Denne boken er blitt forretningsplanens uunnværlige ABC. Den er solid forankret i teori samtidig som forfatterne får med store porsjoner praktisk erfaring. Med denne boken i hånden går forretningsplanen fra å være et pliktløp ovenfor finansieringskilder til å bli et nødvendig strategisk og praktisk verktøy for enhver virksomhet. Bokens tydelige metodikk og klare struktur gjør at selv den travleste entreprenør raskt vil få nytte av den. Terje Wold, adm.dir. i og gründer av Invenia AS.
Forfatterne følger hele veien lean business-filosofien i praksis. Her er ingenting «hogget i stein». Man skal hele tiden jakte på forbedringer, og planer kan og bør endres kontinuerlig. Boken inneholder tre case som viser hvordan teoriene, metodikken og verktøyene i boken kan anvendes i praksis.
Lean business henvender seg til alle som jobber i og med bedrifter som har vekstambisjoner. Den vil dessuten være ideell lesning for alle som tar kurs innenfor forretningsutvikling eller entreprenørskap.
9788215021546_o_UF.indd 1
ISBN 978-82-15-02154-6
ISBN 978-82-15-02154-6 9
788215 021546
Yngve Dahle Gunnar Alskog Erik Solberg Erlend Bang Abelsen Pål Frønsdal
lean business forretningsplanlegging trinn for trinn
Foto: Mona Stenseth Larsen
• Mobilisering • Ressursbeskrivelse • Forretningsideen • Forretningsmodellen • Nåsituasjonen • Risiko • Målsetninger • Handlingsplan • Budsjett • Planoppfølging
Dahle•Alskog•Solberg•Bang Abelsen•Frønsdal
Lean business redefinerer forretningsplanen. Fra å være et dødt dokument myntet på finansieringskilder til å inneholde de sentrale prosessene i all forretningsutvikling. Gjennom ti intuitive og klare trinn tar forfatterne oss med på en reise fra de overordnede strategiske spørsmålene til den taktiske oppfølgingen. Boken støtter et web-basert ledelsesverktøy som gjør deg i stand til å følge opp planen din hver eneste dag, De ti trinnene som samtidig representerer hovedstrukturen i boken er:
Forfatterne av denne boken har til sammen over 100 års praktisk og teoretisk erfaring med forretningsutvikling. Yngve er hovedforfatter av boken Vekstbedriften (Universitetsforlaget, 2012), partner i Televenture og høyskolelektor II ved Markedshøyskolen. Erlend er siviløkonom og sammen med Yngve har han etablert Lean Business AS. Han har 15 års erfaring fra forretningsutvikling, løsningsledelse og salg i vekstselskaper. Gunnar leder KPMGs virksomhet i Troms. Han er statsautorisert revisor og rådgiver til ledelsen i en rekke selskaper. Erik har 16 års erfaring fra Statoil i Skandinavia og Irland. De siste 9 årene har han vært markedsdirektør og ansvarlig for forretningsutvikling i KPMG i Norge. Pål har jobbet med innovasjon og virksomhetsutvikling i 15 år. Han har vært med på etableringen av 5 bedrifter og jobber nå som ledelsesrådgiver.
08.05.13 15.14
LEAN BUSINESS
Layout: Thomas Stavem
CONTENTS
175
CASE 1 Troll Factory
197
CASE 2 Builder
223
CASE 3 AudioVideo
1. MOBILISATION
13
2. RESOURCES
35
3. BUSINESS IDEA
43
4. BUSINESS MODEL
55
5. CURRENT SITUATION
91
6. RISK
101
7. OBJECTIVES
113
8. ACTIVITIES
127
9. FORECAST
137
10. DASHBOARD
161
DETAILED CONTENTS MOBILISATION
13
4
BUSINESS MODEL
55
1.1
Do you need a business plan?
14
4.1
Question1: What will you deliver?
57
1.2
The structure of the book
17
4.2
Question2: Who is the customer?
61
1.3
Target group
18
4.3
Question 3: Who are your partners and competitors?
64
1.4
Strategy, tactics and activities
19
4.4
Question 4: How will you sell?
66
1
1.5
How to create a Lean Dashboard?
20
4.5
Question 5: How will you get paid?
70
1.6
An incremental method
31
4.6
Question 6: How will you deliver?
