As an engineer, I had the typical mild level of disdain for “business people” – marketers, MBAs, people with fuzzy backgrounds that appeared so confident, despite not knowing the basic laws of physics. I took pride in my engineering-ness. I huddled with my fellow engineers, quietly smirking after the business people left the room, telling ourselves their input was less valuable than ours.
Then I somehow ended up at a Venture Capital firm, ostensibly to help them with technical due-diligence on complex clean technology start-ups trying to innovate in solar, energy storage, fuel cells, electric vehicles, biofuels, and even nuclear energy. I found myself listening to hundreds of start-up pitches. I discovered that the “other stuff” in these pitches – market research, strategy, competitive analysis, SWOT, TAM, SAM, ASP, COGS, Opex, Capex – were interesting. And important. And uncertain, but not as “fuzzy” as I once thought. I saw good pitches and awful pitches. And I learned that technical success was only one small ingredient in overall success. And, I wanted to be successful, so I poured myself into learning how these “business people” thought and worked.
Fast forward to today. Realization Ventures gets involved in launching many new products and services at both big companies and startups. And, I’m always surprised at how few of these organizations have built a basic “business case” for their new thing.
A business case is simply a collection of facts and hypotheses that form the rational for why you should do this new thing. How big is the market? how many customers can I get? how much will they pay for it? how much will it cost to produce? how many people and how much equipment will I need? And how will all those things change over time? A business case is much more than just a spreadsheet or document – a good business case provides a testable hypothesis on which to start building a business.
By separating fact from hypothesis, you can develop a set of low-cost “tests” of your business case, to validate that you know what you are doing. You can prototype a business just like you prototype a product – the business case is your design. And it is not a static thing – it should change over time as your hypothesis are validated (or not). It allows business people to utilize the scientific method I was so proud of as an engineer.
Launching a new product, service, or business without a business case is like going hiking without a map. If there are signs on the trail, you can follow them, and hike the same path everyone else has. But, if there aren’t signs (which there usually aren’t), or the signs lead to dead-ends, you are just going to get lost.
Every time Realization Ventures starts working on a new product, we encourage our clients to do what we call the “One Day Business Case”. The idea is to bring all the relevant disciplines into a room for a day – marketing, sales, engineering, operations, etc. – free from distractions, and with all their facts and assumptions at hand, and build a business case as a team. We not only build the business case, but define the tests we need to validate our hypotheses. It’s not easy, and often requires a neutral facilitator. It’s messy but fun. It allows everyone to think about the big picture, and how their piece interacts with the whole. It is a great team building exercise. People leave feeling aligned.
If you are working on something new – I encourage you build a business case. And don’t send an analyst off in a corner to build it – consider the One Day Business Case. If you want any help, Realization Ventures is here for you.