Small Businesses Can Win by Using this Trial-and-Error Approach
One of the drawbacks of getting a business degree is that they are often geared for graduates that are going to go on to work in large corporate business management teams. In this context, it is understandable that anything related to university-taught business planning – whether the plan is for a new business, a new product or a new marketing campaign – is tackled with a highly structured top-down approach. Certainly, this was the case when I got my B.Com degree in the 1990’s.
With the top-down method, the new business/product/marketing campaign is always planned out in meticulous detail, often including a rigid roadmap for 12 months ahead. Nothing is started until this overarching plan is 100% complete and signed off by all parties.
The key is to always let the market be the judge. Continually test the water
A trial-and-error approach
The small business of the 21st century doesn’t work this way. Things are continually changing and evolving, and the entrepreneur needs to be fast, agile and adaptable. Instead of sticking to grand master-plans, a trial-and-error approach often works better. Constantly try things out. Throw spaghetti against the wall and see if it sticks. If not, move on to the next thing.
The key is to always let the market be the judge. Continually test the water. The only real way to know if your new business or product is going to work is to get it out there and see what the market says. It doesn’t matter how clever your management team is or how many spreadsheets you put together – in the end, it is Mr. Market who matters.
Minimum Viable Product
This is the rationale behind the MVP or Minimal Viable Product. MVPs are often exclusively thought about as putting a bare-bones product together in order to showcase it to potential funders. But the MVP concept is actually so much more than this. Say you are running a retail business and want to launch a new product range. Rather than throwing massive resources at the new product and lining up 12 months of logistics and supply, get a small run of the product out into the market as soon as possible. If Mr. Market likes it and the product takes off, then throw your resources and planning into it. If not, move onto the next thing (using the time and resources that you didn’t already blow on the failed product…)
Ditto if you’re running an eCommerce business. Want to put a new feature on your website? The top-down approach would have you fully integrate this feature into all of your business processes upfront – your payment gateways, your CMS, your transactional email system. After spending a lot of time and money, you could then launch your new feature.
But there is a better way. Once again the MVP method applies. Rather get a mini-version of your product out there. Test the waters. Only if it is a success do you carry on building all the back-end integration. Even then, you don’t need to reach “completion”. Maybe the market liked your new feature, but not wildly so. Then iterate – build a little more onto the new feature. Tweak it. Test it. Yes, it’s working. Build a bit more. Repeat.
Bottom-up solutions work because they’ve already been through natural selection and therefore have already adapted to the environment
Feedback is everything
The trick is to be continually responsive to your customers. To develop a feedback loop for your products and continually tweak and iterate as you go along. Sometimes this approach is called the bottom-up method – building your product up from the ground organically, bit by bit, rather than blindly following a blueprint.
Businesses built via iterative steps often prove more resilient than their top-down counterparts. The reason for this is simple: Bottom-up solutions work because they’ve already been through natural selection and therefore have already adapted to the environment.
I am not for a moment suggesting that new and existing businesses do no long-term planning or budgeting. Failing to plan is often equivalent to planning to fail. At the least, you need a Minimum Viable Plan. One that takes into account that you can never plan every detail of a project and that your plans need to be flexible and adjustable. Rather collaborate with the market as a co-planner than force your plans onto the market, no matter how brilliant you think they are. In business, the market is always right.