Training course (PT)

The theoretical background of the “Lean Plan”

The Lean Plan constitutes an ongoing business planning a process that allows the entrepreneur to refine the business strategy as more information about the market environment is gathered. The Lean Plan answers the basic questions of what the entrepreneur should do and how she or he must do it.

Its major contribution is the kind of planning that is made which is iterative planning since it adapts to upcoming needs and by tracking its performance the entrepreneurs know when to change direction and try a new approach.

The Lean Plan is also known as the Toyota Plan since it is the Toyota Motor Corporation that developed the plan in order to continuously improve the production process. The Lean Plan method was developed in order to ensure that any wasting or lacking the capability resources will not be used in the production so as to achieve the reduction of waste. Waste was defined as anything that is not contributing to the creation of value. Therefore and according to the Toyota Lean Plan by eliminating anything that doesn’t contribute to the production of products and services, a business can boost the potential growth of any business. The identification of any “waste” is the outcome of an ongoing process in the planning of entrepreneurs or in other words it is the Lean Plan.

The Business Model Canvas

The Business Model Canvas addressed the need of developing a one-page and lean startup template with the structure of a business plan. The Business Model Canvas (BMC) is a strategic management tool to quickly and easily define and communicate a business idea or concept. It is a one-page document that works through the fundamental elements of a business or product, structuring an idea in a coherent way.

Based on the Toyota Plan the BMC assists businesses to align their activities by illustrating potential trade-offs. It is a visual chart with elements describing a firm's, or product's, infrastructure, value proposition, customers, and finances.

However, the core issue of the BMC is that it doesn’t focus on making sure that a business addresses the real needs of customers. And if a business doesn’t solve a real problem for potential customers, it’s going to have a very hard time attracting customers. Instead of forcing the Business Model Canvas to solve the problem of product/market fit, the alternative of the Lean Plan is proposed.

Definition

The lean plan for running a business is not a document or detailed plan, full of descriptions, to be presented to investors or lenders.

The lean plan is a collection of lists, tables, and bullet points.

The lean plan is an easy way to get the strategy, tactics, milestones, and forecasts documented in a simple format.

The lean plan focuses on taking small steps, reviewing the results, and creating incremental improvements—all while reducing the risk of failure.

Why “lean”?

• Because lean means strong and lean means useful.
• Because lean planning is simpler and faster than writing a traditional business plan.
• Because the lean plan is a constant cycle that can be revised and reviewed at any stage.
• Because the lean plan helps entrepreneurs to develop their own skills.
• Because the lean plan adapts perfectly to changing environments.

What does the Lean plan include?

A lean business plan does what every entrepreneur needs in order to manage strategy, tactics, execution, and essential business numbers. It exists for internal management and not for outsiders. It stays lean and simple with just bullet points for essentials and a collection of lists and tables. It should be reviewed and revised at least monthly so it stays fresh.

1.      Strategy- What you are going to do:

Strategy means staying focused by answering the questions of who you are, what you do and for whom you do it.

The strategy is the art and science of planning and marshaling resources for their most efficient and effective use.

The primary purpose of a strategy is to connect three key areas: the mission, the vision and the values of an entrepreneur.

2.      Tactics-How you are going to do it:

Tactics concern execution by keeping the lean strategy in mind. Some examples of tactics are:

• Marketing tactics like public relations, messaging, online presence, sales structure, advertising
• Offering tactics like launch dates, packaging, delivery options, website, services
• Financial tactics like funding and recruiting, hiring and training policies

3.      Assumptions, Milestones, Metrics, and Schedule- Who is doing what and when:

Tactics need dates, deadlines and specific task assignments like:

• Constantly reviewing the schedule:

This is absolutely essential. If you don’t schedule your monthly review in advance and then follow up and do it, it’s not likely to happen.

• Constantly reviewing the assumptions:

You set the plan running, and then track results, and when results are different from the plan, you look at assumptions first to see whether they have changed. If so, then revise the plan. If they haven’t changed, maybe you still revise the plan, but you look first whether you executed it correctly.

• Constantly tracking the milestones:

What’s supposed to happen, when, and who is responsible? It’s a simple list to do, but it’s the core of execution. Tailor it to fit your needs as a constant reminder.

• Constantly tailoring metrics:

Apart from the sales, costs, and expenses, with the details of who is responsible for which lines or revenue or spending, other performance metrics include web traffic, sales per employee, tweets, followers, minutes per call, presentations, leads, lines of code, contacts made, likes, retweets.

4.      Forecasts of Sales, Costs, Expenses, and Cash- How you are going to make money:

Putting together some basic, bottom-up sales forecasts and a basic budget for expenses will quickly tell you if you have a business model that works—one that can create a viable business that will pay the bills.

You can do a basic forecast of sales and costs. It’s not about being accurate; it’s about laying out realistic assumptions. If you’ll be wrong you can track how you were wrong, in what direction, and make regular corrections.

And you can’t plan a business without considering cash flow. You need to forecast your basic business numbers because without the forecasts, you can’t track results and catch problems before they occur.