In my post last week I said that you should test and iterate your ideas quickly, rather than write a lengthy and detailed business plan for new and untested ideas. This is not an excuse to avoid working systematically with a structured process. Quite the contrary.
However, never start with a detailed business plan! Start with rough prototypes that you can throw away easily. When you’re doing something innovative, it’s inevitable that your ideas will initially turn out to be wrong. You rapidly test these rough prototypes as to customer desirability, financial viability, and feasibility. You sharpen your prototypes the more you collect evidence that your idea might actually work. Once you have enough market evidence pointing towards success you can write a business plan.
At each stage of this innovation journey you should use different tools with different levels of granularity to prototype your ideas. Start with low fidelity prototypes that you can create, explore and test rapidly. Then--with more evidence--you increase the fidelity.
Napkin sketch: Start with several quick drawings on the back of a napkin to explore different directions that your business idea could take. At this stage you don’t care how exactly it will work. Your care about potential directions and different alternatives. Napkin sketches help to make broad alternatives a bit more tangible than just talking about them.
Customer Profiles (right-hand side of the Value Proposition Canvas): After the napkin kketches you quickly explore the waters with potential customers. Map out the jobs, pains and gains of 2-3 different customer segments and then get out of the building to test if you were right about your assumptions.
Value Map (left-hand side of the Value Proposition Canvas): Start exploring alternative value propositions once your understanding of customers improves, and you've selected a minimum viable customer segment. Use the value map to do this. However, don’t fall in love with your ideas at this stage. You might still have to go all the way back to your early napkin sketches if your ideas turn out to be useless when you test them with customers.
Business Model Canvas & Financial Prototype: Now that you have an idea of what customers want, start testing your business model. Test the financial viability, not by making spreadsheets, but by having conversations with customers about their willingness to pay; or even better, simulate a sales. Start testing how costly it will be to acquire customers or to offer your value proposition. At this stage you will also start testing the feasibility of your idea. Can you build it? Can you mobilize the required technical resources or excel at the required activities.
Spreadsheets & Business Plans: By now you might have enough evidence pointing towards a profitable and scalable business. This is the time to start crafting detailed spreadsheets and your execution strategy in a business plan. You’re no longer sketching out an idea, you’re now fully working on describing your business in detail and how to implement it.
In summary, prototype ideas from low fidelity to high fidelity with increasing evidence that your ideas are going to work.
