The Business Plan Is for Dummies

“The business plan? It’s for dummies!”

Raphaël Cohen. Readers of the project implementation method recently published by the Geneva-based entrepreneur and professor were surprised by his brisk remarks on the all-important notion of the business plan. He insists on a better alternative: the business case.

FRANÇOIS SCHALLER

Raphaël Cohen loves a good turn of phrase. “There is a book called The Business Plan for Dummies,” he says. “That’s fortunate, because business plans really can be for dummies!” Not only for project leaders who devote months to them without realising they are wasting their time, but also for investors and other stakeholders who demand the document only to file it away without having read it.

Towards the end of his book Conceiving and Launching a Project – From Idea to Success, recently published by Editions d’Organisation in Paris (and very much geared towards business development), Raphaël Cohen dispatches the business plan in a few paragraphs, even though it has been the cornerstone of every methodology for the past twenty years. “Many books explain very well how to write a business plan,” says an ironic introductory note. “We shall therefore refrain from doing so ourselves.”

Do you really think commercial projects can be carried out without a business plan?

I am not saying the business plan is useless. I simply think it generally comes far too early. The energy it consumes can also neutralise the entrepreneurial spirit. The original function assigned to this document has done considerable damage. We keep hearing that 95% of these plans are not read by potential investors. And that, of the remaining 5%, only one fifth lead to anything. So the implementation rate is 1%. Is it not time to conclude that there is a problem?

The business plan is an important selection criterion. How can a business project mobilise partners if it cannot be formalised?

Criteria are of course essential, but the business plan is not a good criterion. There have probably been more successful ventures that started from nothing, or were developed with a token and fanciful business plan, than successes based on genuine business plans carried out to the letter.

“The business case must convince long before the painful drafting of the business plan!”

The business plan at least helps to clarify and test business ideas.

I do not think so. Designing and writing it takes up precious time and demands a disproportionate and sterile amount of energy. It is arduous, painful, discouraging. And in general there is no testing of ideas during its drafting. In reality, project leaders tend to tell their audience what they think it wants to read. With virtually no persuasive power.

It is in fact a functional analysis of the project (or the business). Derived from the strategic management of large organisations that analyse strengths and weaknesses synthetically in relation to a mission, the business plan imposes a functional breakdown: market, marketing, sales, production, cash flow, R&D, HR... And finance, of course. For an entrepreneur, or indeed for any project leader, this is quite simply unnatural. Every project is approached as a whole. Tackling it in the functional mode of the business plan is as effective as trying to design or sell a car by focusing on its functionalities: payload, acceleration, braking curve, gearbox torque, turning circle...

But surely boards, executives and investors are the ones asking for this document!

Investors? Less and less. They are turning away from it.

So instead they ask for an executive summary, a summary of the business plan, one to three pages instead of 30 or 50 plus appendices. That is progress, is it not?

It is in any case proof that the business plan is not appropriate. And the executive summary can be worse, since it is the summary of a document that is itself problematic.

So what do you recommend?

A simple document of a few pages — perhaps ten PowerPoint slides, if you like that sort of thing — presenting the idea and answering clearly and simply the questions decision-makers inevitably ask themselves. Let us call it an “opportunity case”, or a “business case”. That is the truly decisive stage. The first battle to be won. And it can be prepared in a matter of hours! After that, once the parties to be convinced actually are convinced — which obviously puts the project leader in a new situation, far more comfortable and motivating — one can then envisage what comes next, whether that leads to a full business plan or directly to implementation.

How did you come to attach so much importance to this stage?

Simply by observing what interests investors or managers who are called upon to support or reject internal projects, and the questions successful project leaders ask themselves. What is decisive in the decision-making process? There is generally a business idea, followed by clear and convincing answers to the inevitable objections. The business case answers in terms of why. Why the project should succeed. Only afterwards should the business plan come into play, to answer the question of how. And if the business case does not convince, there is no point exhausting oneself by drafting an implementation plan...

RAPHAËL COHEN

THE MASTER OF IPOP

- Charisma. The author of many articles for PME Magazine over the years, Geneva-born Raphaël Cohen is also well known in French-speaking Switzerland for his widely noticed presentations at business and management events.

- Versatility. Former head of a commercial company operating in textiles internationally (Getratex, founded by his father), he now devotes himself to teaching and research: director of the Certificate in Entrepreneurship and Business Development at HEC Geneva, and full professor at Thunderbird, the oldest American school of global business and management. He is also a company director and investor, particularly in technology.

- Credentials. The company Getratex still exists, under its updated name Management Boosters. Among its activities is the publishing of software developed by Raphaël Cohen himself, entitled IpOp (an acronym for Innovation through Opportunities). Reference users include the legendary Palo Alto Research Center, part of the Xerox group (from which the first personal computer emerged several decades ago), which applies it in evaluating its researchers’ projects. And the France Télécom group, for its innovative achievements and business development.

- Method. Recently published by Editions d’Organisation in Paris, Conceiving and Launching a Project – From Idea to Success is also largely based on the IpOp model, which starts from an “opportunity statement” and leads to a definition of success, then to the tactical action plan with, as an added bonus, a business case to convince decision-makers. The text is peppered with humorous passages (www.ipomodel.net).

“A convincing project should fit into a few pages.”

Is there a business case method to follow?

There is no universal method. The approach must be pragmatic and adapted to the nature of each project. Ways of convincing vary from one individual to another. They should also depend on the people to be convinced.

That said, in my book I propose a decision tree that works quite well insofar as it mirrors what the mind does in a more or less rational or intuitive way. One follows a line of reasoning from one stage to the next. Each stage is eliminatory: do I agree with the reality of the needs or expectations I am proposing to meet? If yes, I move on to the next question. If not, I stop. Is the proposed solution convincing? Are there genuine competitive advantages? Is the potential sufficient? Is the level of risk acceptable? Is the action plan realistic? And so on.

How can one anticipate objections?

Innovation generally generates specific types of objections in each sector. The best way to anticipate them is to have prior discussions with the people concerned. But the most classic defensive reflexes are found almost everywhere, like a kind of cultural tyranny of resistance. And to be convincing, you must not overwhelm your audience with details. That is generally what happens. Afraid of giving the impression they do not master their subject, project leaders pile on the data. Whereas they should get straight to the point. If the reader of the business case wants more information, they can always ask for it. If they do ask, that is a good sign. The aim is to secure conditional support, not definitive approval!

Tyrannies of resistance

The opportunity case must make it possible to circumvent the classic defensive reflexes that may be described as “tyrannies of resistance”.

- THE TYRANNY OF SERVED MARKETS: “Our current customers will not like it...”

- THE TYRANNY OF ESTABLISHED BUSINESS MODELS: “That is not how we usually make money...”

- THE TYRANNY OF DISTRIBUTORS: “Our distributors will not like it...”

- THE TYRANNY OF CURRENT STRATEGY: “We are not in that kind of business...”

- STRUCTURAL TYRANNY (or organisational tyranny): “If this project cannot be taken on by one of our business units, it has no place in our organisation...”

- THE TYRANNY OF ARBITRARY FINANCIAL CONSTRAINTS: “If this project cannot generate so many millions within so many years, it will be a waste of time.”

- THE TYRANNY OF VOCABULARY: “This business (or this technology) is gobbledegook to us.”

Extract from Conceiving and Launching a Project – From Idea to Success, Editions d’Organisation