75
1.7
How to use the Lean Business Developer
33
4.7
Scalability
76
RESCOURCES
35
4.8
Business Model Canvas
83
4.9
Lean Canvas
83
2
2.1
SWOT - no longer relevant?
37
2.2
Owners mandate
38
2.3
Motivation and competence
38
2.4
The current solution
39
2.5
Current customers and contracts
39
2.6
Operational ressources
39
2.7
How to use the Lean Business Developer
40
5.1
Current situation – customer segments
93
BUSINESS IDEA
43
3.1
Needs
46
5.2
Current situation – problem and solution
93
3.2
Target group
46
5.3
Current situation – unique advantage
94
3.3
Your unique competence
49
5.4
Current situation – partners
95
3.4
Template for formulating your business idea
51
3.5
Validate your Business Idea
52
3.6
How to use the Lean Business Developer
52
3
4.10 Comparing the three models
85
4.11 Validate your Business Model
86
4.12 A successful business model: Meltwater News
87
4.13 How to use the Lean Business Developer 5
CURRENT SITUATION
89 91
5.5
Current situation – sales and delivery
95
5.6
Current situation – revenues
96
5.7
Current situation - activities and cost
96
5.8
Current situation matrix
96
5.9
How to use the Lean Business Developer
98
6
RISK
101
9
FORECAST
137
6.1
Risk – customer segment
104
9.1
Forecasting- complex and difficult?
139
6.2
Risk – customer problem and solutions
105
9.2
Roles in the forecast process
140
6.3
Risk – unique advantage
105
9.3
How to create a forecast
141
6.4
Risk – partners and competitors
106
9.4
Create a profit & loss forecast
145 149
6.5
Risk – sales and delivery
106
9.5
Create a cash flow forecast
6.6
Risk – revenues
108
9.6
How to use the Lean Business Developer
156
10
DASHBOARD
161
6.7
Risk - activities and cost
108
6.8
Categorising risk
108
10.1 Management meeting
163
How to use the Lean Business Developer
111
10.2 Objectives and metrics
165
6.9
OBJECTIVES
113
10.3 Risk
167
7.1
Competence objectives
117
10.4 Activities
168
7.2
Solution and deliverance objectives
118
10.5 Forecast
168
7
7.3
Sales and market objectives
119
10.6 How to use the Lean Business Developer
173
7.4
Financial objectives
122
CASE I TROLL FACTORY
175
7.5
Metrics and realisation index
122
CASE 2 BUILDER
197
7.6
How to use the Lean Business Developer
125
CASE 3
223
ACTIVITIES
127
ABBREVIATIONS AND DEFINITIONS
247
REFERENCES
253
INDEX
255
8
8.1
The heritage from Lean and Scrum
8.2
Activities for management and administration
129
8.3
Activities for the development dept.
131
8.4
Activities for the sales and marketing dept.
132
8.5
Activities for handling risk and gaps
134
8.6
How to use the Lean Business Developer
135
AUDIO VIDEO
BUSINESS MODEL
1
8
MOBILISATION
8
1.1
Do you need a business plan?
It is easy to confuse two totally different questions. Firstly, ask yourself whether you need to plan your business; secondly, ask yourself whether you need the kind of business plan that most companies currently use. The answer to the first question is fairly obvious. Would you go to Tesco without having a plan for your shopping trip? You decide what you are going to have for dinner, make a shopping list and then fill your trolley with the items you have planned to buy. It’s not unusual for one or another impulse buy to end up in the trolley. Not everything always goes as planned. However, it is important to have a plan. Between 2005 and 2008, the Swedish Agency for Economic and Regional Growth carried out an analysis of 44000 newly founded companies (Swedish Agency for Economic and Regional Growth 2010). Three years after start-up, fewer than 9% of them had achieved a turnover of 100 000 Euros. This is just about enough to employ one person. We believe that much of this miserable result is due to a lack of proper planning. Unfortunately, the answer to the next question is almost as obvious. However, the answer is negative. Current business plans generally contribute little to value development and innovation. In many cases, the business plan is so poor that the business could have managed equally well without any plan at all! We have worked
MOBILISATION
«I
have laid many plans, but I have no idea where I've laid them”. This quote is said to have come from a former norwegian governor, Leif Arne Heløe. I do not have any personal insight into the kind of plans he speaks of; however, it could readily have been business plans. These are often created without much motivation when applying for external financing or support. After they have been created - they are left at the bottom of a desk drawer. Why is this?
