Biz Model vs. Biz Plan

Steve Blank defines a startup as an organization formed to search for a repeatable and scalable business model. He and Eric Ries have done yeoman’s duty in trying to move budding entreprenueurs away from the linear thinking used by most VCs to evaluate investment opportunities and startup processes that consume investor resources. Unfortunately, it takes wise VCs and smart entrepreneurs to accept iteration and “pivoting” as a natural element of the early-stage startup operation. I can envision a situation that is simply repeated iteration (spinning) that ultimately burns through the investment having collected a ton of data yet made no measurable progress towards the real end game–a business model on which to execute. The other extreme is simply being too cautious in iterating and making pivot decisions. Nonetheless, my thanks to Steve and Eric for articulating a model that really forces us to re-think the startup process. I will confess to having been in the startup game for almost as long as Steve, albeit with a later start, yet I still value the counsel of smart folks like them. It has certainly helped as I have gone though this exercise to define how we will organize and operate veloGraf Systems.

Which brings me to the title of this post–biz models vs. biz plans. You could argue that it’s simply a re-labeling exercise since the core concepts are addressed but just the term model is implicitly more dynamic, immediate and inter-connected. If I change one process in real-time, the outcome should be measurable elsewhere in the model. Plans seem inherently rigid, identify activities than can always be deferred, are never used after being written and absolutely not read by VCs (associates have this nasty task).

I began this series of posts exploring ideas for organizing and operating an early-stage enterprise software startup in a fashion that provides a rational alternative to the conventional wisdom that enterprise software is too difficult and takes boatloads of VC investment. I will confess this was a typical cursory Web investigation conducted over a few days but I have generally concluded that very solid guiding principles are offered by the following:

  • Steve Blank and his work in the area of closely coupling agile product development and customer development to find the right business model and product (www.steveblank.com)
  • Eric Ries’s thoughts on lean startups and minimum viable product (www.startuplessonslearned.com)
  • Alex Osterwalder’s efforts in business model generation (www.alexosterwalder.com)

Steve and Eric offer operating principles while Alex’s insights are really in understanding and organizing the basic elements of business operation. As I develop the veloGraf business model over the next few months, I plan to rely on these tools to direct my efforts.

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