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March 2010

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.

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