9
MOBILISATION
FIGURE 1.1 44 000 companies after three years
8,7% 8,7%
32,2%
7,2%
10 13,9% 13,9%
15,4%
Dissolved Less than € 3 000 € 3 000 - 9 900 €10 000 - 29 900 € 30 000 - 49 900 € 50 000 - 99 900 Over € 99 900
with fast growing companies for a number of years. Most companies create one or another type of business plan. We have seen hundreds of such plans. Many of them are more or less useless. The main reasons for this can be summarised in three points:
Wrong target audience
Unfortunately, most businesses do not create their plan before they need to negotiate with banks, investors or public authority support agencies. This creates two major problems; firstly, the business plan is usually a set of arguments for the future success of the company. The plan, purely and simply, is far too optimistic and lacks necessary scepticism and risk assessment. Another major problem is that these external business plans are useless as a tool for managing the company. Implementation of the plan is poorly described. Thus most companies end up without a properly functioning internal plan. There is nothing in the plan that translates visions and ideas into daily tasks. This makes it difficult to follow up and assess development. We believe that you should primarily plan for yourself. This does not mean, however, that we do not believe it is important to communicate what you want to do to external interests. Banks, potential investors and public authorithies will expect you to have a clear idea of what the future will bring. However, we believe that all of these institutions would rather have a totally honest and realistic description of your business.
One thing is that this method largely produces poor planning documents. It is another that the planning process itself is lost. Dwight Eisenhower once said: «Plans are nothing, planning is everything». Involve as many employees as possible in formulating everything from the overall vision to the daily activities in your company. This will create the most solid platform for reaching goals together. This is an opportunity that too many businesses miss out on. Inability to cope with the fact that things don’t always go to plan
The final important point is that your planning must be operational and dynamic. By operational we mean that it must focus on what the company's employees will actually do every day. Ask the owner of a small company if you can see his business plan and you will often be given a kind of advertising-agency-PowerPoint presentation with the company’s «vision» . It might even state that the company's products «will change the way we view the world». In addition to being just a tiny bit pretentious, it provides little indication of how the company's development manager will contribute in order to reach the company's objectives. However, do you not agree that it is often such guidelines that the above development manager want? By dynamic, we mean that the plans must undergo continual development. The one thing we know about growth companies, is that it is difficult to predict the future.
MOBILISATION
No common thread
Another important point is that you need to link the everyday activities and finacial forecasts to your long-term strategies. Unfortunately, a very small number of growth companies do this. Frequently, strategy documents are drawn up by senior management and the Board of Directors at the annual management conference only to be left languishing in a desk drawer. Objectives are defined independent of the business model and idea. Middle management then create daily activity plans, independent of the objectives. The forecast, which is designed to ensure that money and other resources are used in accordance with the objectives, is then drawn up by the Financial Manager - often unrelated to the rest of the plan. And so the company runs the risk that its everyday activities do not relate to the overriding ideas around which the company is built.
11
MOBILISATION
FIGURE 1.2 Mike Tyson
12
There will be both positive and negative deviations. Perhaps you will spend more time on developing your solution1 than you thought. Or you will perhaps sell more than you had anticipated. In any case, it is important that you adapt to the new reality. We live in a time characterised by high tempo and rapid changes. You may have to respond to overruns on development time by engaging a new developer or informing the customers that the new version of the solution will be postponed. In the worst case you will have to obtain extra financing in order to progress. In the same manner, surprisingly good sales may allow greater investment in delivery capacity than you had originally planned. Thus we do not recommend to make a comprehensive and static 12-month business plan document. This book will suggest that you make a Lean Dashboard instead. Invest a few hours in making a dashboard for the next three to four months. When the preconditions for the dashboard changes, make adjustments. If your idea or business model no longer is viable, you need to change them. The more you experiment, measure and learn, the easier it will be to prolong your estimates into the future. The Dashboard, contrary to a business plan, will adapt to your learning. This let you expand and improve your dashboard every day.
