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Business Planning vs Modeling

April 13, 2010 by Donald McMichael

booksBusiness plans get beat up a lot. The realization that I’ve come to over time is that the entire development paradigm needs to be the context. I’m talking stepping back and looking at the entire plan-launch-monitor-adjust process. Business plans are just one facet of the equation. More precisely, it is the output of a series of activities thus a summary of the current thinking. Unfortunately, it is often quite easy to forget that all businesses are built upon a foundation of facts (market size, economic factors,…) and assumptions (buying preferences, pricing structure, …) any of which can shift and change. This is why the concept of continuous discovery is something that have preached for years. The push to write this mini-post was provided by Steve Blank’s post on Business Plans versus Business Models. Steve contends that we are better off building and testing models than writing business plans. Just for the fact that plans are constructed on unsubstantiated assumptions while models are built to be verified in the real world. In practice I’m sure that this is more often the case than not. My take is that this behavior could be more the result of people primarily being exposed to one of the development process’ outputs than the full process. The bottom-line, reserve the right to change to mind at any given point in time based on new evidence. Start to understand the bigger game, go read Steve’s post.

Filed Under: blog, Business Management

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