A Business Plan? Or a Journey to Plan B?
By John Mullins and Randy Komisar
April 1, 2010
From Apple to Twitter, some of the most successful businesses are not what their inventors originally envisioned.
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IN MARCH 2006, Biz Stone, Evan Williams and Jack Dorsey were working on a new venture called Odeo, apodcasting service. Odeo was in something of a creative slump, and Dorsey wondered if a short messaging service that would enable everyone in the company to communicate with others in the group might be of some help.
Their solution, which the world now knows as Twitter Inc., was to build a simple Web application that would let the team stay in touch by sending short 140-character messages to the restof the group. It wasn’t long before they realized that the new application held considerably more promise than the original podcasting idea on which they had been working.
The rest of the story is history. Twitter reached its tipping point at the South by Southwest festival in 2007, where the number of tweets per day jumped to 60,000 and it won the festival’s Web Award. Whether or not Twitterwill develop a viable business model remains in question, but the Twitter story is a powerful reminder that an entrepreneur’s main job is not to flawlessly execute the business idea so lovingly articulated in his or her business plan. It’s to embark on a learning journey that may, on occasion, reach the destination that the initial plan had in mind. More commonly, though, for open-mindedentrepreneurs and innovators in large companies, the surprises that arise on this journey lead to a very different destination, which we call Plan B.
So, What’s the Problem?
Nearly every aspiring entrepreneur or innovator has a business plan, and virtually all of these individuals believe that their business plan — what we call Plan A — will work. They can probably even imagine how they’ll look on the coverof Fortune or Inc. And they are usually wrong. But what separates the ultimate successes from the rest is what they do when their first plan sputters. Do they lick their wounds, get back on their feet and morph their new insights into great businesses, or do they stick to their original plan? If the founders of Google, Starbucks or PayPal had stuck to their original business plans, we’d likelynever have heard of them. Instead, they made radical changes to their initial models, became household names and delivered huge returns for themselves and their investors. How did they get from their Plan A to a business model that worked? Why did they succeed when most new ventures crash and burn?
First, an uncomfortable fact: The typical startup process, whether in nascent entrepreneurialventures or in the innovation units of established businesses, is largely driven by poorly conceived business plans based on untested assumptions. This process is seriously flawed. Most new ventures, even those with venture capital or corporate backing, share one common characteristic: They fail. There is a better way to launch new ideas — without wasting years of time and loads of investors’ money. Thisbetter 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.
Most of the time, breaking through to a better business model takes time. And it takes errors, too, errors from which you learn. For Max Levchin, whowanted to build a business based on his cryptography expertise, Plans A though F didn’t work, but Plan G turned out to be PayPal Inc.
Getting to Plan B at Apple
Were Sergey Brin and Larry Page of Google, Howard Schultz of Starbucks or PayPal’s Max Levchin simply lucky? Or is there something rigorous and systematic about their successes that any entrepreneur can learn? Indeed, there is. Let’s let...