1.2 1 By «solution» we mean either a product, service or a combination of product and service. If you wish to read more about this concept, we recommend the book Vekstbedriften (Universitetsforlaget 2012)
The structure of the book The main part of this book consists of 10 chapters that systematically lead you through the process of business development. In addition, it also includes detailed case studies from 3 different businesses: •• The first example is a company called «Troll Factory» . This small company has one full-time employee and publishes children books cast in the North Calotte. •• The next company is a small software firm in Oregon, USA called «Builder's Inc».
•• The third company is called «AudioVideo», a leading South-African company within sales, customisation and development of professional systems for TV and film production. This company has 50 employees and an annual turnover of USD 40 million. You will find these examples in the back of the book. To complement the book, we have developed an online tool called Lean Business Developer.. At the end of each chapter you will find advice on how to use this tool.
1.3
Target group This book is suitable for all companies with ambitions for growth. Both companies in the start-up phase and established firms that wish to revise their strategies. It is especially relevant for managers, owners and board members that wish to play an active role in the business development process. The four roles below are particularly central in this process: Business development manager
We believe that a clear division of responsibility is a premise for successful companies. The business development process is no exception in this respect. Therefore, we will now introduce the «Business development manager». The Business development manager has overall responsibility for fascilitating innovation and change in the company. This includes managing the dashboard. In a smaller company, the General Manager and/or the owner of the company has this responsibility. In larger companies, it may be delegated to another person, or even to a hired consultant. In any case, it is important that the Business development manager is given a clear mandate from the senior management.
MOBILISATION
The company has 25 employees and an annual turnover of approximately USD 9 million. This company sells a software solution to the housebuilding industry.
13
MOBILISATION
Finance manager
When your company reaches a certain size, you will often employ a dedicated Finance Manager. In small companies, the General Manager may have this role, possibly with the support of an accountant. The finance manager has the task of creating and following up the forecast Heads of department
14
When the number of employees in the company begins to approach double figures, you may begin to establish departments. Examples of departments may be a sales department, R&D department and support department. The heads of departments will be involved in creating a business idea, business model and objectives. They will also be responsible for creating activity plans for their respective departments and for providing information to the Finance Manager to help form the basis for the forecast. Board of Directors
1.4
As the top-level legally responsible body in your company, the Board of Directors has a major interest in the business development process. Exactly how the Board should be involved could be the basis for a separate book. This book, however, is primarily designed as a form of help for the company's administration. Therefore we will only briefly describe the role of the Board of Directors. In general, we can say that the Board of Directors is involved in the creation or change og the Business Idea and Model. In addition the General Manager can use the dashboard to inform the Board of Directors about the progress of the company.
Strategy, tactics and activities The three different concepts of strategy, tactics and activities describe time horizon your business operates within. According to theory, a strategy is something you should maintain as unchanged as possible over a longer period, preferably three to five years. Tactics covers a shorter period, generally the current year, and activities concerns the company's day-to-day operations. In todays's world, development progresses at a steadily increasing tempo, which leads to frequent adjustments of direction and progress. The time that elapsed from the day Steve Jobs first presented the vision of a portable mp3 music player until the first iPod was on store shelves was nine months. In
1.5
If you ask people who can achieve such things to tell you how the world will be in five years, they will just laugh and tell you to go and watch the latest science-fiction movie. Five-year strategy plans, as you can imagine, are now all but obsolete. In this book, we will simply state that the work in deciding on a business idea and business model represents strategy. The description of risk and objectives is tactics; whilst activities, forecasts and plan execution are operational activities.
How do I create a Lean Dashboard? This book will help you with the day to day business development of your company. If your company is not very large, the Lean Dashboard will likely concern the entire enterprise. Larger companies often have several different business areas targeting different groups and customer needs. Such companies can have separate business models and dashboards for each area. As we have said, it is important that the business development is a collaboration between the people who are to carry out the activities. We will present a brief description of how to include your entire organisation. All in 10 simple steps.
MOBILISATION
that time, Apple managed to complete the design of the iPod, sign contracts with subcontractors, create a plan for manufacturing of parts, physically manufacture millions of examples, market the product and get it distributed to stores. Apple also founded the digital music store iTunes - perhaps the most important element of the whole innovation.
