The signals we give to entrepreneurs and enterprising organizations about how to build businesses need to be updated because they espouse a route to launching that is inefficient and ineffective. Despite their purpose, these exercises do little to hedge risk and advance the entrepreneur’s business. Instead, they eat up time and focus that should be spent securing the first customer. Shifting these signals is all the more important in social enterprise because so many nonprofits and charities are looking to enterprises to augment their revenue outlook as soon as possible.
Moving forward, we should take a cue from the Lean Start-up movement. Lean Start-up labels a new ethos among entrepreneurs (particularly popular in tech) that ascribes a methodology for launching in the cheapest, fastest, least risky way possible. It is founded on the basic premise that most things you think about your idea at the start – who your customer is, how to deliver to them, what they want, how to make it, etc. – are incorrect, and you’ll learn that the hard way if you don’t learn it earlier. It is based almost entirely on execution and iteration, and very little on planning. Entrepreneurs need to focus on testing their assumptions about why their business would work, and building a base of customers or users. Start with an idea and iterate rapidly. Everything else is a less optimal use of time.
So, I’d like to borrow a page from the Lean Start-up movement and suggest three alternatives to the typical exercises (business plans, market research, competitions), ones that are focused more on execution:
1. From business plans to business models
We know that most business plans are IOA (Irrelevant On Arrival), but we legitimize the exercise by pointing out its usefulness in fleshing out an idea. Maybe so, but there’s a more direct route from A to B: a business model canvas. A plan describes what you’re going to do; a model describes how you make money and make an impact. You can’t have a plan if you don’t have a model to execute, so focus on the model.
A business model should be succinct enough to be articulated through post-it notes on a business model canvas. It should hang on the wall in your office, and you should tinker with it every day or as often as you tinker with how you do business. If forethought is the relevant mode for producing a plan, experimentation is the relevant mode for producing a solid model.
2. From feasibility studies to rapid prototyping
Using a business model canvas will outline all of the foundational assumptions you have – your customer, the problem your product solves, whether it actually does solve it, whether they’ll pay a profitable price, etc. Too often, the next stage after ideation is market research through focus groups, surveys, market analyses, and other methods. The problem is that what you learn is often only marginally helpful to actually running a business. In a focus group, many people will tell you they love your ethical website idea and that they’d pay for it. But in the holiday rush, will they buy gifts on your site or Amazon?
I know from personal experience that as much as you can learn through months of researching at a distance, only trying to sell a product in the marketplace will tell you what you need to know. The only way to validate your assumptions is to prototype cheaply. If it’s a website you’re launching, slap together a landing page with a “Find out more!” button and see how many people click. Proving your assumptions right or wrong at the start may have just saved your otherwise ill-fated approach.
3. On competitions
There seems to be an abundance of social enterprise and entrepreneurship competitions, with each congratulating winners at the end. Competitions are a great way to stimulate and celebrate entrepreneurship, but most miss the point. I hypothesize that there is very little if any correlation between winners of competitions and actual subsequent business performance. That’s because most are judging presentation and planning skills, not demonstrated entrepreneurship skills.
Having judged a good number of them, I know that there’s very little I can actually tell about a business in the eight minutes it has to present. The judge entrepreneurs should be focused on is the marketplace. The Lean Start-up Machine conference in Toronto got it right by basing its judging on how far groups advanced their businesses in a time period; how many customers they signed up, or initial assumptions they overturned. It would be a treat to participate in a social enterprise competition that judged on execution rather than presentation.
There is an overemphasis on cerebral exercises being encouraged in social enterprise in an effort to mitigate the considerable risk of launching ventures. A more direct route to mitigating risk and discovering a path to success is to encourage entrepreneurs and organizations to put their business ideas in motion as quickly and cheaply as they can.
My partners and I close every meeting with entrepreneurs by asking them how they can move their business forward as much as possible in the next week, and we start each meeting by asking what they did in the preceding week. Too often, groups get comfortable at the planning stage and procrastinate launching. Execution separates a dreamer from a social venture that actually moved the dial on a social issue. We need to emphasize it.
Assaf Weisz is co-founder and Partner of Venture Deli, which builds companies that matter to the world and connects them to impact investors. Prior to this, he co-founded and was the executive director of the Young Social Entrepreneurs of Canada (YSEC).