No More Business Plan Competitions – Written by Doug Neal

I was watching a presentation by some student entrepreneurs a few weeks ago and enjoying the creativity and unique approaches each student was presenting.  It was about 5 minutes into a 20 minute presentation by one student team when it happened… the student had just explained the basic product offering and then immediately went on to state “… now let’s assume we get 4% market penetration …” and he was off and running describing his business plan and how his company would change the world for the next 15 minutes.

I was stunned.  Had I been the only person who saw it?

The student team had made a complete “leap of faith” from the product concept to market acceptance and left no possibility to the fact that they may not actually have a product that people want or would buy!

To me, this is absolutely crazy.  I could develop all sorts of amazing companies if this logic were to hold true.  For example, let’s assume for a minute that I could fly.  There for, given that I can fly I could easily cut my commute time in half due to my levitating abilities, etc.

I know this isn’t going to be easy to hear for some people but I believe that the over emphasis on the “Business Plan” is what causes this type of significant simplification of the entrepreneurial process.

I’m surprised that there has not been a general revolt around this concept and I find myself feeling like that child in the famous story “The Emperor’s New Clothes”.  Why do so many Universities  focus on Business Plan competitions when trying to educate students on entrepreneurship?

For me, having entrepreneurs put a laser focus on creating the best business plan is similar to us asking our students to focus all their energy on creating the best resume.  Sure, it’s important and has its place and time, but it should not be the primary focus of their educational activity.

Robert Shedd says it best in his recent post:  Are We Actually Creating Startups Through Business Plan Competitions?  Business plan competitions were valuable as a starting point and years ago may have been a good way to get entrepreneurs engaged but it’s not the most effective way to teach entrepreneurs the essential skills they need to identify market opportunities, validate with customers and ultimately find the best business model for them to run with.

I’m sure many of you have seen Steve Blank’s recent video from an Entrepreneurial Woodstock event in California last month… Steve nailed it when he shared with the audience that business plans fundamentally do not survive first customer contact!  

Customer validation is critical in the early stage of business formation and the over emphasis on the business plan development steamrolls right over critical milestones in validating business models and give entrepreneurs a false sense of security that their assumptions are correct.

Before entrepreneurs charge ahead with product development or raising tons of cash they need to make sure they have done the difficult task of validating their concept with the market and talking to some customers.  Jeff Hawkins, the founder of the Palm device understood this when he used to walk around the office with a block of wood that simulated his future handheld wonder when trying to gauge customer interaction.  You can’t get much more low-tech than a block of wood!  But it worked; he learned a tremendous amount about the validity of his idea with this approach.

So, to help in this effort I’m pledging to reduce the number of business plan competitions on our end and help focus our energy and students on the more important aspects of Entrepreneurship – helping our students identify the best way to create companies that truly deliver value to what customers want.

Advertisements

6 thoughts on “No More Business Plan Competitions – Written by Doug Neal

  1. Doug,
    Thanks for the link. I think “starting point” is a great way to put it. Hopefully, we’ll see many more take your active stance in working to convert the momentum behind competitions to more fruitful efforts. Best of luck and let me know how things go!

  2. Pretty nice post. I just stumbled upon your blog and wanted to say that I have really enjoyed browsing your blog posts. In any case I’ll be subscribing to your feed and I hope you write again soon!

  3. Doug,

    I have long given up on the local business development scene since there is an overemphasis on business plans, venture capital, and exit strategies. Your comments provide me with some hope that building traditional profit-based businesses will get some attention. I think we would have more success stories locally if people would just get out there and do it. Instead, many people seem to be armchair businesspeople waiting to get early stage funding instead of considering bootstrapping and organic growth. Not every business is capital intensive, so some ideas/businesses could be successful yet would never meet the critera VCs and Angels are looking for. This shouldn’t discourage people from going for it.

    Please do put more time into teaching people about the nuts and bolts of running and growing a business.

  4. Business plan presentations are always really crazy. The main thing about the plan is that if you really believe in it or not. There is no need for proper plan if you know your goals and what steps you must take to achieve them.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s