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Why a startup’s initial business plan is important

By August 2, 2007 4 Comments

In his Guide to Startups Part 7 Marc Andreessen argues that a startup’s business plan doesn’t matter that much.  I am not so sure that is the right way to think about things.  For sure every plan will change, but that doesn’t mean you shouldn’t think about it thoroughly.

Marc makes an analogy with the military saying:

No battle plan survives contact with the enemy

True enough.  But it doesn’t stop the military from being obsessive planners.  And it doesn’t stop armies without a good plan getting beaten by more organised oponents.

It is possible to overplan – and I agree that the most important thing for a startup by far is to find what Marc calls the ‘product/market fit’ – but for me the best approach is to always have a clear plan and then to be flexible in changing it.

If a startup is like a journey, and the plan is the route map from startup to success, then having a reasonably detailed plan is the best way to make sure you are setting off in the right direction.  And of making sure you turn in the right direction when you get to a block in the road.

The exercise of writing it down is valuable too.  It forces a clarity of thought and makes the assumptions behind the plan explicit.  Both of these should improve the quality of a plan.

I’m not sure about the next part of Marc’s post either:

The history of successful startups is quite clear on this topic [the unimportance of plans].

Normally I would simply point to Microsoft, which started as a programming tools company before IBM all but forced Bill Gates to go into the operating system business, or Oracle, which was a consultancy for the CIA before Larry Ellison decided to productize the relational database, or Intel, which was a much smaller company focused on the memory chip market until the Japanese onslaught of the mid-80’s forced Andy Grove to switch focus to CPUs.

I think these examples, with the exception of Ellison, are examples of what I was talking about yesterday.  Gates was lucky that IBM pushed him into operating systems – not having a plan didn’t help him get there.  In fact, if Gates had been trying to plan for world domination he might have seen earlier that without a move into OS’s he was unlikely to get there and pursued the opportunity more aggressively – as it was he had to be all but forced into it.  Ditto for Andy Grove.

As an aside – it is testament to how uncomfortable we are with the notion of randomness that I found writing that last paragraph difficult.  It just feels wrong saying that Gates was lucky.  But if Marc has the story right (and I have heard it elsewhere) then he was – IBM could easily have retained the rights to the DOS IP.