15
MOBILISATION
FIGURE 1.3 Lean Dashboard – 10 simple steps
10 9
16
8 7 6 5 4 3 2 1
RESOURCES
MOBILISATION
OBJECTIVES
CURRENT SITUATION
BUSINESS IDEA
FORECAST
ACTIVITIES
RISK
BUSINESS MODEL
DASHBOARD
We recommend that you create a activity plan for the business development work. Start by determining when you will have a first draft of the ten steps and decide the dates for the required work sessions. Ensure all participants in the work sessions allow sufficient time to do what they need to do. Define when you will meet to follow up, change and continously create improved dashboard versions. Step 2: Resources
We will address the company’s current situation in two parts. Firstly, we will take a look at the company's internal resource situation in chapter 2. Thereafter, in chapter 5, we will evaluate the current situation in relation to the business idea and model that you have defined in chapters 3 and 4. This step exclusively describes the internal ressources that can help you define your unique competence. What competence does your current employees have? Which solutions have you developed or launched? How is your company organised? What kind of resources do you have in the form of relevant customer relationships and partners? Do you have solutions under production or own any particularly valuable technology? You must also outline the expectations that the company's owners have in regard to the planning period and about the instructions they have given. This is information you will need in order to select the correct business idea and business model and to reach realistic objectives. The external part of the current situation description, as we have stated, can only be written after you have defined your business idea and business model. Only then will you know which market you should be in and who your competition is. Then it will be possible to specify which aspects of the current situation are dependent on these external factors.
MOBILISATION
Step 1: Mobilisation
The purpose of this step is to motivate the organisation for the business development process you are starting. You will briefly describe the various participants and which roles they are to take. If applicable, you can also state which board meeting gave the mandate for the business development initiative and the prerequisites that apply. If you believe it is of interest, you can also say something about the company's history and the events that have led you forward to this point.
17
18
It is important to involve the whole organisation when defining the business idea. Allocate sufficient time to allow a good working session, and get as many relevant employees as possible to participate. Even established companies that have been active for some time, that have both solutions and customers, should critically review their business idea from time to time . Can it be improved? Has the resource situation changed? Have external changes created opportunities that can be followed up? The end result of step 3 should be a simple description of your business idea. FIGURE 1.4 Business Idea and Business Model
Step 4: Business Model
How will we sell?
UN
IQ
Who are our partners and competitors?
How will we get paid?
UE
COMPETEN
OUP
Who is the customer?
GR
DS
R ET
NEE
TA
G
What will we supply?
How will we deliver?
CE
Whilst the business idea describes what the company will do, the business model describes how it intends to do it. When you are working on the business idea, you must try to see through the eyes of the customer. You should change to your own perspective when developing the business model. For example, the concept of “needs” in the business idea should be considered from the customer’s viewpoint. Then, move on to examine “what will you deliver” in the business model. Then define how your company will be best able to meet customers’ needs.
MOBILISERE
MOBILISATION
Step 3: Business idea
At this point, many introduce concepts such as value description, vision, mission and objectives. We do not believe that any of these concepts are particularly useful. We believe that business idea is a more appropriate starting point. The business idea explains what the company will do and is comprised of three components: your target market, the specific needs of this target market and which unique competence makes you better positioned to meet these needs than others.
With your business idea as a starting point you should once more gather your key employees in the organisation for a work session in order to define the business model. If you consider it appropriate, you can bring in Board members or other external persons that you feel are able to contribute. After revising and improving the business model until you are satisfied, you have an excellent starting point. Then test wether your solution really solves the customer's problem, and that the other Business Model elements works as expected.. Step 5: Current situation
Now you have reached a point where you can create a description of the current situation. You have defined your business idea and business model. This means that you know which market you should be in, who you will compete with, which alliance partners you need to prioritise and how you will sell, deliver and receive payment for your solutions. When you create the current situation description, you take the business idea and the business model as a starting point. For each point above, you describe the current situation in the areas that are still relevant. If, for example, you have decided to phase out a product with immediate effect, it is not worth spending time writing about it. FIGURE 1.5 ď ˝ Table for description of current situation
You Target group and customer Needs and solutions Unique competence Alliances How to sell and deliver How to get paid
1
2
Compare your current situation with the companies that you believe will be your most significant competitors. You will be left with an evaluation of where you are at this time in relation to the business idea and model that you have defined. This description forms the starting point for the objectives you will later establish in step 7. When you compare yourself with your
MOBILISATION
The business model is comprised of responses to six simple, but totally fundamental, questions. One that begins with what, two that begin with who and three that begin with how. The answers to the six questions represent your business model.
