Its almost 2 AM and I see half the MGM’ers (our juniors) finalizing their business plans for presentation presumably early today morning. Yes, I’m in school too :). On March 16th, we (MBA’ers) present the final version of our business plans. Few of my classmates were not overly enthused about the fact that their business plans did not pass the initial screening due to the lack of a clear revenue model definition. Others (like my own team) received feedback that the business plan should focus on a specific value proposition.
The jury members who provided these feedbacks are highly accomplished both in research and successful entrepreneurial endeavours and therefore I respect the feedback. However, I cannot help but feel that these feedbacks cannot apply universally to all business plans .
Firstly, about a revenue model. If the business plan is to start up an innovative online service, the costs are so low that we don’t really need to care about a revenue model. Twitter received funding of 35 million dollars recently and nobody has a clue if and when it will ever make money. The same was true for YouTube, Face book or even Google. The revenue model for these businesses is not a “set target and achieve” process, rather its sort of an evolutionary process based on how consumers, not producers, find innovative uses of the service.
Secondly about focus. Every strategy course we study will prescribe focus as a key element of success. Therefore, this feedback is based on conventional wisdom. But we need to understand why strategy courses prescribe “Focus”. In my opinion, it is because organisation are built with a certain value chain which can only deliver certain value proposition like low cost or best quality or flexibility etc. Therefore to not focus is to be everything to everyone which is a perfect recipe for failure. But, in a start-up, there is no value chain of production yet. So why not try offering different services and figure out what we are good at. Then, focus on a specific value proposition rather than begin the business plan with “focus”. I mean, with no prior experience in running a business, how could anybody know what to focus on. Isn’t it a bigger risk to focus right from the beginning because we could be staring completely at the wrong end!
I have a feeling that North American schools might have a different attitude to business plans with “no revenue model” and “no focus” simply because they have witnessed them succeed and more importantly, they love risk.