93% Chance of Getting It Wrong

Traditional startups are constantly iterating their strategy to find one that works. So it is no surprise that business plans are a waste of time for fundraising. VCs are really investing in the people, as they will readily admit. But it turns out business plans are a waste of time for product development as well. I have been looking for data to support this, and I finally found it. 

A study done by Amar Bhide, found that 93%(!) of successful startups reported that "the strategy that led to their success was largely different from what they had originally planned."

 

So now we know: a strategic plan won't get you funded and it won't lead to a successful product. What is an entrepreneur to do? There are two possible conclusions. 

 

First, get rid of planning altogether and just wing it. This is the fail fast strategy: build and ship quickly and cheaply to see it anything sticks. By definition this strategy will only work if you can make more bets and hope that a few win. In other words, this strategy doesn't change the success rate, it just changes the number of bets and hopes a very small number of successes make up for all the losses. It is basically a lottery. See Y Combinator and Tech Stars. 

 

The second option is to fundamentally change the way strategic planning is done. From the perspective of the entrepreneur, this is the only option because starting and running 20, 30 or 100 companies is not possible. The starting point has to be a different unit of analysis for strategic planning. And that unit of analysis has to be the job the customer is trying to get done.