19
MOBILISATION
competitors, you may see weaknesses in the business idea or business model. If this is so, you must go back and change it. Allow the people around you to contribute. Tell them to be critical and to actively look for faults. You must continue in this way until you are satisfied. Step 6: Risk
20 FIGURE 1.6 ď ˝ Risk diagram
CONSEQUENCES
As Business development manager you should use the first five stages as a starting point, and draw up a list of things that are likely to go differently than planned. In 1 2 3 this chapter we will focus on events that 1 occur due to external influences outside 6 7 3 your control. Situations that arise because 4 you or your employees do not do what you planned to do, we call deviations. We will 9 2 take a look at these in more detail in chap3 ter 10. Here, you must include things that can go better than expected, as well as things that 2 8 do not go as well as expected. Assess these on a scale from 1 to 3 taking into account, PROBABILITY respectively; the probability that they will occur, and the degree of advantage or disadvantage if they should occur. For those with the highest score, a series of initiatives must be set up that will reduce the likelihood that negative events will occur, and increase the chances that positive events will occur. In addition, you must decide what to do if the events should occur. 1
10
5
Step 7: Objectives
Now that you have documented the revised version of the business idea and business model and established this within the organisation, the management group (for example CEO, Sales Manager, R&D Manager, Finance Manager) draws up proposals for objectives.
Objectives, metrics and the realisation index can then be presented to your employees – preferably at a general meeting if this is possible to organise. The objectives, metrics and realisation index become Stage 7 «Objectives». 8: Activities
OK…Now you have a set of objectives. These objectives are of little value if you do not know what you must do to achieve them. This is where the activity plan comes in. The activity plan specifies all the necessary activities and who is responsible for them. FIGURE 1.7 Radar diagram
ISO 9001 Quality Assurance System completed Employ 1 Key Account Manager Soft funding 1,2 mill 90% Profits 1,5 mill
Total turnover 11.000.000
80% 70% 60% 50% 40% 30% 20% 10% 0%
Subscriptions 800.000
Marketing survey in the major contractor market V4.9 in February, V5.0 in March and V5.1 in September
New profile ready
16 new contracts User forum over two days
100 participants in relationship program
Jan Feb March April May June July Aug Sept Oct Nov Dec
MOBILISATION
You then discard the least important objectives and periodise the others through the period. We call these periodised objectives «metrics». These are shown in graphic form in a diagram. The metrics are then weighted according to their importance and summarised in the realisation index.
21
MOBILISATION
If you have several departments, an activity plan should be drawn up by each department. It is important to coordinate the heads of department so that dependencies between the departments are taken into consideration. Part of this coordination will be to reduce the number of milestones to a realistic level. When this job is completed, you have Step 8: “Activities”.
22
queue
active
c o m p e t e n c e s o l u t i o n
employee #1 in NL - interview employee #1 in Norway - advertisement
employee #1 in NL - advertisement
spec V 5.0 spec V 5.1
Spec V 4.9
m a r k e t
hotel for user forum contract masters guild new graphical profile finalize web invitations user forum
contact list contract subsiduaries
FIGURE 1.8 Activities
done/cancelled
expand
new logo
Step 9: Forecast
The penultimate step concerns forecasting. If you have the resources, business idea, business model, objectives and activity plans in front of you when you begin this task, the forecast will be an economic specification of what you must achieve in the period. You will have created a correlation between the long-term choices in the business idea and business model and what your money will be used for on a daily basis. Creation of the forecast should be coordinated by the person responsible for finance and must be rooted in each department. Normally, the management group will agree on a simple framework for the forecast. The heads of department
Profit & loss forecast Sales subscriptions Sales services, ,other Sales of older solution SALES INCOME Stock costs (old solution) - 50 % Gross profit
Jan
Feb
Mar
Apr
Cash flow forecast
590
600
620
640
Payment from customers, subscriptions
70
70
150
130
Payment from customers, services
40
30
30
30
700
700
800
800
20
15
15
15
680
685
785
785
Jan
Feb
Mar
Apr
0
2 213
25
25
125
88
88
188
125
2 300
113
213
25
25
19
19
415
425
511
Other incoming payments, Govt. support Total PAYMENTS Payment of variable stock costs
Costs Employee salaries (holiday pay in June)
415
415
425
511
Employee salaries (holiday pay in June)
415
Social costs (factor 0,3)
125
128
128
153
National Insurance Contributions 14,1%
117
Government assistance, red. of salary costs
Lease charges (energy etc.)
