The History of Lean Planning
By Noah Parsons, December 2016 <Article Source>
Lean Planning is a concept that we introduced back in 2012 as an evolution in business planning. The traditional business plan just wasn’t fitting the needs of modern, fast-moving companies and it was time to bring more of a scientific approach to business planning.
There’s nothing wrong with planning—it’s just that the tools and methods for planning needed to evolve. In fact, multiple scientific studies hold up the fact that planning leads to greater success.
However, the traditional business plan took too long to write, often wasn’t read by anyone outside the business, and wasn’t used properly to start, grow, and manage businesses.
We proposed Lean Planning as the next step in business planning. But, where did Lean Planning come from?
Here’s a quick history of how we developed Lean Planning.
It starts with “Plan-As-You-Go”
Lean Planning started with Tim Berry’s 2008 book, “The Plan-As-You-Go Business Plan,” which was a new way for entrepreneurs to think about planning. Instead of encouraging entrepreneurs to focus on developing long, in-depth, static business plans, Berry advocated for a simpler approach:
- Define your business identity: What’s your value proposition to your customers?
- Determine your target market: You need to know and understand your customers.
- Build an action plan: How are you going to validate your assumptions and measure progress?
- Develop a forecast: Basic forecasts and budgets are critical; tracking them is even more so.
The idea here was that business plan should no longer be just a single event. Instead, it should be a living tool that is revisited on a regular basis. “Plan-as-you-go” planning is about setting goals and objectives, defining accountability, and then revisiting and revising the plan as new information is discovered.
Here at Palo Alto Software in 2007 and 2008, we embraced these planning concepts and moved toward a more agile planning process. Instead of detailed documents, we focused on tracking our performance to our plan and managing to regularly updated schedules and milestones. At the time, we used Business Plan Pro and Basecamp for this. We’ve since transitioned to a modern system that’s much easier to use (more on that in a moment).
Can the Business Model Canvas replace the business plan?
In 2010, Alex Osterwalder published his book, “Business Model Generation,” wherein he created a framework for what Tim Berry calls “business identity.” Osterwalder defined a template called Business Model Canvas for documenting business models. This form of planning condensed the business model onto one page and is most useful for high-growth, technically-focused startups (think Silicon Valley).
We really liked the concept of condensing a business model onto one page, but as we worked with startups, small businesses, and academics, the tool proved to be not quite the right fit for all business types. It was also difficult for small businesses to make use of the canvas without coaching.
For example, many businesses have a difficult time arriving at their key value proposition without first thoroughly understanding the customer problem. Also, the “customer relationships” section didn’t seem to fit for many traditional businesses. Finally, while the Business Model Canvas asks for a basic list of expenses and revenue streams, it doesn’t help entrepreneurs determine if their company is truly financially viable.
Do startups have a manual?
In 2012, Steve Blank synthesized the ideas from his first book, “Four Steps to the Epiphany,” with The Business Model Canvas in his “Startup Owner’s Manual.” Blank’s main innovation here is what he calls “customer development,” which is a methodology for learning and validating market needs through detailed customer communication and follow up.
For us, this methodology made sense for high growth technology startups seeking to define and prove a new business model. But, it stopped short of the tracking and accountability that we really liked from “Plan-As-You-Go” planning.
Lean Planning is born
We felt that there was a need to pull all of these concepts together and create a methodology and set of tools that both startups and existing businesses could use—a tool set that would work for both Silicon Valley startups and Main Street small businesses.
So, we developed the concept of Lean Planning, with its foundations in “Plan-As-You-Go” planning and incorporating the idea of documenting a business model in a simpler format so entrepreneurs could find success faster.
