Lean Startups – Part II – Business plans – Where do they fit in?

Following the last post, I was asked two main questions:
Customer development – Isn’t that what we do when running focus groups and surveys ?
Business plans – where do they fit in ?

Customer development isn’t about questioning users for their needs. Especially when it comes to the internet, no one, even not the user himself, knows what he needs. So what do you do? You test and experiment. You develop a cover, a mockup or something with basic functionality and watch how your customers use it. For example, if you develop a downloadable software, you can place a link on your homepage and test to see how many users actually click on it (and get a page saying “please register” for example). If you think customers will pay for that, offer a link to a dummy online purchase form. Find out how to give your customers the experience and test your assumptions without putting too much effort before you test whether it works.

Business plans – One comment on the previous post said “no business plan survives the first customer”. He is right ! A business plan, in my view, is most important for internal needs (vs. an executive summary which is used for external needs). It helps the entrepreneur focus, think about execution, risks and ways to mitigate those, distribution channels etc. You don’t have to write it down but you better think about them and have a proper plan in place. As you try to deploy your plan, most likely you will learn new facts and have to adjust your plan on the fly. For example, you plan to focus on a certain segment and discover that your product attracts another segment. Very few startups ended up executing their original business plan (Hotmail is a good example) but their original business plan helped them think about the elements critical to their business, find a way to address them and later on take a different path if needed.

Good luck !

Tags: customer development, role of business plan, writing business plan