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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.

I definitely agree with Mark's view. In fact, business plans are extensive and they take time and money to create for one reason: the goal is to never fail by reducing as much risk as possible before investing in development. Of course most of the venture community (and the broader innovation community) thinks this is impossible, but jobs-to-be-done innovation has shown it is possible by using scientific methods to understand markets and customer needs and significantly reduce venture risk. 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.

A better, lower risk model would be a "zero burn" model. In the traditional model capital is invested in overhead and development ("burn") to build and launch a product idea. The fail fast model just tries to accelerate this by launching multiple products with less capital, but the process is fundamentally the same.

As Peter Drucker said, "There is nothing so useless as doing efficiently that which should not be done at all."

In a zero burn model, you 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 it uses a different unit of analysis (the customer's job) 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 some capital to get it right. But it is essentially a business planning process designed to significantly reduce the failure rate. And it works.