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Tuesday
Dec212010

Business Plans Are Like Treating Patients Clinically

Recommend a treatment and see if works.

Laryngopharyngeal reflux is a controversial entity. Patients complain of hoarseness, throat clearing, globus symptoms,cough and sore throat. Some have coexistent symptoms of gastroesophageal reflux disease (GERD), some don't. Some have abnormal physical findings on laryngeal examination, some don't. Most doctors treat such patients clinically with proton- pump inhibitors for several weeks to see if things improve. We doctors call it treating someone on a clinical basis or treating clinically. Business people call it a business plan.

When treating someone clinically, you are never sure the treatment will work and are prepared to reconsider the diagnosis and the underlying assumptions you made when you made the diagnosis and recommended treatment. Likewise when you write a business plan, you are never sure the plan will work and should be ready to make frequent adjustments...getting to Plan B.

John Mullins, Professor of Entrepreneurship at the London Business School, and Randy Komisar, a partner at Kleiner Perkins Caufield &  Byers , explain all of this in their book, "Getting to Plan B".

The basic thesis is that no battle plan. or business plan,  survives the first shot and you need to be prepared to make changes quickly. Just like you monitor patients for response to treatment, you monitor your business to see if things are working. If they are not, then make changes.

Mullins and Komisar recommend using dashboards to monitor your business. The numbers will tell you whether your leaps of faith, beliefs you hold about the answers to your questions despite having no real evidence that these beliefs are actually true, are valid or not.

In addition, just like you use history, physical exam and testing to monitor a patient's progress, you should use metrics and dashboards to monitor the vital signs of your business. Those vital signs are your revenue model, your gross margin model, your operating model, your working capital model and your investment model.

You can count on the fingers of one hand the number of businesses that have succeeded based on Plan A. None of them are mine. Be prepared to monitor your business's clinical progress, challenge your initial diagnosis,  and, if the patient is not responding to treatment , change your therapy before things go terribly south.

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