs and revenues as accurately as possible, as well as aspects related to financing and cash flow. Very useful things indeed… but especially for involved companies that have already acquired a proven knowledge of their environment.

But not for start-ups and certainly not in the initial phase!

Start-ups are organizations that evolve in great uncertainty: uncertainty about the market and its potential, about customer segments and needs, but also about the characteristics of the offer (products or services). In this case there is no need for an execution plan – the BP – but rather a “pattern search pattern”.

It is therefore up to the company to build a global model for creating, delivering and capturing value and test it in the field as soon as possible, leaving the offices and leaving the magic formulas of spreadsheets behind.

If the BP doesn’t resist the first appointments with customers, the BM feeds on it to evolve. And it is indeed the iterative function of the BM that makes it a suitable tool for start-ups, rather than the linear, sequential aspect of the BP.

Example of the differences:

Here is an example regarding the market segment – cornerstone of entrepreneurial project success – with 2 different approaches. †

In the first case, an entrepreneur who has devoted many years to developing an innovative solution based on a revolutionary technology in the field of internet.

His BP shows a preliminary income statement over 5 years, accurate to the euro. After the first meetings with clients, his plans are radically changed: what he had identified as a priority target – VSEs/SMEs – are not in line with his offer. Suddenly, months of useless development and months of development to reposition the offerings on major accounts. If we know the importance of cash in start-ups…

On the other hand, a more pragmatic and less dogmatic approach: a start-up specializing in the management of geographic information in SaaS mode.

It first identified a segment – ​​government agencies – namely some 20,000 contacts in France alone (then) potentially. Thanks to the initial feedback – and the success – the company decided to focus on the regions, departments, public institutions and urban planning offices.

In total, a well-defined core objective reduced to approximately 3,200 organizations where all efforts (marketing but also technical developments) will be focused on with a much greater chance of return on investment than initially.

Finally :

In the first case, an approach that applies to financially turning an idea into becoming, a solution to formalize. As if everything had been decided in advance and all that was left was…

In the other, a survey and a survey that changes the business model at a time when it is still looking for itself.

Suffice it to say that implementing an active approach to BM requires meticulous preparation on the part of leaders. They cannot escape the dilemma of living wrongly rather than dying believing they are right.

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