SCM Awareness: Business Planning
Business Planning is about deciding what the company will do and how. It is a very high-level stage in the planning process. It is quite likely in fact that if you are an employee you will never actually see this document as it will contain highly confidential information. However you should be aware of some key elements from it and hence we will mention it here because it is probably the founding document that sets the business model from which all other strategy in the company should flow.
So, what is a Business Model. Well to quote a famous business guru Alex Osterwalder “A Business Model describes the rationale of how an organisation creates, delivers and captures value”. There are really two types of document. The traditional business plan and the newer concept of a Business model canvas.
These are usually created by the founders of the company or the board of management of an existing company. A traditional business plan is a lengthy document easily running to over a hundred pages. It outlines the nature of the business with a strong emphasis on money, revenue, and growth projections.
A typical structure of such a plan is
- Executive Summary – This is a brief summary of the rest of the document.
- Company Description- This is a detailed outline of the company including the problem it solves and the target consumers.
- Market Analysis – This is an analysis of the industry and competitors in the market
- Organization and Management Structure – The corporate and legal structure of the company and the senior management who run it.
- Product or Service Details – This contains details of the product you offer and the benefits to the customer over your competitor’s products.
- Sales and Marketing Strategy – This details how the company plans to attract and retain customers.
- Financial Projections – These are projections of the expected costs and revenue for the business over the next 3-5 years.
- Funding Request – Usually a company has created a business plan in order to seek funding from a bank or an investor. Here they will outline what they will do with that money.
- Supporting Appendices – This is any documentation the company thinks will strengthen its case with potential investors.
In modern start-ups, especially in the technology sector there is a growing trend to prepare a business model canvas or a Lean Business Model Canvas.
The business model canvas was created by a company called Strategyzer and then refined into the Lean Business Model Canvas by Alex Osterwalder.
These tools allow a business to capture the essential parts of a business plan on one page
And that one page contains 9 blocks of information
The 9 blocks on the Lean Business model canvas are
- Problem – A List of the Top 3 problems faced by the customer and the key alternatives
- Solution – The Top 3 solutions the company offer to those problems
- Key Metrics – What are Key activities to measure
- Unique Value Proposition – What makes your product different and worth buying
- Unfair Advantage – Why your offering can’t be easily beaten
- Channels – How you will get to your customers
- Customer Segments – Who is your target market and who are the early adopters in that market
- Cost Structure – What are the costs of doing business
- Revenue Streams – How are you going to make money
And here is how all that fits together in one page. We will not go into any more details than this as this is worth knowing but is outside the scope of your day to day work as a planner. If you want, you can find more details on the Strategyzer website. In the next section we will move into more strategic long-term planning processes that you ARE likely to encounter.