Getting to Plan B: Breaking Through to a Better Business Model, by John Mullins and Randy Komisar, is a very good new book for both entrepreneurs and those running more established businesses. It's an important book because it fills what had been a major hole in the literature on entrepreneurship, business planning and strategy. Too much of the literature of entrepreneurship treats successful start-ups as ideas that sprang full-formed from the brow of a brilliant and insightful founder or founding team. The reality is that the majority of start-ups go through much searching and experimentation before finding the combination of business model factors that allow them to be successful. Getting to Plan B talks about that process of experimentation, exploration and learning that leads entrepreneurs from their unworkable Plan A to the Plan B (or C, or D, ... or Z) that allow their start-up to become successful.
The book has several strengths. One is that each chapter has several mini-case studies of companies that had to find their own Plan B - ranging from well-known high tech start-ups like Google to not-for-profits like GlobalGiving to airlines like Ryanair and beyond. Some of the examples are well known and others are much more obscure but all illustrate key elements of the authors' approach to experimenting to find a workable Plan B.
Another strength of the book is the way it points out that it's not just brand-new start-ups that need to evolve to Plan B - in today's "big shift" driven global market even established companies cannot milk a successful business model for an extended period of time without taking major risks. Every established organization should be continuously testing its overall business model and/or the business models of the individual lines of business, products, services, etc. that make up the business.
But how to test the model? How do you know if you're closing in on a workable or better Plan B? That leads to the two major contributions of the book. The first is providing a structured, repeatable process or model for how to test a business model to determine if it will work. Essentially, Mullins and Komisar propose treating the entire exercise as a structured, iterative experimental process. They provide a model for the conditions to be tested (their business model framework) and some tools by which to do the testing. The most important tool is the dashboard on which the elements to be tested are listed and the results of the test(s) are recorded.
Finally, Mullins and Komisar define what a business model is and define how to test the various components of the model. Their business model definition is solely quantitative and focused on five components:
- revenue model
- gross margin model
- operating model
- working capital model
- investment model
Each component is defined in a separate chapter and supported by examples of two or three companies and how that particular element of the business model contains a key to the company's success. All the discussions are good - the one on the working capital model is particularly useful (you can never stress too often that "cash is king").
It's funny that given how much we all use the term "business model" that there doesn't seem to be a widely recognized definition for the term. I love that Mullins and Komisar establish a firm definition and then show how to test a business model to determine if it's going to work. I think this may turn out to be the most important contribution of the book.
It's slightly disappointing that Mullins and Komisar didn't acknowledge or cite the similarity between their approach to testing a business model and the assumption-driven planning approach called discovery-driven planning developed by McGrath and MacMillan. Also, the process of structured experimentation that the book discusses is very similar in intent to the Lean Start-up approach advocated by Eric Ries and discussed in an earlier post on this blog.
All in all, this book is a major contribution to the literature on entrepreneurship and business planning. Strongly recommended.