Monthly Archives: September 2017

An Autopsy of the Business Plan

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Here lies the business plan. Once integral to every new business, it’s now been reduced to a cold, lifeless body on a mortician’s table. Who delivered the killing blow? The business model canvas, of course. How? Let’s take a look.

For a long time, business plans were considered essential to the development of any new business. Typically 20-40 pages long, the document sets out a business’ objective and lists out strategies that could be adopted to achieve them.

Therein lies the business plan’s first fatal flaw: it attempts to predict the future. In an article for inc.com, entrepreneur Steve Blank said, “Entrepreneurs often mistake their business plan as a cookbook for execution, failing to recognize that it is only a collection of unproven assumptions.” Soon-to-be entrepreneurs often rely too heavily on the assumptions made in a business plan. It is impossible to predict the future, so a plan can’t be set in stone. While business plans aren’t intended to be followed word-for-word, they often aren’t dynamic enough to keep up with rapidly changing market conditions.

Business plans’ second hamartia is the fact that they are too long. We’ve grown accustomed to articulating ourselves in 140 characters or less, sending and receiving 10-second-long disappearing videos and watching 2 minute videos instead of reading 5 page articles. Business executives want information delivered to them as quickly and concisely as possible.  For better or worse, we simply don’t have the patience to read 40-page long business plans anymore.

Finally, business plans tend to place too much focus on results, partly through the heavy focus they place on projected income statements. A new venture is a means, not an end, according to an entrepreneur.com article by Martin Zwilling. Business plans often focus on the end goal of a business without considering key activities in depth. To quote Brigid Schulte, “You can’t think your way into a new way of acting, but you can act your way into a new way of thinking.”

What then led to business model canvases usurping the throne from business plans? In short, business model canvases – the brainchild of business theorist Alex Osterwalder – solve the issues associated with business plans presented above. They are dynamic, concise and place a strong focus on action. They are only one page long and can easily be updated to reflect changing market conditions.

Some might argue that the business plan is still alive and kicking. There are certainly entrepreneurs that do continue to use it. It remains to be seen how long business plans stick around for, but in my mind, there is no doubt: business plans have lived long past their prime. Business model canvases are the way forward.

Word count: 442

References:

https://www.raconteur.net/business/death-of-a-business-plan

https://gocatalant.com/blog/the-business-plan-is-dead-here-is-what-to-replace-it-with

https://www.inc.com/steve-blank/startup-owners-manual-customer-development-rules.html

https://steveblank.com/category/business-model-versus-business-plan/

https://www.entrepreneur.com/article/229804

Picture: https://canvanizer.com/new/business-model-canvas

Picture: http://moziru.com/explore/Drawn%20tombstone/

https://nomorestartupmyths.com/the-death-of-the-business-plan-and-the-successor/

Best Buy, Hurricane Harvey and Overpriced Essentials: An Exploration of Business Ethics

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Business. Ethics. It’s interesting to think about how these two seemingly antithetical words can sometimes go hand in hand. It’s not uncommon to hear stories of businesses going out of their way to help the local community. Take, for instance, Autodesk, a software corporation that allows employees to take 4 hours of paid time off every month to volunteer; or, General Electric who spent $219 million in 2012 on community service grants.

Unfortunately, not every business is like that.

In August 2017, Hurricane Harvey devastated Texas and Louisiana. Faced with death, displacement and disastrous floodwaters, the last thing survivors needed was to be taken advantage of by local stores. Yet, that’s exactly what happened.

According to a report by the Washington Post, the state attorney general’s office received 684 consumer complaints (as of August 30th) mostly regarding the price-gouging of essential items such as water and gas.

Best Buy, in particular, came under heavy fire after twitters user shared pictures of cases of bottled water being sold for $42 while other retailers charged $16-$32 for the same case online.

Was Best Buy justified in raising their prices?

Some people might argue that Best Buy’s approach was inherently capitalistic. They responded to an increase in demand for water by raising their prices. Invisible hand, right? If the main aim of a business is to maximize profit for its shareholders within legal boundaries (as economists such as Milton Friedman believe) then perhaps Best Buy did nothing wrong. What Best Buy did was terrible for the community, but ideal for its shareholders.

But just how ethical was their decision? Not very, is what I would say.

Freeman’s Stakeholder Theory states that a business is only successful if it creates value for all of its stakeholders: customers, suppliers, employees and financiers. Choosing to help one stakeholder (the shareholders) at the expense of another (the local community) could be considered a failing on the part of Best Buy’s managerial team.

Best Buy put out a statement saying that they don’t normally sell water by the case, and that the situation arose out of employees determining the price of a case by multiplying the price of one bottle of water by the number of bottles in a case.

Regardless, I believe Best Buy should have done their best to help survivors during their time of need by offering reduced prices on water instead of adding to their misery by taking more than needed out of their wallets.

To end with a quote by Henry Ford, “a business that makes nothing but money is a poor business.”

-430 words

Sources:

https://www.washingtonpost.com/news/business/wp/2017/08/30/99-for-a-case-of-bottled-water-texas-stores-accused-of-price-gouging-in-wake-of-harvey/?utm_term=.90c7fc0466b4

Best Buy Statement on Water Pricing

http://people.com/human-interest/companies-doing-great-things-in-their-communities/

https://mic.com/articles/81335/18-companies-that-are-doing-good-while-doing-well#.fIeob6Eq7

Best buy picture taken from: http://bgr.com/2017/07/21/best-buy-black-friday-in-july-2017-deals/

Hurricane Harvey forecast track taken from: http://www.theadvocate.com/baton_rouge/news/weather_traffic/article_7165bc30-893d-11e7-99e1-f3085130e564.html