New Game, New Plan

If they’re to suc­ceed today, knowl­edge entre­pre­neurs must use new meth­ods of busi­ness oper­a­tion
(A ver­sion of this post was pre­vi­ously pub­lished in the Finan­cial Post)

In a recent sur­vey reported by the Finan­cial Post, one in three Cana­di­ans said they were inter­ested in start­ing their own busi­ness in the next two years. Of that group, 35% said they’re going to fol­low through with those plans.

If we extrap­o­late from the sur­vey of 1,010 Cana­di­ans by the tax and account­ing soft­ware maker Intuit, that means almost one-quarter of Cana­di­ans plan to start their own busi­nesses soon. If even half of those do fol­low up on their dreams, that will be quite astonishing.

What will also be aston­ish­ing, how­ever, is if those thou­sands of would-be Cana­dian entre­pre­neurs pro­ceed as 21st-century entre­pre­neurs instead of blindly imi­tat­ing the entre­pre­neur­ship method­ol­ogy of 30 years ago.

Any­one who takes up the chal­lenge of busi­ness start-up today would do well to exam­ine how entre­pre­neur­ship has changed in this century.

The biggest change is that today, less is best. Start­ing a busi­ness now is all about less –as in less elab­o­rate busi­ness plan­ning; less imi­ta­tion and more inno­va­tion; less step-by-step exe­cu­tion and more going with the flow; less one-way deliv­ery and mar­ket­ing and more con­ver­sa­tion with customers.

This less-is-best con­cept gen­er­ally goes against tra­di­tional busi­ness train­ing, which is based on the old industrial/ retail sys­tem. Busi­ness plans, for exam­ple, are about exe­cu­tion of known fac­tors, so if you’re build­ing a fac­tory that is going to be around for 10 or 20 years, you’ll need a busi­ness plan. But in today’s world of con­tin­u­ing change, any plan that details steps fur­ther out than quar­terly or semi-annually is unsuited for any­one start­ing a small business.

The top entre­pre­neur­ship method now is the lean startup, an appli­ca­tion of Lean think­ing, which is an orga­ni­za­tional method of oper­a­tion derived from the Toy­ota pro­duc­tion sys­tem. In Lean think­ing, an orga­ni­za­tion attempts to elim­i­nate all waste­ful effort and cost.

Lean think­ing means new start-ups rarely use for­mal busi­ness plans in the begin­ning because in a rapidly chang­ing world they can­not obtain the infor­ma­tion they need to plan sev­eral years in the future.

In fact, in 2002, the mag­a­zine Inc. sur­veyed founders from its Inc. 500 list of fastest-growing entre­pre­neur­ial com­pa­nies and found that only 40% had writ­ten for­mal busi­ness plans. Of those, nearly two-thirds said they changed their busi­nesses con­sid­er­ably from their orig­i­nal plan.

The Lean start-up applies the Lean think­ing approach at the cru­cial period when new com­pa­nies often have a con­cept but really don’t know how their busi­nesses are going to evolve. Since most new busi­nesses — even those in tra­di­tional areas such as retail or ser­vices — now pri­mar­ily oper­ate online, this learn­ing process is much easier.

Gen­er­ally, a Lean start-up fea­tures three characteristics:

• It keeps costs low by using open source and free soft­ware. If those aren’t avail­able, it uses low-cost cloud com­put­ing (rent­ing soft­ware and other ser­vices online) instead of ini­tially buy­ing expen­sive sys­tems and soft­ware.  It also endeav­ours to “rent” as many busi­ness needs, such as per­son­nel, as possible;

• It applies agile devel­op­ment when cre­at­ing prod­ucts or ser­vices. In this method­ol­ogy, prod­uct devel­op­ment bor­rows from new software-creation mod­els. Agile devel­op­ment is per­fect for start-ups in which the prob­lem (the gen­e­sis for all busi­ness con­cepts) and the solu­tion (the busi­ness’ answer to the prob­lem) are still fuzzy;

• It con­stantly talks with cus­tomers, exist­ing or poten­tial, to see how it can improve. It usu­ally begins with a sim­ple prod­uct or ser­vice and then changes or expands it to answer cus­tomer con­cerns. Its main busi­ness process is con­tin­ual cus­tomer research and development.

So far, we’ve been talk­ing about start-ups, but the same think­ing applies to exist­ing advi­sory busi­nesses. If you’re an agent, con­sul­tant, coach, or adviser of any sort, Lean start-up prin­ci­ples can help you retool your busi­ness for oper­a­tion in this century.

After all the essence of rein­ven­tion is to start over and go in a new direc­tion. If you’re think­ing of that new direc­tion, you could do worse than bor­row these techniques.