Times change. And so does the approach to how founders approach business ideas. While 20 years ago a comprehensive business plan was the start of many startup projects, today a lot of founders follow the lean startup method. Validating the identified problem and the intended solution at an early stage by means of a minimum viable prototype (MVP) with potential customers makes sense, a lot of sense in fact. The Lean Startup Method is a real asset to the startup scene. I even teach a course on it at my university. Over the last decade, the pendulum has clearly moved from a strong focus on thinking to a strong focus on doing. Ott, Eisenhardt & Bingham1 also observe these two different approaches, speaking of strategy development by doing and strategy development by thinking:
Strategizing by Doing: „Form strategies by taking action and then learning from their experience (e.g. trial-and error, experimentation)“
Strategizing by Thinking: „Form strategy by relying on cognition (e.g. mental modes, analogies)“
But which approach makes the most sense for founders? In the startup scene, the focus on doing is currently very much in vogue. Instead of analyzing the initial situation of a startup, things are often simply executed. Whether the right things are done is secondary or only after results have been achieved is it decided whether the action was the right one. Before thinking about something for a long time, facts are rather created by actions. Thinking too long or carefully analyzing the initial situation is rather seen as a way of thinking of old-fashioned corporations, from which it is necessary to differentiate. In principle, I am a supporter of an action-oriented approach, the basic idea is a good one. But in the pure form outlined, it also leads to a certain actionism, in other words, action without a concept. And many small attempts can also take up resources, i.e. time and money. If actions and results are not reflected, the learning effect is also limited. Founders then remain on a symptomatic level, they can evaluate the results as positive or negative, but they do not understand the causes. No deeper and transferable insights are gained.
Coaches who focus strongly on doing give advice to people interested in founding such as, "Don't think long, just start and see where it goes" or "just do it." What is well meant and is supposed to bring timely results can also cost time in the end, however, because founders may then pursue ideas that would have been discarded as unattractive in a quick analysis. Or business ideas are pursued that appear commercially opportune at first glance, but at the end of the day do not fit at all with the founders' life goals, which can consequently lead to dissatisfaction and the end of the entrepreneurial activity.
With a focus on thinking, extensive thought is given, detailed plans are forged. Often, all eventualities have been thought through, detailed product definitions and processes have been developed and then, in a waterfall logic, the concept is brought into development without any conversations with the customers. The founders think they understand the market, the customer. After a long conception and development phase, the musket is then pulled out and a targeted shot is fired at the market. However, hitting the target with the first shot may be considered lucky, a second shot is usually not possible, as all resources have already been used up by the long conception and development phase. With this approach, it takes far too long for one's thoughts, often fantasies, to be validated in reality.
Coaches or founders who focus heavily on thinking give advice to people interested in starting a business such as, "First, create a proper business plan." Then there are rounds of meetings to discuss and revise the business plan. The plan numbers and analysis give a sense of security, which is not there. The market is merciless. Years of conception and development work can be undone in a short time at the first impact on the market. The danger of developing solutions that miss the market is high. As we know from CB Insights2 analyses, 42% of start-ups fail because there is no market demand for the developed solution.
Whether or not a focus on thinking or doing makes sense also depends on the characteristics of the startup project and its context. In cases of high predictability, a business plan can certainly make sense, while it is often pointless in cases of high uncertainty. However, in my opinion, following a pure form of these approaches in startup projects should usually be viewed critically, which is why I would like to integrate the different perspectives. Founders should take a holistic perspective on their start-up project. In doing so, they should think, reflect, act and feel. In addition to thinking and doing, my approach should also take into account feelings, which are often left out in business, but can be an important source of knowledge for founders when making decisions. I call my holistic approach, which I would like to present in the next episode, "TAF Decision Frame". Using the TAF (=Think-Act-Feel) Decision Frame, founders should make the right decisions for them, take a holistic perspective and consider information from the world of thinking, feeling and doing.
Ott, T. E., Eisenhardt, K. M., & Bingham, Christopher B. (2017). Strategy Formation in Entrepreneurial Settings: Past Insights and Future Directions. Stategic Entrepreneurship Journal, 11.
CBInsights. (2019). The Top 20 Reasons Startups Fail. https://www.cbinsights.com/research/startup-failure-reasons-top/