This topic examines the relationship between the entrepreneur’s vision and the need for strategic planning. It recognises that flexibility is critical in the development of entrepreneurial ventures and that the planning process must be non-linear in nature if it is to be responsive to the opportunities that market or product innovation offer.
While the discipline of formal business planning is highly important to the development of a successful venture, the plan is only a manifestation of the business case or model that underlies the venture. Planning should not be confused with clarity of vision. A formal business plan is no guarantee for success and that, while planning is important, too much attention can be paid to business plans at the expense of having a clear vision for the business.
The business plan is often viewed as a complex document, but it is really a mechanism for helping the entrepreneur systematically communicate their vision to others – either to raise money, secure contracts or organise the work of employees. Of more strategic importance is the ability to create a clear vision for the future.
The business plan is also less important than the underlying business model upon which the plan is built. The key elements of the business model are the product, profit formula and the key processes and resources. Of particular importance is the ability to identify a customer value proposition (CVP) that can be sustained over time in a competitive manner.
Business plans come in a variety of types but most need to have a statement of the opportunity, the environmental context, the risk-reward and the team. Ultimately you must use common sense when writing the plan.
Entrepreneurs generally don’t plan, at least in a formal manner, and much of the reason for this their propensity to perceive risk differently to others. They use biases and heuristics plus the ‘law of small numbers’ to convince themselves that the risk is less than it might really be. As a result they plan less but launch into a new venture or invest in an innovation and seize a first mover advantage.
Strategy and planning are not the same. Strategy is a continuous or double-loop process while planning is a single-loop process. The appropriate planning response for a given situation will differ.
Textbooks and readings
Alvarez, S. A., & Barney, J.B. (2005). "How Do Entrepreneurs Organise Firms Under Conditions of Uncertainty?" Journal of Management 31(5): 776-793.
Bhide, A. (1994). "How Entrepreneurs Craft Strategies that Work." Harvard Business Review 74(2): 150-161.
Brinckmann, J., Grichnik, D., and Kapsa, D. (2010). "Should Entrepreneurs Plan or Just Storm the Castle? A Meta-analysis on contextual factors impacting the business planning-performance relationship in small firms." Journal of Business Venturing 25(1): 24-40.
Sahlman, W. A. (1997). "How to Write a Great Business Plan." Harvard Business Review 75(4): 98-108.
Trimi, S. and Berbegal-Mirabent, J. (2012). "Business model innovation in entrepreneurship." International Entrepreneurship and Management Journal 8(4): 449-465.
Zahra, S. A., and Nambisan, S. (2012). "Entrepreneurship and Strategic Thinking in Business Ecosystems." Business Horizons 55(3): 219-229.