Thanks for the comment Peter! I fully agree with you regarding Getting to Plan B in combination with the books on design thinking.
Looking forward to your blog post. This is very much in line with my reasoning using hypothesis-driven business development stating and challenging assumptions, learning and iterating new hypotheses. I am currently looking into how to identify and question one's assumptions and the characteristics of different types of assumptions. Saturday, January 16, Getting to Plan B The book Getting to Plan B: Breaking through to a better business model, written by John Mullins and Randy Komisar, contains several important lessons, primarily for start-up entrepreneurs, on developing successful business models.
Though very repetitive around a few key ideas, the book is well worth reading especially for those who want to better understand how the business model is reflected in the different financial statements. The business model concept is in the book defined as the pattern of economic activity comprising of five key elements that together determines the viability of any business. The five key elements being the revenue model, the gross margin model, the operating model, the working capital model and the investment model.
Companies are successful when the five elements work together.
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Getting to Plan B is about the process of discovering a business model that works, with the assumption that the initial plan is most often wrong. The discovering process can be made systematic by constantly formulating different hypothesis and measurements and continuously follow up and iterate the business model into a new Plan B.
The starting point for a new business model is to learn from successful examples worth mimicking in some way and examples to which you explicitly choose to do things differently, where the ultimate judge is the customers and the cash flow generated from your business model. Don't reinvent the wheel, make it better - the concepts of analogs successful predecessors , antilogs predecessors that you want to differ from , and Leaps of Faith beliefs about answers with no evidence is covered with the key take out to learn, mix and match to create your own business model, to experiment to test different hypothesis to prove or refute them.
Guiding your flight progress - the concept of dashboarding a systematic way to guide experiments and track results is presented with examples showing that measuring of specific parameters or results increases the focus of the company's activities, and that the dashboards, including parameters and goals, need to evolve over time based on the learnings they uncover.
Air, food and water - the chapter, focusing on revenue models, hits home two important points: the importance of resolving customer pain or providing customer delight, and the need for actual evidence of how customers are likely to respond.
Getting To Plan B: Breaking Through To A Better Business Model | Fresh Business Thinking
To develop a revenue model questions that need to be asked are: Who will buy? What will they buy? Why will they buy?
How soon, how often, and how many will they buy? With what effort and cost on your part?
At what price will they buy, and on what basis will they pay? Avoiding rocks and hard places - the topic for the chapter is gross margin models; the spread between the price at which products and services are sold and the cost of selling those COGS. The key messages with the chapter are that digital technology enables gross margin models in which COGS approaches zero, that a superior gross margin model creates leverage that can be applied differently depending on strategy, and finally the fact that pricing decisions should be value-based and not cost-based.
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Trimming the fat - is a short chapter on operating costs; all the day-to-day costs that must be incurred in addition to COGS. Key ideas are that by doing things differently in relation to other actors in the industry, operating cost can be lowered or eliminated, and by starting the analysis at the most costly or scarcest resources in the industry areas for business model innovation might occur.
Another key point is that adding costs might also enhance the customers' experiences and willingness to pay premium prices, so cost cutting is not always the answer to profitability. Cash is king - is according to me one of the more important chapters in the book as the balance sheet, working capital and cash management is often forgotten in business model discussions. Different industries and business models requires different amount of working capital the cash a company needs to keep the business running and all elements in the business model have implications for the cash generated and the cash consumed.
From page "Failure to earn a profit won't put you out of business, as long as you still have cash. It takes money to make money - focus on the investment needed to get the business started and through the period until it can generate enough cash itself, and the general goal there are exceptions is to find a way to get to breakeven with as little investment as possible. The authors mention some of the many trade-offs involved with external funding from different sources, but primarily focus on venture capital.
The conclusions are: Less investment means giving away less of the business, less credibility lost when leaving a business model for another, and fewer sleepless nights if you've mortgaged your house. Can you balance a one-legged stool? The conclusion is that the revenue model, gross margin model and operating model directly affect the working capital model, and these four models directly affect the investment model.
