Customer Reviews

Getting to Plan B: Breaking Through to a Better Business Model

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The book, written by John Mullins and Randy Komisar, contains several important lessons, primarily for start-up entrepreneurs, on developing successful business models. Though very repetitive around a few key ideas, the book is well worth reading especially for those who want to better understand how the business model is reflected in the different financial statements. with interesting examples from: Amazon, Apple, Celtel, Costco, Dow Jones & Company, eBay, GlobalGiving, GO airlines, Google, Oberoi Hotels, Pantaloon, Patagonia, Ryanair, Shanda, Silverglide, Skype, Southwest Airlines, Toyota, Walmart, Zara and ZoomSystems.


The book in three bullet points:

* The business model concept is in the book defined as the pattern of economic activity comprising of five key elements that together determines the viability of any business. The five key elements being the revenue model, the gross margin model, the operating model, the working capital model and the investment model. Companies are successful when the five elements work together.

* Getting to Plan B is about the process of discovering a business model that works, with the assumption that the initial plan is most often wrong. The discovering process can be made systematic by constantly formulating different hypothesis and measurements and continuously follow up and iterate the business model into a new Plan B.

* The starting point for a new business model is to learn from successful examples worth mimicking in some way and examples to which you explicitly choose to do things differently, where the ultimate judge is the customers and the cash flow generated from your business model.


A brief summary of the different chapters:

1. Don't reinvent the wheel, make it better - the concepts of analogs (successful predecessors), antilogs (predecessors that you want to differ from), and Leaps of Faith (beliefs about answers with no evidence) is covered with the key take out to learn, mix and match to create your own business model, to experiment to test different hypothesis to prove or refute them.

2. Guiding your flight progress - the concept of dashboarding (a systematic way to guide experiments and track results) is presented with examples showing that measuring of specific parameters or results increases the focus of the company's activities, and that the dashboards, including parameters and goals, need to evolve over time based on the learnings they uncover.

3. Air, food and water - the chapter, focusing on revenue models, hits home two important points: the importance of resolving customer pain or providing customer delight, and the need for actual evidence of how customers are likely to respond. To develop a revenue model questions that need to be asked are: Who will buy? What will they buy? Why will they buy? How soon, how often, and how many will they buy? With what effort and cost on your part? At what price will they buy, and on what basis will they pay?

4. Avoiding rocks and hard places - the topic for the chapter is gross margin models; the spread between the price at which products and services are sold and the cost of selling those (COGS). The key messages with the chapter is that digital technology enables gross margin models in which COGS approaches zero, that a superior gross margin model creates leverage that can be applied differently depending on strategy, and finally the fact that pricing decisions should be value-based and not cost-based.

5. Trimming the fat - is a short chapter on operating costs; all the day-to-day costs that must be incurred in addition to COGS. Key ideas are that by doing things differently in relation to other actors in the industry, operating cost can be lowered or eliminated, and by starting the analysis at the most costly or scarcest resources in the industry areas for business model innovation might occur. Another key point is that adding costs might also enhance the customers' experiences and willingness to pay premium prices, so cost cutting is not always the answer to profitability.

6. Cash is king - is according to me one of the more important chapters in the book as the balance sheet, working capital and cash management is often forgotten in business model discussions. Different industries and business models requires different amount of working capital (the cash a company needs to keep the business running) and all elements in the business model have implications for the cash generated and the cash consumed. From page 139: "Failure to earn a profit won't put you out of business, as long as you still have cash. But if you run out of cash, even if you are profitable, you'll be gone in a heartbeat"

7. It takes money to make money - focus on the investment needed to get the business started and through the period until it can generate enough cash itself, and the general goal (there are exceptions) is to find a way to get to breakeven with as little investment as possible. The authors mention some of the many trade-offs involved with external funding from different sources, but primarily focus on venture capital. The conclusions are: Less investment means giving away less of the business, less credibility lost when leaving a business model for another, and fewer sleepless nights if you've mortgaged your house.

8. Can you balance a one-legged stool? - tries to summarize, at least on a conceptual level, the different elements of the authors' definition of a business model, and their implications on one another. The conclusion is that the revenue model, gross margin model and operating model directly affect the working capital model, and these four models directly affect the investment model.

9. Getting started on discovering your Plan B - ends the book where it started with a focus on the talented and visionary entrepreneur. In the beginning of the book there were statements such as "Intuitively, as is almost always the case for committed, passionate, entrepreneurs, they felt that the answers to all five questions were yes" (p29) and in the end "dreaming your entrepreneurial dream" (p214).


