Learning from the Rise and Fall of BlackBerry
Traditional business plans can leave companies vulnerable to major market shifts.
In my previous post, ” Five Important Questions Entrepreneurs Need to Ask,” I refer to the deficiencies of conventional business planning – at least for the purposes of commercializing innovation. Jeff Fagnan, partner in Atlas Ventures, recently described such weaknesses from his point of view as a seed-stage investor, while serving on a panel at the Kauffman Foundation’s 2013 State of Entrepreneurship event:
“I happen to think that the business plan is outdated. I think that market validation is not outdated, but the business plan with five years of forecasted financials: terrible.
I actually was on record last year stating that I have never actually funded a startup that had a business plan. Absolutely true.”
(Full disclosure: Fagnan made these statements in response to a point I introduced.) He went on to say what he was looking for as an investor – in a nutshell, the major shift the entrepreneur sees in the market and what qualifies the entrepreneur to exploit that shift:
“Give me seven slides, tell me about what you’re doing, tell me about your background, tell me why you’re a domain expert, tell me about the tectonic shift that’s happening – that’s what I’m interested in.”
Why don’t more innovators focus on this? In order to commercialize their innovations, entrepreneurs and corporate innovators typically require the involvement of others, such as investors, lenders and executives who can green-light funds; market players and decision-makers who can provide critical skills, resources and stamps of approval; and partners and gatekeepers who control access to customers. When innovators pitch the people whose involvement they need, we often ask them to present business plans; but the business plan as we know it tends to be an exercise in detailed forecasting based on grand assumptions – a pleasant imagining of the future. It’s like painting a detailed picture of the sea on a sunny day, as proof that you’re ready to navigate those waters. Fagnan illustrated this bluntly in his Kauffman panel remarks:
Senior Consultant Alejandro Crawford on “Developing Entrepreneurial Students for the 21st Century Economy” – what it means for students to create solutions to emerging problems, instead of just applying formulas derived for yesterday’s world. Crawford’s remarks were delivered as part of the Network for Teaching Entrepreneurship’s Entrepreneu