Tag Archives: steve blank

The Case Against The Business Case – Part II

Note: This is part of 1 of a two-part series. Read part 1 here.

In part 1, I talked about the problems of pursuing a new product idea in an organization, which traditionally starts with preparing and selling a business case. I shared research that I conducted in which I spoke with a number of product management professionals across the country in companies large and small who resoundingly shared their distaste for the process.

The response was amazing. It seems my post touched a chord!

Some interesting stats:

  • Within one week, the post became the 3rd most viewed on my blog.
  • Tweets, likes and positive comments on my blog and LinkedIn groups where I shared my post totaled 31. In other words, 31 additional people were in agreement with the original 24 with whom I had spoken.
  • On the flip side, there were a 6 disagreeing comments posted on the same LinkedIn groups.

Now, if there were any other detractors (because many more viewed the article), they either didn’t agree, didn’t comment, or didn’t care.

Still, with 83% promoters and 17% detractors, this would give an NPS-style score of 66%.

So it seems I’m on to something here.

Here’s something interesting. According to the Pragmatic Marketing’s 2013 Annual Product Management and Marketing Survey, 50% of respondents indicated they spend at least half a day per week preparing business cases.

part-of-job

Do the math on this, and that’s 17.6 hours per month or the equivalent of 1 month and 3 days per year spent preparing business cases.

So on average, a product manager is spending over one month of an entire year preparing business cases. Surely there should be some ROI to spending that much time? Yet, we all know the rate of failed products is sadly high.

To be clear, I’m not saying a business case is not necessary. Indeed, one needs to have a robust business case to ask for a commitment of resources and/or investment.

I’m saying that while well-intentioned, somewhere along the way, the process by which we’ve gone about preparing the business case has become wasteful.

[optin-monster-shortcode id=”tjtsmjhkd0zsxede”]

 

Several months ago, Steve Blank wrote a column in the Wall Street Journal that talked about the need for a startup to begin not with a business plan, but with building and testing a business model.

Three years prior to that, he blogged about how Customer Development is more effective than the traditional product development process in helping startups raise VC money.

“In a traditional product development model, entrepreneurs come up with an idea or concept, write a business plan and try to get funding to bring that idea to fruition. The goal of their startup in this stage becomes “getting funded.” Entrepreneurs put together their funding presentation by extracting the key ideas from their business plan, putting them on PowerPoint/Keynote and pitching the company – until they get funded or exhausted.”

It seems to me the same logic can be applied to pursuing new product ideas in established organizations.

Just like entrepreneurs typically jump right into writing the business case and seeking funding, product managers (or any visionary employee) often go direct from coming up with a concept to writing the business case and seeking its approval.

traditional-biz-case

Here’s another quote from that WSJ article:

“Entrepreneurs treat a business plan, once written, as the culmination of everything they know and believe. All they need to do is add money and magically that five-year forecast in Appendix A will simply happen if they execute to the plan.”

I’ve found the same with business cases. There are two key problems with the traditional approach to preparing a business case.

One is, like with startups, pursuing a new product idea in an organization is also fraught with uncertainty. The assumptions that go into the financial forecast need to be tested.

The other is that when seeking approval, your goal and your execs’ goal may not necessarily be aligned.

You still have a lot to learn and prove in your model. But the execs are ultimately interested in only one thing: ROI. Perfectly understandable, given the financial responsibility entrusted upon them.

problem-with-biz-case

This often leads to wasteful execution. The focus becomes hitting an arbitrary delivery date and trying to hit a promised ROI.

The product manager is caught between a rock and hard place: learning from customers and launching on time. It often leads to delivering bloatware or crapware.

What was that stat again about the rate of failed products?

So it seems to me that to build a robust business case, it’s important to validate that you’ve truly understood your customers’ problems, that they’ve bought into your proposed solution, that the problem is worth solving, and that it fits with the company’s overall corporate strategy.

For extra credit, you need to identify some early adopters, or “earlyvangelists,” as Steve Blank calls them.

These insights can help you identify key metrics that will drive your financials, making for a much more solid business case, and increase the chances for more efficient execution.

To add to this, product managers face a unique challenge that entrepreneurs don’t, which is gaining and maintaining internal stakeholder support.

This can be especially true in larger organizations where there are simply more people to manage and placate. Lots of opinions. Capturing and addressing concerns. Following up. Competing agendas. Finding an executive champion. Lots of approvals.

These are real challenges with which the bold product manager has to deal.

How to address that? Perhaps there’s a way to apply Customer Development concepts to internal stakeholders…?

In fact, there is.