A quick comparison with some other popular books on business models:

* The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book.

* The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read.

* Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

* Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Osterwalder and Pigneur, atempts to introduce a standard language and format for analyzing and innovating business models based on the business model canvas. The book that was co-written with 470 practitioners is a great book to learn about different business models and tools for business model innovation.

All in all, the book is somewhat repetitive and rather long for the ideas it delivers, but with many interesting examples and important chapters on gross margins, operating costs and cash flow, it is well worth reading and a good complement to other books on business models not going into the financial details.

//Anders, The Business Model Database

It takes an average of 58 new product ideas to deliver a single successful new product. That is the core message of Getting to Plan B, a new book by John Mullins and Randy Komisar.

Since Plan A almost never works, it is critical to quickly learn from failure and move on to a successful Plan B (or C or D or E...). This book provides an exceptionally helpful framework for how to do this. Its power lies in its analytical framework combined with vivid examples from companies - including both for-profit and non-profit.

Contrary to popular perception, most successful businesses did not strike it rich from the beginning. A company like eBay, profitable from day one, is the exception that proves the rule (and Pierre Omidyar has said that he realizes how lucky he was). Even eBay has struggled to figure out how to make money from new business lines such as Skype. Google would not be the behemoth it is today - and might even be out of business -- if it had not discovered its own Plan B, paid Adwords. Amazon burned through hundreds of millions of dollars before it hit upon the right business model that made it profitable. Today, the jury is out on whether Twitter and even Facebook will find profitable Plan Bs that sustain their early growth.

What matters most is not the quality of the initial business plan, but instead the ability of the team to iterate successive business plans as a means to finding what works. Merely flailing about from Plan A to B to C increases the chance you will run out of cash before finding the right Plan. So the trick is to experiment quickly but intelligently, and with discipline. That is what this book helps you do.

Anyone who is thinking about starting a new business should read this book. Given the pace of change in the world, even established business leaders should read it, since the constant threat of new competition often requires even existing companies to develop new Plan Bs.

Full disclosure: My own organization, GlobalGiving, is one of the case studies in this book. My only beef is that Mullins and Komisar did not write this book years ago, which would have saved me a lot of heartache and helped me iterate my own business plan more quickly.

I'd like to start with the conclusion, get yourself "The Entrepreneur's Guide to Customer Development" by Brant Cooper and "The Four Steps to the Epiphany" by Steve Blank, those two books will give you a real step-by-step guide to building a company. Now for the actual review.

This book is a collection of stories in the style of "Founders at Work" or "Art of the Start" or any one of the other Startup Genre books. And as such, it is interesting to read the authors analyses from an academic stand point, hence 2 starts, but it offers little advice for someone starting a company.

However, as a guide for building a business, this book can be summed up as follows:

Your first idea will fail, plan on it failing but you need to start somewhere, so get going and look for opportunities to change course or pivot in the startup parlance.

It's an important notion that has been covered on numerous blogs and in great depth, which you can read for free, without paying money for the book; just do an online search for "startup pivot" and you will find plenty of examples by industry veterans.

As a Professor of Entrepreneurship I have been a big believer in Randy Komisar. His book, The Monk and the Riddle has inspired hundreds of my students.

Much to my surprise, this is a very different book. Most new venture planning and strategy books remind you of doctoral dissertations--moving bones from one grave to the other. There is nothing new.

This is different. It challenges you to delve deeper into a venture (new or growing). What can you learn from other companies experiences. Mix and match what you learn. Figure out what you don't know and develop tests to learn.

This book is also the best I have seen in blending its unique approach to the business model--revenue, gross margin, etc. It shows how the components work together to create a sustainable business. Its examples are stimulating.

The answer to the riddle in this book is hard work and creative research and continual learning. There are no eggs.

Ordering this book was a no-brainer.

Every (would be) entrepreneur who has enjoyed reading Randy's ,Goodbye Carrier, Hello Success` knows Randy`s wisdom for entrepreneurs. It'd call him the ,Zen Entrepreneur` for his enlightement and razor sharp thinking (for a taste, check out Youtube ,the biggest successes are often bred from failures).

The book is about a rarely covered topic: Getting to plan B (if necessary to Z). If the founders of Google, PayPal or Starbucks had stuck to their original plan, we might have never heard of them. PayPal's plan A didn't work. Neither did B, C, D, E nor F. Plan G stroke gold.