75
0
177
0
0
75
Lease charges (energy etc.)
20
20
20
20
IT/telephone
25
25
25
25
IT/telephone
20
20
20
25
Marketing
19
19
19
169
Marketing
15
15
135
25
0
0
0
0
External consultant services Travel expenses
14
16
22
20
Other operational costs
15
15
15
5
624
629
765
760
0
0
0
0
Travel expenses
External consultant services
14
18
20
28
Other operational costs
19
19
19
Payment of VAT Investment, repayments of loans etc.
Total Costs Gross operating result (ebitdea)
57
57
21
25
-22
-21
-21
-21
Pre-tax profit and loss
34
36
0
4
Accumulated profit/loss
34
70
70
75
Net financial items
FIGURE 1.9 ď ž Forecast (1000 USD)
73
19 443
81
81
81
81
Total OUTGOING PAYMENTS
790
674
784
1 368
Cash flow at start of year Ingoing balance 1/1
700 1 627
-672
-1 156
1 662
990
-166
Change - Net payments in/Payments out
Outgoing balance
-665
35
MOBILISATION
will thereafter present a forecast regarding costs for planned activities for their areas. Normally, you will hold several meetings to discuss activities and adjust costs until you are satisfied with the forecast.
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MOBILISATION
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It is important that you make sure that you create a forecast for profit and loss development, investments and cash flow. The profit and loss forecast is all about when income and costs are entered into the accounts. The cash flow forecast, however, is based on when incoming payments and outgoing payments are carried out. Adequate cash flow at all times is absolutely necessary to the company - therefore, the cash flow forecast is perhaps the most important. This applies to an even greater degree to companies that are developing and growing. Step 10: Dashboard
The Lean Dashboard offers you the opportunity to measure almost every action against your long-term objectives. As the assumptions for your company can change rapidly, you must revise constantly. If you cannot meet the income objectives, you must consider cutting out activities that cost money. If you achieve a greater income than planned, you must be prepared to apply extra effort, for example in recruitment, sales, marketing and development. We recommend that you carry out frequent measurements within five main areas: •• •• •• ••
Development within the defined risks in step 6. Progress in relation to the metrics and realisation index in step 7. Progress in relation to the activity plan in step 8. Development in relation to the profit & loss forecast in step 9 and in relation to the cash flow forecast in step 9.
All of this information is entered into your five-section measurement matrix - which forms the basis for management of the company.
ME
OW FL
TR
IC
MOBILISATION
CA
SH
S
25
IVITI
RISK
AC T ES
FIGURE 1.10 ď ˝ Dashboard
PROFIT & LOSS
The business development will ultimately comprise the following ten steps: Step 1: Mobilisation Step 2: Resources Step 3: Business Idea Step 4: Business Model Step 5: Current Situation Step 6: Risk Step 7: Objectives Step 8: Activities Step 9: Forecast Step 10: Dashboard
MOBILISATION
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1.6
An incremental method The «Lean Startup» movement has been a great inspiration to us. The most important contributors to this movement are Steve Blank (2005) with his «Customer Development Method», Eric Ries (2001) with his «Lean Startup» methodology and Ash Maurya (2012) with «Running Lean». The overarching concept behind both these methods is that an innovation, in either a new or an existing company, is linked to considerable uncertainty. Therefore it is not wise to employ major resources in commissioning a solution and a business model before you have tested it out on the market. In order to avoid wasting time and resources on creating solutions that the market does not want, Eric Ries suggests that you develop a Minimum Viable Product (MVP). This is a prototype that has just sufficient functionality to be able to be tested in the market, but does not cost much to develop. This prototype is then released in the market with the aim of testing fundamental premises for its success. The prototype is then developed gradually via a series of improvements based on feedback from your initial customers. This is based on the assumption that you measure feedback continually, preferably in the form of experiments in which various groups of customers are presented with different solutions and business models. If there are indications that the first business idea does not function you can carry out that which Eric Ries refers to as a Pivot. A Pivot is a clear change of the business idea based on what you have learned from your initial customers. Steve Blank’s (2005) «Customer Development Method» maintains that you have to develop your customers at the same time as you develop the solution. This is done in four steps: The first step is to Find the customer, or to select a target group in the business idea. Step two is to validate the customer. This is done by finding out which particular solution to offer the selected target group, and how you will sell, deliver and receive payment from them. If you find a business model that functions in practice, you have proved that the selected target group functions. The third step is to create the customer. Here, you apply your major sales and marketing efforts. As you have already determined and tested out the optimal business model, there is
build
build measure
discover learn pivot
FIGURE 1.11 Customer Development
confirm learn pivot
build measure
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build
scale learn pivot
measure
structure
MOBILISATION
less chance that you will waste money on unsuccessful marketing. The fourth step in the process is to build the company. It is first at this stage that you alter the company from the initial learning and searching modus and create a formal hierarchical organisation with a Sales Manager, Development Manager and Marketing Manager.
