This blog post is co-written by Yngve Dahle and Mark Robinson.
As the most personal of our blog posts, we hope that this one will give a good description of what the term ”Lean” really means in practice.
We will tell the story of our own company, Lean Business – from 2010 to 2015. First we should clarify how we use a couple of the words in the heading: whereas the term “success” is still too early to use in a company profitability meaning, we definitely have gone from delivering little value to our clients to gradually delivering more and more value. For us, as for most entrepreneurs, giving value to our customers is the truest measure of success.
The term ”failing” might also be a bit too strong. We have actually never failed in the sense of losing money. The company has grown year by year while delivering satisfying financial results. We use the term ”failing” as delivering less value to our customers than we would have liked. Realizing that, we have always tried to start fresh with an improved business idea. Or a “pivot” as Eric Ries calls it. In the four years we have run our company, we have actually gone through four such “pivots”. Doing so is what has brought us forward. We have improved our unique value proposition throughout all of these changes.
Photo: Gunnar Kopperud
It all started with two good friends in Scandinavia that wanted to work with startups. One of us got a part-time job teaching entrepreneurship at the university. Trying to find a suitable curriculum, it became clear that entrepreneurship textbooks relevant for Scandinavian Startups were virtually non-existant. The solution suggested by the headmaster of the university was as simple as it was terrifying: “You just have to write one yourselves.” Never having written anything longer than a shopping-list (OK, a few school thesis’, but they weren’t really readable)- this was of course a daunting task. Surprisingly enough, the representative for the most relevant publisher also thought this was a good idea – and in 2010 the book was published.
Failure 1: The Business Model Workshops
Intoxicated with the idea of being writers, we decided to offer a one-day workshop in Business Modeling (one of the main themes of our book) to startups. The idea was to try to offer a little taste of this new way of thinking to the companies that really needed it, with local advisors helping them. We were typically situated in the smaller places outside of the big centers.
We managed to get leading investment companies and auditors as partners, and visited incubators and growth centers all around Scandinavia. We had more than 70 of these workshops with more than 1000 companies present. We received very good reviews, and our partners were satisfied. So far, so good!
But, after a few months we realized that our ambition of changing the way these companies worked was far from being realized. The attendees came to our workshop, and had a nice day. When they came back to their offices the next day, they were ambushed by all of yesterdays unanswered emails and voice messages, and after a few weeks all good ambitions of improving their business model had evaporated.
Failure 2: The Traditional Business Plan Consulting
We realized three things. We needed to cater to one company at a time, spend a longer time with each customer – and we had to offer them more than just the business model. At this time we started working on the first drafts of our business plan concept. We started by figuring out each company’s resources, and connected that with the business idea and business model before adding objectives and tasks. Finally we designed a method combining the revenues from the objectives and the costs from the tasks into profit & loss and cash flow forecasts.
The method was truly new and interesting, and we had quite a few successful consultancy sessions, creating business plans for small and mid-size companies.
The only problem was that the business plans were not adapting to the rapidly changing reality surrounding our clients. As the months went by, the gaps between the plans and what actually happened grew. After a while, the business plans had become gradually more irrelevant. The fact that we were two guys, and most of our clients had their offices in other cities made it difficult to meet with them to edit the plans.
Failure 3: The Lean Business Planning Advisors
So, two things had to be fixed. We needed to make the planning method dynamic, able to change according to responses from customers, competitors and the general surroundings. And, we had to find some way to create a presence near the clients, so that we would be able to give continuous advice, not just meet them once or twice a year.
The first solution came by a lucky break. We stumbled over the “Lean Startup”movement. The most important contributors to this movement are Steve Blank with his “Customer Development Method” (2005), Eric Ries with his “Lean Startup” methodology (2001), and Ash Maurya with “Running Lean” (2012). Here we found the theoretical foundation to make our method truly dynamic. We went from static twelve-month plans to rolling three-month plans that would be changed and improved every day. This made the connection between idea, model, objectives, tasks and forecasts even more powerful. We were able to show the financial consequences of any pivot, change in business model or objective dynamically.
The geographical presence was solved by creating a program for certifying local consultants in the method. This was very successful. Within the first year, we had certified more than 250 consultants. Some of them worked with entrepreneurship support in the public sector, while others worked in consultancy firms. We got many good partner organizations, and the advisors made a big difference for a number of startups.
However, all was not perfect. It was very difficult to teach the method to the certified advisors. Not because it was particularly complex or that our advisors weren’t smart enough (on the contrary). Simply because creating structure in the plan demanded a lot of work and considerations. The advisors should be able to concentrate on giving good advice. They should not use their limited energy on organizing the different parts of the plan according to each other. Something had to be done!
Failure 4: The Lean Business Planner Test Harness
We decided that we needed to create a software solution. The first version was a Microsoft Word template that was hacked together the night before it was presented to some of our customers. They said (rightly so) that we were idiots, and that the solution was useless. The next night we tried to make it in MS Excel. The feedback was that we were slightly less idiotic, and that there was a small chance that this might work somewhere in the distant future. Over the next few months, we made 21 totally new Excel versions before employing a professional team to make 24 test versions using proper computer code. Every single one of these versions were released on our patient customers, who provided us with vital feedback. All in all we have had more than 1500 companies trying out these test versions. Gradually they became better, and in the end the customer feedback was very good.
However, one big problem kept coming back to haunt us. The system was too complex to use without proper training. We wanted people to be able to go to our website and spend an hour hammering out a reasonable first draft of a business plan without having had any training beforehand. Then they should be able to use the certified advisors to challenge the business decisions in the plan. There was no way we could use our test harness to do any of that.
After conducting test trainings in everything from townships in South Africa to major European cities, it was clear that both our methodology and our system had to be dramatically simplified. We decided to give priority to the practical entrepreneur, and accept that it might be a bit too simplistic for the most advanced academics. We started to realize that we needed to go critically through everything we had. Sadly, it was obvious that nothing of the existing test harness could be used!
So, we got help from a professional design company and a whole lot of our customers, and started from scratch. We started by redesigning and improving the Lean Business method. Then we built it into a brand new Software Solution- The Lean Business Planner 1.0.
Of course it is a bit early to claim a success. But, it is clear that the combination of the Lean Business method, the books, the Lean Business Planner software solution and the locally available advisors have created value for our customers. As the word spreads, we get to work with more clients. The two friends have grown into a competent team, and we currently have offices in four countries. We will open new territories rapidly over the next few months.
We are currently releasing our new book, Lean Business Planning, in five languages – and we had the first training sessions in the new method for our certified advisors. The main point of this is that we, as most entrepreneurs, didn’t get it right from the start. But we were willing to challenge our ways, respond to feedback from our customers (not always fun!) and make radical changes. We do not think for one minute that the current incarnation of Lean Business is perfect either. We will continue to challenge everything we do. It is always possible to make things better. In our opinion that is the core value of Lean. We hope that this blog post may inspire you, and perhaps start a discussion. If some of the entrepreneurship terminology used is new to you, you will find it better explained in the Introduction chapter of our Lean Business Planning book. You can download a free PDF of the chapter here.