This is not a book about ,business planning`. It's a book about, in a sense, ,business discovering`. Getting to Plan B is a structured process of discovering, over time, a fluid pattern among the five business model* elements that, working together, will make the economics work (provided the business model is sound), so you don't run out of money along the way.

*revenue model, gross margin model, operating model, working capital model & investment model.

Randy & John, thank you very much for sharing your knowledge & wisdom with us.

This is an excellent book on how entrepreneurs can succeed by finding similar successful companies to emulate, by creating formal business experiments and then by monitoring and learning from them. Since entreprenuers tend to think about their business constantly, we do the above in the back of their minds and informally. Applying the tools in the book help you formalize the process and create brief but actionable plans which utilize the lessons we have learned. Once I applied the dashboard, several key insights jumped right out and I have been able to make changes to my business based on the data we had gathered over the past year.

As I started applying the dashboard to other business initiatives that we were conducting, we also added a column to the dashboard which identified the risks associated with those initiatives and the cost of the risks (in $ and time). In one case, it was a legal contract that we needed our sales reps to sign.

This book is a huge contribution to all entrepreneurs to help them succeed.

Mohammed Mansoor Ahmed
President
Fore Support Services, Inc.

Getting to Plan B is a very powerful book. It resonates with wisdom on many levels and rings true for those who have been in the entrepreneurial trenches. Too often we think and act from fairy tales about entrepreneurship and cinematic images of founders, not to mention fuzzy thinking about business models. Mullins and Komisar pull back the curtain and show how often we are wrong about our initial business ideas and how the market will respond, and how much work we have to do on business modeling. But at that point they are just getting warmed up. They show how many great success stories came not from Plan A, but Plan B and beyond, often closer to Plan Z. Their frameworks for analogs and antilogs are useful ones for the aspiring entrepreneur, as well as their dashboards. Finally, they take us on a tour of different business models and ways of thinking about, developing, and implementing them, fueled by many real-world examples that inform and inspire. Mullins draws on his own entrepreneurial experiences and teaching here, and Komisar does the same from his varied and remarkable journey across so many disciplines. A first-class book that really delivers the goods.

For new business owners, this is a must. It saves you valuable time in trying to find out where you are going wrong in marketing your product.

The book is written by an academic (John Mullins / LBS) and a venture capitalist (Randy Komisar / Kleiner Perkins). Their goal is to help entrepreneurs build a better better business model that will actually generate positive cash-flows in a shorter period of time (and thereby reduce the risk VCs are exposed to).

To reach this goal they touch upon different building blocks and provide real-world examples. They focus on models for:


* Revenue
* Gross Margin
* Operations
* Working Capital
* Investments



Furthermore, they provide a framework for how to test your own assumptions and develop them.

In total the book is a good starting point for anyone who is seriously interested in building a functioning company and highly recommndable.

The implementation of all of this in a real world setting however is a wholly different issue.

In life, sometimes God throws a wrench into our carefully-laid plans. We set out our goals on paper, and we make a list of intermediate steps to reach that goal. Or, we spend six months on a business plan for our new business, only to find that it doesn't work when we launch our business.

We work hard on Plan A, but Plan A rarely happens. When it does, it's great. But when it doesn't, we have a tendency to do a couple of things:

*Give up on our Plan altogether
*Blame someone else for messing up our Plan A
*Blame God for messing up our Plan A

I recently read a book called "Getting to Plan B," by John Mullins and Randy Komisar, who teach at the London Business School and Stanford University. They write, "If the founders of Google, PayPal or Starbucks had stuck to their original business plans, we'd likely never have heard of them." Changes happen in business (and in life), and we need to make sure that we adapt to that change.

Mullins and Komisar say that you make a profitable business by throwing out your Plan A almost immediately, and getting to Plan B as fast as possible. You do this by putting your Plan A through rigorous trials, have a "dashboard" for your company by which you track the metrics of Plan A, and making swift corrections to Plan A in order to adapt to the data that you're receiving from your dashboard.

We do this in life, too. "In their hearts humans plan their course, but the Lord establishes their steps" (Proverbs 16:9). We set goals, we make our life plan (or, in my case, a "strategic plan" for our family), but in the end, the Lord is sovereign over our lives.

This doesn't negate the necessity of making plans or goals. Those without goals or plans often are those that are tossed about by the winds of life.