A Quote by Steve Blank
We now understand the distinction between startups - who search for a business model - versus existing companies - that execute a business plan.
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Startups are companies that are still in the process of searching for a business model. Ventures that are further along and executing their business models are no longer startups; they are early-stage companies.
Founders have continually struggled with and adapted the 'big business' tools, rules, and processes taught in business schools when startups failed to execute 'the plan,' never admitting to the entrepreneurs that no startup executes to its business plan.
Business plans are the tool existing companies use for execution. They are the wrong tool to search for a business model.
Companies that acquire startups for their intellectual property, teams, or product lines are acquiring startups that are searching for a business model. If they acquire later stage companies who already have users/customers and/or a predictable revenue stream, they are acquiring companies that are executing.
Most companies are built to execute today's business model, not discover tomorrow's.
The reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption. Companies in fact are specifically organized to under-invest in disruptive innovations! This is one reason why we often suggest that companies set up separate teams or groups to commercialize disruptive innovations. When disruptive innovations have to fight with other innovations for resources, they tend to lose out.
All too often, a successful new business model becomes the business model for companies not creative enough to invent their own.
Yes, some banks will only float good companies. But others could not give two hoots if you have a business, a business plan or any business experience.
The reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption.
Companies will need to pursue a more diversified business model, but I think those companies that have what I call a focused diversified business model will be more successful.
As a serial investor who has raised hundreds of millions of dollars for startups, I know that the business plans coming out of incubators tend to be vetted and more thoroughly validated. The incubator's input into your business plan will make you look far more polished and experienced - even if you have never run a business before.
It's a funny line when you're walking - the creativity, the subjectivity versus the objectivity, creativity versus the business, and recognizing that you are in the music business, so there are certain things that you have to acquiesce to on the business side and certain creative decisions that you have to make for the purposes of serving the business side of it.
Generally, the technology that enables disruption is developed in the companies that are the practitioners of the original technology. That's where the understanding of the technology first comes together. They usually can't commercialize the technology because they have to couple it with the business model innovation, and because they tend to try to take all of their technologies to market through their original business model, somebody else just picks up the technology and changes the world through the business model innovation.
In my own business, I took on the insurance companies and built my own self-insured plan for my employees that was cost effective and included no caps on coverage, coverage for pre-existing conditions, and allowed kids to stay on their parents' plan until they turned 26.
In the past, when venture-funded startups told their investors they'd found a profitable business model, the first thing VCs would do is to start looking for an 'operating exec' - usually an MBA who would act as the designated 'adult' and take over the transition from Search to Build.
Startups have finite time and resources to find product/market fit before they run out of money. Therefore startups trade off certainty for speed, adopting 'good enough decision making' and iterating and pivoting as they fail, learn, and discover their business model.
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