Getting started on discovering your Plan B - ends the book where it started with a focus on the talented and visionary entrepreneur. In the beginning of the book there were statements such as "Intuitively, as is almost always the case for committed, passionate, entrepreneurs, they felt that the answers to all five questions were yes" p29 and in the end "dreaming your entrepreneurial dream" p A quick comparison with some other popular books on business models:. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Osterwalder and Pigneur, atempts to introduce a standard language and format for analyzing and innovating business models based on the business model canvas.
Getting to Plan B define the business model concept in financial terms and is not overlapping with this book. Johnson, explores the circumstances when a new business model might be needed from an incumbent perspective, with several classic examples. See my review here Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.
The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book. Enlarge cover. Error rating book. Refresh and try again. Open Preview See a Problem?
Details if other :. Thanks for telling us about the problem. Return to Book Page. You have a new venture in mind. And you've crafted a business plan so detailed it's a work of art. Don't get too attached to it. To succeed, you must change the plan in real time as the inevitable challenges arise. In fact, studies show that entrepreneurs who stick s You have a new venture in mind. In fact, studies show that entrepreneurs who stick slavishly to their Plan A stand a greater chance of failing-and that many successful businesses barely resemble their founders' original idea.
The authors provide a rigorous process for stress testing your Plan A and determining how to alter it so your business makes money, solves customers' needs, and endures. You'll discover strategies for: -Identifying the leap-of-faith assumptions hidden in your plan -Testing those assumptions and unearthing why the plan might not work -Reconfiguring the five components of your business model-revenue model, gross margin model, operating model, working capital model, and investment model-to create a sounder Plan B. Filled with success stories and cautionary tales, this book offers real cases illustrating the authors' unique process.
Whether your idea is for a start-up or a new business unit within your organization, Getting to Plan B contains the road map you need to reach success. Get A Copy. More Details Other Editions 6. Friend Reviews. To see what your friends thought of this book, please sign up. To ask other readers questions about Getting to Plan B , please sign up. Lists with This Book. Community Reviews. Showing Rating details.
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I might have been slightly misled by the title even though the subtitle was quite clear, Breaking Through to a Better Business Model. But it might be I never read seriously subtitles. I thought the book was about what you do when you were wrong first. But it is more subtle. It is not so much about what happens if your idea was not good vs. If it says better, you plan A might have been good enough!
The other reason I was not totally convinced comes from my feeling the case studies were chosen to illustrate a theory, a process, a framework, but did not prove it.
I had the feeling the same case studies might have been used to illustrate opposite views, but again, who am I to say such things! In their preface, the authors say important things. I was a little puzzled because I am not so sure; many companies failed because customers did not buy. But it might be the same! Again I am puzzled, I am not sure this exists. But still, they certainly provide interesting tools. Analogs are successful predecessors worth mimicking in some way whereas antilogs are predecessors whether successful or not in light of which one explicitely decides to do things differently [Page 14].
Then their methodical dashboard is about validating leaps of faith by testing hypotheses. Plan A had no revenue model, plan B was licensing, plan C was advertising. But remember Google was always a search engine. In terms of product, it was still plan A! And to waste your talent on something mediocre would be a real shame. Many case studies illustrate how to optimize each of the 5 business models elements [chapters ], whereas chapter 8 shows that you will need to find a balanced solution trying to get the best of these 5 key financial objectives.
A contingency plan would probably be just as flawed. This is clearly an important lesson to remember. View 1 comment. Feb 13, Amit rated it really liked it. Good book with lots of examples. Notes: Your First Plan Probably Will Not Work The research on new products success and failure indicates that it takes fifty-eight new products ideas to deliver a single successful new product. Getting to Plan B is about how to avoid getting stuck in a rut, missing real opportunities, or worse, closing your doors. Should outline the five elements in a business model, to determine the economic viability and whether the business is likely to run out of cash or not.
Plans are useless but planning is indispensable.
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