Certain uncertainties…

Uncertainty is a given when it comes to startups. So, the way you design and implement your strategy should be focused on actively managing this uncertainty.

But chances are that it isn’t. Why? Because it’s not the traditional way of doing things … and your advisors, investors, peers, and other contacts will probably encourage (with good intentions) that you follow the well-worn path. Many of them are probably unaware there is a better way.

Traditional strategic planning is based on the assumption that you already have a strong understanding of your business and environment. It assumes that previous experience is a decent guide to the future, and that the underlying “game” you are playing hasn’t changed. The classic example is a detailed set of financial projections that simply increments the previous month or year’s number by some assumed percentage growth rate.

The assumptions of traditional strategic planning fail in startup-land.

In a new venture, you typically have a bunch of theories about what customers value and how you can profitably serve them… but as one expert puts it, the “ratio of assumptions to knowledge is high”. In fact, you will almost certainly be wrong! The key questions are when do you find out, how much does it cost you, and how well can you adapt?

The best startups focus on learning quickly and at low cost, by investing small amounts into activities that test their key assumptions. The worst put all their resources behind the initial plan … and only discover when it is too late that they are on the wrong track.