A PROFITable Business Plan for Success in the Digital Epoch
“Let me tell you a story about the problem with business planning for digital
economy projects: It is far from planning and even further from the business.”
Do you think that a business without profit is just a hobby … or charity? I’m sure you do. Do you believe that a “classical” business plan is an appropriate tool to forecast prospective businesses’ profitability in the contemporary digital disruptive environment? I’m afraid, only so-called professional “business plan writers” answer yes, while both digital startups and investors don’t agree. It is a reason why “writers” continue writing of long narrative-styled business plans that are so far from today digital reality, startups try to encourage investors to fund their projects with no any proof, and investors rely on gut feelings instead of reliable projections. But new information technology allows creating an effective algorithmic system to plan future profitability to reach success in the modern digital world. And this article shows you how such a system, called PROFIT™ do it.
What are the problems with old business planning? There two groups of problems: one of them comprises the set of objective problems, and another group encompasses business planning problem of behavioural origin. In the contemporary digital economy, new projects are creating by millennial entrepreneurs who envision an opportunity to develop a new product or service. Some digitally enabled startups promise to provide access to more profitable alternative products and services, but innovators have to prove it.
To start projects and attract funding, startups must foresee complex and unique problems that their projects encounter in the future and measure chances of success (and failure), risks, as well as profitability, called as projects’ feasibility. Well performed feasibility study allows for producing a good business plan. To conduct feasibility studies innovators have to have a wide range of skills and experiences (as a rule, they haven’t it) or employ facilitators who are ready to help startups to plan future digital business (but there’re only “traditional” business planers in the market who don’t fit today requirements).
Why? Because the digital business model is subject to significant changes in comparison with a “classical” one:
- The costs structure has changed radically (low marginal cost and gross profits margins that can get reach 90%).
- New values (besides cost value) appeared being derived by customers’ novel experiences and network effects.
- Markets and competition patterns changed dramatically (online customer interface platforms instead of manufacturers became the dominant market player’s type, and new profit pools arose instead of traditional value chains).
- New risks that were unknown before arise (hacking and security weaknesses, insufficient encryptions, and so on).
Initiators of new digital business-related projects are millennials who are tech-savvy, able for multi-tasking with focus on personal development. They are open-minded persons and early Innovators who are able to understand new values (besides cost value). But they also rebels who recognise authorities as barriers, restricting innovators’ brilliant opportunities. They rely heavily on digital media and prefer bright visual presentations to long and boring texts. And millennials don’t like of being guarded and managed, preferring working as equal partners or co-workers.
From the millennials’ point of view, a “classical” business plan does not match neither the features of new disruptive epoch nor millennials’ qualities:
- Such plans are made by so-call “writers” as long narrative texts, while new innovators think mainly visually, and PROFIT™ have inbuilt appropriate technical means available.
- The plans were proposed to be performed in the same way how they were written, but millennials use an experimental approach to test decisions, and PROFIT™ employs the modelling techniques to follow the new route.
- The plans were based on pure logic and a command language, while millennials’ has emotional intellect prevailed, and have to be encouraged and engaged in a planning process. And PROFIT™ uses a modern interactive planning approach.
- Traditional planning demands a wide range of skills and experiences from users, but Millennials don’t want to study for long, preferring to have help and advice online. PROFIT™ proposes innovators a virtual facilitator.
According to Gartner, collecting and storing massive amounts of data isn’t enough to gain a competitive advantage. Only actions derived from data can add value, and algorithms (procedures that transform input data into output data via a well-defined processing chain) define actions. Algorithms are extremely good at some parts of the whole business planning process – sometimes, much better than humans are. Not computers but humans make decisions, and good business planning model has to be hybrid. Deloitte shows that digital platforms are the mainstream of business services delivery. So, decentralized, cloud-based feasibility study and business planning platform is the only way today to efficiently process data and effectively communicate with millennial innovators.
PROFIT™ (it is an abbreviation of a longer sentence of PROjects’ FITness) platform has all the above-mentioned features to be appropriate to the contemporary digital surrounding:
- Giving opportunity for projects’ profitability analysis via scenario computer modelling to check the viability of new digitalized products or services, reducing business risks and accelerating the planning process.
- Developing feasibility algorithms through an iterative process of testing, training, validating, and improving them in a continuous cycle, creating better algorithms that can add value to any business project.
- Unifying configuration, data access and information processing on the platform, and the efficiency of its operations via standardization and formalization of repetitive tasks.
- Making applications and services to innovators quicker and cheaper, providing them efficiently to keep pace with modern business requirements via faster completion of mundane processes and reducing the time needed to obtain feasibility reports.
Nowadays, on the innovation wave, our (Innovation Wave Pty Ltd’s) mission within PROFIT™ project is creating, establishing and facilitating a cloud platform, inviting startups that are in digital business to join new business planning. PROFIT™ will increase the efficiency and transparency of the business planning process, lowering transaction costs dramatically. The platform also helps innovators to check the profitability of new revenue models before its performance, in reality, decreasing risks of failure and chasing a chance for success.