Fail Fast vs. Zero Burn
Mark Suster has a nice post about the "fail fast" method. He rails against fail fast, and rightly so. He writes:
I have met so many young entrepreneurs who tell me, “we don’t need business plans anymore, there a waste! We’re going to put our product out there and fail fast!”... or they tell me, “we’ll launch a bunch of products and see what works.” That is the old “throw spaghetti against the wall and see what sticks” approach. It’s intellectually lazy and I doubt many great companies are born this way.
We definitely agree with Mark's view. In fact our plans are extensive and they take time and money to create for one reason: the goal is to never fail. Of course most of the venture community (and the broader innovation community) thinks this is impossible, but as we have shown with over two-decades of successful product launches, it is possible by using scientific methods to understand markets and customer needs. The problem is not with the idea of creating a business plan, it is with the inputs to the plan. The inputs (i.e. the definition of a market and a customer need) have to change, otherwise creating the plan will not result in a higher chance of success.
In our zero burn model, we do the work of selecting and sizing markets, uncovering all the customer needs (which is possible contrary to the mistaken "latent needs" school of thought), prioritizing all the opportunities, picking the right strategy and generating and validating a solution idea (i.e. a platform, business model and feature set). All of this work is one before development and before any investment in recurring burn.
Why does this work? Because we use a different unit of analysis (jobs and outcomes) and rigorous quantitative techniques that can predict if there is product-market fit before the product is launched. It takes a lot of time, hard work, and capital to get it right. But it is essentially a business planning process designed to significantly reduce the failure rate. And it works.