In recent years, the ‘lean startup’ methodology has become such gospel in entrepreneurial circles that rigorous planning is almost seen as passé.
Business plans? Unnecessary. Strategy? Old fashioned. Just start doing! Pivot quickly, and use agile development to rapidly test your ideas. Ready...Fire...Aim!
The lean startup methodology has gained favor because it recognizes that startups are not like traditional businesses, where planning presumes that a business model already exists, and that efficient growth is the primary goal.
In a startup, by contrast, only a hypothesis exists, and a viable business model and appropriate product offering must be found before the company runs out of money.
Because startup capital is usually very limited, running out of cash is typically a bigger problem than coming up with hypotheses to test.
But, a little upfront planning can go a long way towards cutting out needless and costly ‘experiments,’ saving your startup precious time and money. Or, as my entrepreneur friend, Mark Sigal, notes, "When you fail to plan, you plan to fail."
So before you take the leap with your own lean startup, be sure to factor the following in your planning:
1. Talk to everyone about your idea. Forget about ‘stealth mode.’ Ideas are cheap; execution is what counts, so get out of your fishbowl. From this exercise, you may get feedback that validates, challenges or re-shapes your original assumptions. Minimally, you will make valuable connections while building practice in telling your story. You might even get introduced to potential customers or investors. One caveat, though. Don't just talk to people like you. For example, if you're an engineer, don't limit yourself to talking with other engineers. Talk to marketing folks, finance experts, retired CEOs, and target customers. The more diverse your circle, the more likely you are to turn up information that is expands your realm of understanding.
2. Research the incumbents and competition. Many industries are ripe for disruption, and many fellow entrepreneurs are busy trying to do just that. Old industries, including music, transportation, payments, and vacation rentals, to name a few, are being challenged by Millennials with a gleam in their eye and Amazon Web Service instances at their fingertips. But before you can overthrow the old, take a moment to understand how they operate. What are the legal, regulatory, technological and labor issues facing the existing order? While some startups choose to ignore or skirt regulations that the incumbents are bound by, it's best to know what those are before starting. That way, you will have a plan of record regarding how you'll cope in case you're challenged.
Similarly, the other startups in your space are worth understanding. In some cases, your competitors will take a completely different approach to the problem that is worth emulating. In other cases, careful study will reveal vulnerabilities that are best avoided. Minimally, spend the necessary time to understand their business models, as one of the primary goals of a lean startup is to find a business model.
In a world where the answers to most questions are just a Google search away, remember the axiom that forewarned is forearmed.
3. Find out what the "crazies" are saying and thinking.
Finally, take time to research what the outliers in your industry are saying. At the recent Google I/O conference, CEO Larry Page spoke about his strategy for entering new markets.
"I try to use Google a lot, and I research things really deeply. So you know, before we get something started, I try to actually understand it. And not just really understand it, but understand the crazy people in the area. And Google's great for that. You can find the craziest person in a given area. And normally I think people don't do that."
These are the crazies and futurists who talk about how things will be, "after the revolution." Remember: Many of today's ‘bellwether’ products started in science fiction. And this is where the crazies shine most, inasmuch as they excel at imagining the societal or personal impact of future technologies, which is something that you will need to consider if you're going to be successful.
Being a successful entrepreneur requires juggling two oft-competing truths. The first is that action, given incomplete information, is better than indecision and inaction. The second is that planning and preparation can save one from making costly mistakes.
Startups demand a certain level of bravado and extreme self-confidence. But, the best practitioners also take their time before committing to action. Follow these rules and your chances of success will grow by leaps and bounds.
(ABOUT THE AUTHOR: Jim Y. Li is the Founder and CEO of Halloo Communications, offering the first virtual phone system with integrated contact management and call tracking. Jim started his first company when he was just 17, and has has two successful exits with Whistle Communications (IBM), and Tribe Computer Works (ZOOM). As an angel investor, he has helped founders raise capital and grow their businesses, and was the first investor in CafePress (PRSS). Follow Jim on Twitter at @Jim_Y_Li.)