There are seven stages in the life-cycle of a business:
- Assessment (ideas, resources, market)
- Seed (nurturing the idea)
- Discovery (discovering a sustainably profitable business model)
- Proof (proving the business model)
Most people starting this journey for the first time think they will go directly from brilliant business idea to execution of a highly lucrative business model. What they miss is all the hard work in between that it takes to nurture their idea, discover a viable, sustainably profitable business model, prove that model and then scale that model into the highly lucrative machine of their initial dreams.
In addition, most of the business startup press, especially the maximum-buzz high technology startup media, concentrates on the Lean Startup methodology as applied to the business model discovery phase. http://theleanstartup.com/ This leads some first time entrepreneurs to believe that as long as they optimize the business model discovery stage of the journey, nothing else really matters. Unfortunately, this is not the case.
However, the Lean Startup methodology does teach some very important lessons about how to be as efficient as possible while you are in the business model discovery cycle.
It is very unlikely that you will go directly from idea to proven, sustainably profitable business model. In fact, it is almost certain that if you survive the business discovery cycle before you run out of resources, you will exit the cycle doing something very different from what you originally thought you would be doing.
Each time you go around the business model discovery cycle you consume resources: time, money, people, relationships, energy, etc. If you consume all of your available resources before you discover and prove a sustainably profitable business model, then your business startup is dead.
That consumption of resources every time around the business model discovery cycle is the core reason why the Lean Startup methodology is so valuable. Anything that enables you to use as few resources as possible every time around the cycle allows more trips around the cycle. Why is this important? Because it will take you many more cycles than you think it will to both discover and prove a sustainably profitable business model.
The downside to the Lean Startup mania is that too many entrepreneurs come to believe that proving the business model is the finish line. This is very similar to people who believe that getting startup capitalization / funding, especially from venture capital, is the finish line. Neither of these is the finish line, they are just milestones along the journey.
Comparatively few have extended the Lean Startup principles to the practical aspects of applying them to a business model. Once exception is Ash Maurya and his book Running Lean. http://www.runningleanhq.com/
Ash has also developed the Running Lean Canvas, an adaptation of Alex Osterwalder’s Business Model Canvas. This approach, a one-page business model focused on the essentials of what it takes to make your idea work in reality, is a boon to anyone starting a business, regardless of their level of experience. http://leancanvas.com/
For more depth and variation on the one-page business model, a great resource is the book Business Model Generation http://www.businessmodelgeneration.com/ iPad toolbox application available here: http://www.businessmodelgeneration.com/toolbox
Every single business in the world is built upon a business model. Until you articulate and document what that business model is, and then—crucially—prove it to be sustainably profitable, all you have is an idea. You can’t jump from idea to execution. You must first pass the milestones of business model discovery and proof.
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