By Tina Dettman-Bielefeldt, Co-owner of DB Commercial Real Estate in Green Bay and district director for SCORE, Wisconsin.
Most entrepreneurs agree that a business plan is an important component in developing and managing a business. Now, with the advent and growing popularity of the business model canvas, the traditional written format is being questioned.
Frank Sherman and Earl Humphrey, SE Wisconsin SCORE mentors, led a discussion on this topic a few weeks ago during a training session in Milwaukee.
"The advent of globalization and expansion of the Internet has forced business leaders and entrepreneurs to adapt their practices," Sherman said. "They must adopt more flexible business models that can pivot to respond to the competition and evolving customer needs. Entrepreneurs often find their initial business models don't work for one reason or another. This requires new planning methods and tools."
The canvas, widely taught at top business schools such as Harvard, is being embraced by large and small companies. Leading global companies like General Electric, Proctor & Gamble, and Nestle are using the canvas to manage strategy or create growth opportunities.
Startups use it to develop a business model; something that can be done more easily with the visual, nine-component canvas.
Sherman and Humphrey directed mentors to www.canvanizer.com, where entrepreneurs can start to put down ideas and construct their business.
"The business model canvas methodology has several advantages over the traditional business planning approach. It is simple to construct providing a one-page visual display. Your assumptions are explicit and can be easily tested. Finally, the canvas is flexible to allow you to pivot to a new model if the first one is not successful," Sherman said.
A recent retiree with a 35-year career with Akzo Nobel, the world's largest coatings company and a major producer of specialty chemicals, Sherman is well-versed on business plans. In his most recent position, he oversaw Akzo's corporate shared service organization with 12,000 employees and $4.5 billion in sales.
Yet, the entire group wasn't sold on it. There is always the issue of financing, because traditional lenders still will require a written plan. Sherman and Humphrey proposed a unique merging of the formats.
First, there is the construction of the canvas with its nine areas: customer segments, value propositions, customer relationships, channels of distribution, key activities, key resources, key partners, revenue streams and cost structure. Then, there is the integration.
Sherman said: "Our SCORE chapter decided to integrate the canvas with some of the traditional business planning approaches because our clients need more direction on market research and background on financial basics. We are just starting the transition."
In the recently designed training program, the segments of the canvas are related to traditional categories in the written business plan. For example, revenue streams and cost structure go directly to the financial plan section and key activities are part of the operational plan. Once the plans are merged, there is a solidly constructed written plan.
Many entrepreneurs won't get to that point, but that is another benefit of the canvas. It provides the ability to quickly test a concept with perspective customers, suppliers and capital supporters, and either make adjustments or throw in the towel and start over.
Regardless, of the structure, Sherman is quick to point out the importance of having a plan.
"It is essential for obtaining a loan or interesting an investor in your business," he said. "But even if you plan to self-finance, having a well thought-out plan significantly increases your speed to market and your chances of success."