Posted on 06. Feb, 2010 by Tony Wanless in Reinvention

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New Game, New Plan

For Successful Reinvention, Use New Business Methods

In a recent survey reported by the Financial Post, one in three Canadians said they were interested in starting their own business in the next two years. Of that group, 35% said they’re going to follow through with those plans.

If we extrapolate from the survey of 1,010 Canadians by the tax and accounting software maker Intuit, that means almost one-quarter of Canadians plan to start their own businesses soon. If even half of those do follow up on their dreams, that will be quite astonishing.

What will also be astonishing, however, is if those thousands of would-be Canadian entrepreneurs proceed as 21st-century entrepreneurs instead of blindly imitating the entrepreneurship methodology of 30 years ago.

Anyone who takes up the challenge of business start-up today would do well to examine how entrepreneurship has changed in this century.

The biggest change is that today, less is best. Starting a business now is all about less –as in less elaborate business planning; less imitation and more innovation; less step-by-step execution and more going with the flow; less one-way delivery and marketing and more conversation with customers.

This less-is-best concept generally goes against traditional business training, which is based on the old industrial/ retail system. Business plans, for example, are about execution of known factors, so if you’re building a factory that is going to be around for 10 or 20 years, you’ll need a business plan. But in today’s world of continuing change, any plan that details steps further out than quarterly or semi-annually is unsuited for anyone starting a small business.

The top entrepreneurship method now is the lean startup, an application of Lean thinking, which is an organizational method of operation derived from the Toyota production system. In Lean thinking, an organization attempts to eliminate all wasteful effort and cost.

Lean thinking means new start-ups rarely use formal business plans in the beginning because in a rapidly changing world they cannot obtain the information they need to plan several years in the future.

In fact, in 2002, the magazine Inc. surveyed founders from its Inc. 500 list of fastest-growing entrepreneurial companies and found that only 40% had written formal business plans. Of those, nearly two-thirds said they changed their businesses considerably from their original plan.

The Lean start-up applies the Lean thinking approach at the crucial period when new companies often have a concept but really don’t know how their businesses are going to evolve. Since most new businesses — even those in traditional areas such as retail or services — now primarily operate online, this learning process is much easier.

Generally, a Lean start-up features three characteristics:

* It keeps costs low by using open source and free software. If those aren’t available, it uses low-cost cloud computing (renting software and other services online) instead of initially buying expensive systems and software. It also endeavours to “rent” as many business needs, such as personnel, as possible;

* It applies agile development when creating products or services. In this methodology, product development borrows from new software-creation models. Agile development is perfect for start-ups in which the problem (the genesis for all business concepts) and the solution (the business’ answer to the problem) are still fuzzy;

* It constantly talks with customers, existing or potential, to see how it can improve. It usually begins with a simple product or service and then changes or expands it to answer customer concerns. Its main business process is continual customer research and development.

So far, we’ve been talking about start-ups, but the same thinking applies to existing advisory businesses. If you’re an agent, consultant, coach, or adviser of any sort, Lean start-up principles can help you retool your business for operation in this century.

After all the essence of reinvention is to start over and go in a new direction. If you’re thinking of that new direction, you could do worse than borrow these techniques.

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