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Writing a business plan for digital health startups Sketch try fail and learn

on March 29, 2012

There are lots of reasons a startup should write a business plan. It articulates the company’s methods of capturing and delivering value, and it enables a common understanding of the company’s direction, which will lead to better strategy sessions and meetings.

But a startup shouldn’t have one early on, according to Alexander Osterwalder, author of Business Model Generation. Especially in industries like digital health, where it’s not enough to have a good product alone, a disruptive business model is crucial, and writing a static, detailed document early on is counter-productive.

Instead, an entrepreneur should start by looking at the most successful business models within and outside of his industry. Then, he should assemble a group of colleagues, hang some canvas on the wall and begin sketching out every possible business model the group can think of.

“One mistake that we often make is that we fall in love with our first idea,” Osterwalder said in this interview with The Startup Slingshot. “Rather than sketching out several possible business models one where you give away the product for free, one where you sell it for a million dollars, one where you work with your biggest competitors rather than sketching those out, we usually go for one and refine it until we think it’s perfect.”

Instead, entrepreneurs should think like architects and designers and get comfortable working with prototypes to explore all of the possibilities.

“What you really want to do is start with a rough business model. You want to go test it, you want to change it, test it again, change it again, until you have something that you think, ‘Hey, I nailed it,’” Osterwalder said. “Once you have that, then you can write a business plan.”

The quicker you fail, the cheaper you fail, and the more likely you are to learn from the experience, he added.

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