measure
learn pivot
If you are going to read just one book about «Lean Startup», we actually think Ash Maurya's (2012) «Running Lean» is the one that will give you the most value. Ash is introducing the «Lean Canvas» for finding your company's optimal business model, and also three main types of experiments. To be able to develop your company in a lean manner, you should test: • that there really is a target group that has the need you are betting they have (need-target group fit) • that your solution solves the need (need-product fit) and • that the target is so large and scalable that you can actually make enough money (scalability test). He then introduces a number of handy and practical tools to do this. We have built our method on the principles in «Lean Startup» and «Running Lean». We believe that you should begin with a hypothesis about which business idea and model that will work for you.
MOBILISATION
Then use a «product-problem test» to make sure that your solution solves the problem and test the other elements in the business model on real customers. Create a Minimum Viable Product if you can. If you cannot prove that your business idea and model will work, correct it in order to realign, or reject it and try out a new method. When you have validated your business idea and model, the current situation analysis becomes another test. If the gap between the desired business model and your current situation is unbridgable, you may need to pivot. Use a Scalability test to see if your total market is big enough, and ask yourself whether the competitors will be to strong for you. Then check wether you can find realistic objectives and activities. Finally the forecast will tell you wether your project is financially feasible. If it is not, you have to see wether other activities or objectives will improve the scenario. It it does not - you might need to go all the way down and pivot the business model or idea.
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In this way you continue to step up and down the Lean Business Stairs until you succeed. In this way your whole operation becomes an experiment. After all - the safest way to see if you succeed is to count your money at the end of the day. And the experiment will continue as long as you continue to challenge your business idea, business model, objectives and activities.
1.7
If this introduction has confused you, we hope that you don't give up now! In each progressive chapter we will explore each individual stage in detail. Following each simple step is not especially difficult.
How to use the Lean Business Developer We have developed an online tool that will lead you through the 10 steps as outlined in the book. We are calling it «Lean Business Developer». Of course, Lean Business Developer doesn't automatically make the right strategic choices for your organisation; however, it can help you create structure and
You receive detailed instructions along the way, or you can learn from examples from companies of varying sizes and from different industries. You will end up with a dynamic dashboard that will allow you to manage your business based on objectives, activity plans, risk, profit & loss and cash flow In addition you will have a brief and a slightly longer summary of what you have written. This will update itself as you make changes. You must provide the content, yourself. We believe, however, that you will find much more use for the measurement matrix than for the document itself. In this matrix you carry out management and make amendments during the period. You own your Lean Dashboard, and the information in the solution, in principle, will not be available for any other persons than yourself. The data is protected in accordance with industry standards in the same way as in other systems that you use, for example Internet banking. However, it is our strong belief that you get better planning when several persons participate. Therefore you can easily give access to colleagues or Board members. It can perhaps be useful to receive advice from someone with more experience and the right skills in the process. You can also contact certified consultants via the solution. Hopefully you will be able to find someone from your local area. The Lean Business Developer is available at: www.leanbusiness.no.
MOBILISATION
collaboration in your planning process. You begin at the bottom of the ÂŤstaircaseÂť and work your way upwards step by step. Each new step has a starting point in the choices you already have made. If you need to change anything, you can return to the previous step at any time and make changes.
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