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Business planning for technology business
It is tempting to say that business planning is simply common sense. It isn't, of course, otherwise all companies could produce effective and high quality business plans with ease. But neither is it rocket science. Many years experience of business planning in a technology environment lead us to draw six basic conclusions. All plans are wrong
The purpose of planning is not to lay down a firm prediction of where the company will be in 5 years time. In a fast-growing technology-based business, especially, such predictions are impossible. A medium term plan does, though, provide a framework of objectives against which progress can be judged retrospectively. Most important, it tells you what to do today and tomorrow and how to achieve it. Not just numbers
Effective planning is essentially about thinking and analysis, not about producing financial projections. Financial projections are an essential output. But the key task is to stand back from the day-to-day running of the business and address issues such as market demand, product development, resource allocation, financing and management. A business plan should not be 'owned' by the finance director, still less prepared by the accountants. It must be owned by the directors and senior managers together, who will then understand and engage with the financial projections which result. An external perspective
One of the most difficult tasks for managers of any business is to develop an 'external' perspective on their own company, and see themselves as others do. Many business plan presentations do not answer basic questions (what does this product actually do? who is going to buy it? etc.) An outside-in perspective is crucial if the planning process is to address and respond to issues in a way which satisfies the target audience. Different purpose, different plan
Adopting the external perspective implies that different audiences and different purposes require different plans. Perhaps the most common target audience is the bank, the prospective shareholder or other potential investor. Their requirements and expectations are all too often not met. Too many plans landing on venture capitalists' desks, for example, are poor quality. Equally, however, especially in a larger company, the management may need to present its business plan to its board and shareholders, and a different approach is necessary. Finally, perhaps the most important audience for a business plan is the company itself: if you don't know where you are going, how can you convince others how you are going to get there? Analysis and synthesis are different
Thinking through and preparing a business plan requires a different approach from final formulation and presentation. Often, the sequential logic is actually reversed. The analysis may start with technology assessment, development planning and so on. In the final plan, these factors follow, and are subordinate to, primary issues such as market demand and competitive positioning. The technology dimension
Business planning in a technology-based company environment is not in principle different from planning in other companies. But the specific challenges posed by a strong technology dimension to the company need to be appreciated, especially where the target audience is a potential investor. It is a truism that the finance industry in the UK is both short-termist and technology shy. Like all truisms, there is some truth in this. But there is in fact no shortage of investment finance for strong business proposals from early stage and growth companies based on technology development. An effective and impressive management team is essential. But so also is the need for the plan to be based on sound strategy and analysis, and for it to follow the recommendations above: stand back and think; develop a detached and objective view; understand what the target audience needs to see; tackle analysis and final presentation as two distinct tasks. In a technology-based business key issues are the nature of the technology itself, the intellectual property position, development timescales, risk and factors which impact on continuous innovation (such as technology foresight). It is necessary to present and explain these clearly and simply to help the audience or reader, rather than confuse or worry, but also to put these in the context of a strong overall business plan. After all, if the company succeeds, tomorrow the technology will be commonplace and taken for granted. What will differentiate the business will be its unique vision and strategy, a clear plan for achieving these, and a management team which can deliver. To that extent, business planning is indeed common sense. |