If Your Business Plan & Model are Based on Fictitious Assumptions You’re Finished BEFORE You Even Start!

mocha momentsSo many great ideas out there but none are getting implemented because the banks won’t lend and investors won’t invest. The world has never been without dreamers. Everyone has a great idea and most think that all it takes is MONEY to get it done. We fixate, we obsess on money. Even non-profits experience this frustration. Most people swear that if only they got more funding they would make a bigger impact and have more success.

Take a step back and ask yourself “Are my assumptions for my plan’s stunning success based on my own enthusiasm for my idea or is it based on facts as a result of experiments conducted by my team in real life settings?” Notice I said in REAL LIFE and not just WITH REAL PEOPLE.

Many of us conduct our research this way: we ask a couple of friends if they think this is a good idea or great cause. They tell us how fantastic it is and how successful we’ll be and “BOOM!” we’re off to the races! Or we choose a more formal route. We use an advertising agency favourite – conduct focus groups. Advertising agencies conduct focus groups to better understand consumer needs, wants, satisfaction, barriers and problems on a qualitative rather than statistical level.

The thing is that when you have a group of people gathered together, they seldom tell the whole truth. Some people will go along with the majority because they will begin to question their own reasons for liking or not liking a product or an approach. Other people will say that “yes if this product or service is offered in the market they will definitely buy it” and then go out into the world and act contrary to what they said they would do.

Remember the New Coke fiasco?  The New Coke battered by competition from the sweeter Pepsi-Cola, Coca-Cola decided in 1985 to replace its old formula with a sweeter variation, dubbed the “New Coke”.  Coca-Cola spent $4 million on market research. Blind taste tests showed that Coke drinkers preferred the new, sweet formula, but the launch of New Coke provoked a national uproar. Market researchers had measured the taste but had failed to measure the emotional attachment consumers had to Coca-Cola. There were angry letters, formal protests and even lawsuit threats, to force the retention of “The Real Thing”. Ten weeks later, the company withdrew New Coke and reintroduced its century-old formula as “Classical Coke”, giving the old formula even stronger status in the marketplace.

Malcolm Gladwell, bestselling author and speaker provides us with a more recent example that I plucked from a keynote he gave to the American Association of Advertising Agencies’ Account Planning conference in Chicago. “Now think about the Aeron chair. [The focus group participants] say they don’t like the chair, of course they don’t. The chair is nothing they’ve ever seen before, but that was the whole plan in designing the chair. But that’s what’s wonderful about it, that’s why this chair will make billions of dollars for Herman Miller, but it’s also what dooms that chair in the focus group, because people don’t have the language.”

Before you even think about taking your product, idea, service, cause or whatever you want to call it to get funding, go test your idea. Then present the bank or potential investors with FACTS – ACTUAL RESULTS.  Follow these guidelines from Thomas Davenport, an American academic and author specializing in analytics, business process innovation and knowledge management:

Design an experiment.

Start with a hypothesis about how your proposed change will: help businesses, change lives, improve efficiency, solve x problem etc. Implement and measure what happens in a test group versus a control group. From the outset, be clear on what you need to measure to produce a decisive result—and whether that’s a metric you even have the capability to track.

Act on the facts.

Nothing but a success in a testing environment should be rolled out more broadly. But neither should failures simply be scrapped. Refine the hypothesis on the basis of the results, and consider testing a variation. Most important, capture what’s been learned, and make it available for easy reference to those working on your team,  through the development of a “learning library,” so resources aren’t wasted trying to prove the same thing again.

If you make “TEST FIRST” your motto before you try to get funding, or launch an idea successfully you’ll have a much better chance at succeeding. Remember, most funders, investors and banks, would like to know how solid an idea is (that it works) before they take a risk. They’re not going to part with money because you’re enthusiastic and promise to work hard.

Jonathan Fields, lawyer turned award-winning author, media-producer and entrepreneur shared recently in a blog post ‘How’s that Working Out for You?’ – “I once had a successful fitness-industry entrepreneur share his dream business plan with me. He’d written it himself and run all the numbers by his good friend, a Harvard MBA, but one who knew nothing about the industry. The projections painted a picture of stunning success, but the assumptions upon which they were built, total fiction. I went data-point by data-point and ended up, without intention, shredding the plan. His response:  Pissed off.  He threw the document across the room and said “then what’s YOUR big f#%@ing idea?!”

Jonathan makes a point worth remembering: “When you’re building something you want desperately to matter…you don’t need validation, you need truth. And if that truth blows your concept, dream, vision or current failing venture to smithereens, that’s a GOOD thing to experience as fast and early as possible. Better a reality-check and pivot now than a 10X catastrophe in 10 months, $10,000 or ten trips to the hospital later.” I agree. Do you?

 comment (1)How do you go from insight to action? From ideas to results? And how do you do it reliably without getting exhausted? Find out how I support entrepreneurs in mastering &  managing the Brand Called YOU

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