Act of business planning is more important than the plan itself
According to my opinion, business plans may become outdated the very day they are
finished, but the process of planning is very important as it prepares entrepreneur to face the
future.
Dwight D. Eisenhower, the past US president and a five-star general in the US Army during
World War II, once said, ‘Plans are worthless, but planning is everything’. What he meant
was that one cannot make full proof plan to offer ready-made solution for an emergency
(which, in any case, is an ‘unexpected’ event), but the act of planning can prepare the
individual to face any situation as it is a useful learning tool. This statement is highly relevant
for today’s entrepreneur who is preparing to chart a plan for his/her new business in a market
which is highly volatile and uncertain.
There is no perfect business plan, but the process of planning can provide useful
simulation tool, which can help entrepreneur to convert business ideas into reality. In my
book ‘Business Planning’ (2011) that describes in detail the stages of starting a business
project and offers useful tips to transform good ideas into a sustainable business – believes
that business plans may become outdated the very day they are finished, but the process of
planning is very important as it prepares entrepreneur to face the future.
I here share my insights into entrepreneurship, emerging markets and how to develop a
coherent business plan as I always have worked on entrepreneurship and business planning
and have recently developed an interest in emerging markets from entrepreneur’s point of
view to know more about innovation, new business models, etc.
I have worked closely with Italian firms who have ventured into the emerging markets and,
hence, I can share my observations based on my experience with western companies. The
differences are astonishing in emerging markets, and this provides an interesting topic of
research for business schools. It is important for western companies to be present in emerging
markets as it gives them new ideas (which can be emulated in developed markets). For
example, today price sensitivity is not just relevant for emerging markets, but also for
customers from developed countries. So strategies adopted to solve price sensitivity
challenge in the developing countries can be put to good use by western companies in
developed markets such as Europe, where people are scouting for cost-effective products
with economy increasingly becoming topsy-turvy.
There are lots of things that companies from developed countries can learn from emerging
economies as the market conditions and consumer preferences are different. Hence, one has
to adopt new strategy to gain market share and customer’s loyalty in the highly competitive
developing markets. This also forces companies to be innovative not just in terms of product,
but also with respect to business processes. This can provide immense help to companies in
handling the uncertainty in the new market.
If we see from different types of companies’ perspective, Yes. It is not just the big companies,
but also small and medium scale companies (having expertise in niche product categories)
who are spreading their wings in emerging markets such as China, India, Brazil, etc as these
companies know that the future growth is going to come from developing countries. It is
important to understand that in order to grow and survive companies have to be present in
emerging markets, which offer high growth prospects.
As the demand for products is growing in the developing and emerging markets, most of
western companies follow their customers in these markets. Take the example of Almax, an
Italian manufacturer & supplier of mannequins (dummies used by dressmakers to display or
fit clothing). The company ventured into China as majority of its customers – i.e. European
fashion houses – shifted their focus to China. And today Almax has more employees in
China, than in Italy.
Every emerging market is different with their unique challenges. Hence, for the company,
which is planning to enter the market, it is important to understand the way business is
conducted in that country and be aware of market & customer preferences. It is essential to
hire employees with experience of local market condition.
Business plan is written when you launch new product, company, or enter a new market.
Some people say it is useless to prepare business plan, since the plan becomes old the time
you finish writing it as market conditions are changing so fast. While this may be true,
writing a business plan still helps the entrepreneur to have clarity of the business, to be
organized, bring in coherency in the thoughts, etc. Business plan can be a learning tool to
clarify the idea or to present the idea to somebody else (may be to potential investors).
It is said that value of the business plan is in the understanding about your products,
customers, and markets. It is a learning tool that helps you to understand your strengths and
weaknesses, opportunities and threats. It should be used as simulation tool and should include
‘what-if’ scenario planning, which is based on thorough on-the-field study and data.
The answer to that is you do not have to forecast, you have to simulate. One has to have
simulation model, which can help entrepreneur to better understand changes in the business
environment and enables him/her for scenario planning.
Hence, business plan should essentially be a learning tool and used for simulation. In
addition, one has to be prepared to make changes in it, if required. Plan should be dynamic
which can be altered to suit the external environment.
In case of Nokia, I think it was unlucky as the technologies in the telecommunication sector
changed rapidly with hardly any time for reaction. The company was not fully prepared for
the market which saw the convergence of computing technology with mobile phones. This
change was driven by companies from the IT industry. No wonder today the smart phone
market is ruled by companies who were connected to the computer industry, and not by
companies who were pure-play mobile manufacturers.
Today, tools (such as Customer Resources Management, IT technologies, etc) required to
start new businesses are easily available, but the market has become highly competitive.
Smart entrepreneur will always find the way to success irrespective of the circumstances.
Prof. Cinzia Parolini
