About three years ago, I had the opportunity to speak with a venture capital analyst about a new software company his firm was funding. The company was in the analytics space and proposed a creative pricing model to compete with existing vendors. The “plan” was for the new company to convert just 5% of the existing market in the first years. New customers would turbo-charge the company into early profitability from which it could subsequently grow to gain additional market share. Life with this plan was good. Alas, the real world was not very accommodating, and the initial plan had to be scrapped. Now, three years later, the company is back at it with an additional round of funding – and a new plan.
The misfirings of even the most meticulously assembled business plans are not surprising to John Mullins and Randy Komisar, authors of the MIT Sloan Management Review article A Business Plan? Or a Journey to Plan B? Indeed, according to the authors: “Most new ventures, even those with venture capital or corporate backing, share one common characteristic: They fail.” The antidote to the failure of Plan A? “There is a better way to launch new ideas — without wasting years of time and loads of investors’ money. This better way is about discovering a business model that really works: a Plan B, like those of Google Inc. and Starbucks Corp., which grows out of the original idea, builds on it and once it’s in place, helps the business grow rapidly and prosper.”
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