A New Way to Look at Eric Ries's Vision-Strategy-Product (VSP) Pyramid: The Lean Plan

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“A Lean Plan is the modern vehicle for rapidly translating a vision into reality”

Rod King

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Tucked away in Eric Ries's seminal book, "The Lean Startup," is probably the most important tool in the Lean Startup Methodology. It's on page 23 of “The Lean Startup” and it does not even have a formal name in the book. I and other people have called it, the "Vision-Strategy-Product (VSP) Pyramid." I'm now calling it the Vision-Strategy-Pyramid (VSP) 1.0.

In my view, the above VSP Pyramid 1.0 provides the single and most important conceptual framework for holistically illustrating, understanding, and applying the classic Lean Startup method. The VSP Pyramid 1.0 is probably the most overlooked tool or weapon in the arsenal of a Lean Startup. Yet, deeply understanding the VSP Pyramid 1.0 can reveal nearly all key ideas, principles, and tools of the Lean Startup Methodology. In the world of entrepreneurship, innovation, and startups, the Lean Startup Methodology is fast becoming the de facto standard approach for managing risky startups and innovation projects. The VSP Pyramid should therefore be the common or standard point of departure for all Lean Startup projects.

A question, of which I constantly think is: Why is VSP Pyramid 1.0 so underused in the Lean Startup community? In other words, why is there such a wide gap in use between the most holistic tool of the Lean Startup method and the many but disparate and ineffective tools that are used by Lean Startups?

My hypothesis is that the VSP Pyramid - with its topic of "Vision" and "Strategy" - is reminiscent of traditional or waterfall Business Planning. And as Steve Blank – a key influencer in the Lean Startup movement - is wont to say, "No Business Plan survives first contact with a customer." In fact, 'antagonists' of the traditional business plan such as Alexander Osterwalder have gone as far as saying, "Burn Your Business Plan;" they've reputedly held bonfires! I frankly feel that all this rhetoric about ineffectiveness of business planning and business plans is at best, misguided or “political.”

There are many variations of a business plan: from 1-Page Business Plan to full-scale Business Plan. Lean Startups can and should use formats of business plans that fit the stage and objectives of a project. The traditional business plan is generally a proposal or report that basically answers three planning questions: Where currently are you? Where do you want to go? How would you reach your desired destination? For a Lean Startup, a business plan is best prepared and presented after achieving problem-solution fit (pre-feasibility project) and product-market fit (interim feasibility project). A voluminous, data-rich business plan should ideally be a final (technical) feasibility report as well as a proposal about the financial viability of scaling a Lean Startup project. Voluminous business plans should be avoided for Lean Startups that have neither validated problem-solution fit nor validated product-market fit.

So, rather than the myopic suggestion of burning a business plan, I’d say that we need a new type of business plan for Lean Startups that are yet to validate problem-solution fit as well as product market fit. We need a lean and strategy-focused business plan, a plan that strongly integrates ideas, principles, and tools of the Lean Startup method with selected tools of Strategic Management. My proposal is that we use a "Lean Plan" which can be regarded as a Minimum Viable Plan of a traditional business or strategic plan. Unlike in a traditional business plan, a Lean Plan focuses on quickly developing a winning strategy that is rapidly deployed using small-batch experiments.

A Lean Plan has many uses including quick explanation or "pitching" of a business idea, facilitating team alignment, and managing agile strategy execution. The above Lean Plan, which is based on Eric Ries's VSP Pyramid or VSP Pyramid 1.0, features the VSP Pyramid 2.0. The above diagram shows an "iceberg graphic organizer" which is strongly integrated with the concept of a Business Model Engine. A Lean Plan can be regarded as the Minimum Viable Canvas of a Business Model Engine.

Although the "Product" occupies the visible part of the iceberg, the invisible parts are also important. While building or development activities focus on a product, measuring, learning, and pivoting activities focus on the value proposition and strategy. The Lean Plan therefore encompasses the Build-Measure-Learn Feedback Loop of the Lean Startup Method. This loop is driven by the pursuit of creating an Ideal Business Model Engine. The hallmark of a Lean Planner is his or her obsession with getting fastest and closest to the Ideal Business Model Engine. Several iterations and pivots may be needed in order to develop a practically ideal Business Model Engine for a given job-to-get-done.

By way of definition, an Ideal Business Model Engine instantly creates, delivers, and shares/captures value for a job-to-get-done at minimum pain (e.g., little or no cost) and maximum delight (e.g., highest differentiation, performance, quality, or positive emotional experience) while using internal resources and/or freely available external resources. Like in the concept of infinity, the Ideal Business Model Engine is utopic. However, successful business models converge towards the Ideal Business Model Engine. Derived from the concept of the Ideal Final Result (IFR) in TRIZ, the concept of the Ideal Business Model Engine can be used to generate ideas for business models that create an uncontested market space while making the competition irrelevant. In short, the concept of an Ideal Business Model Engine can be used to disrupt Red Ocean industries while creating Blue Oceans.

The Lean Plan or VSP Pyramid 2.0 can be used to rapidly generate, test, and validate ideas especially for the business model of a Lean Startup. Below is a Lean Plan developed (in retrospect) for Dropbox, a file-sharing company which is now securely placed among the new breed of Billion Dollar Lean $tartups.

There are two main approaches that can be used with a Lean Plan: Emergent Strategy approach and Deliberate Strategy approach. In the Emergent Strategy (Effectuation) approach, the focus is on rapidly developing and testing a Minimum Viable Product (MVP) with a view to achieving problem-solution fit as well as product-market fit. Emergent Strategists use a learning cycle of Build-Measure-Learn. In this Emergent Strategy approach, the Vision and Strategy may initially be tacit. In contrast, a Lean Startup that focuses on a Deliberate Strategy approach prefers a learning cycle of Learn-Measure-Build. A Deliberate Strategist starts with a vision and strategy while cascading to the Minimum Viable Product before commencing testing and validation of hypotheses. I prefer initially using a "small batch" approach of the Deliberate Strategist, that is, formulating and testing one topic before proceeding to the next: Vision; Strategy; Value Proposition; Product/Service.

The Emergent Strategy approach has its supporters and detractors; and so does the Deliberate Strategy approach. Irrespective of whether an Emergent or a Deliberate strategy approach is chosen, a Lean Startup should aim at rapidly having a validated, scalable, profitable, and sustainable Business Model Engine.

Unlike in a traditional business plan which is voluminous and rigid, the Lean Plan occupies a single page and is flexible, simple, easy, and fast to prepare as well as use. In addition, using an approach of deliberate strategy, a Lean Startup can translate statements of strategy into tactics, operational hypotheses, and performance targets that can be rapidly tested with a view to validating or rejecting them. Further, the Lean Plan facilitates visualization and explanation of concepts like Problem-Solution Fit, Product-Market Fit, Optimization, Pirate Metrics, Build-Measure-Learn Feedback Loop, Validated Learning, Business Model, and Pivot. A simpler worksheet as well as an example of a Lean Plan is presented below.

If there's one tool that ties with all paradigms, ideas, principles, and tools of the Lean Startup methodology, it is the Lean Plan or Vision-Strategy-Product (VSP) Pyramid 2.0. So, if you're thinking of starting a project with great risk and uncertainty, your best bet is to visually document, test, and validate your vision, strategy, value proposition, and product while starting with a template of the Lean Plan. Here's another example of using a Lean Plan:

Good luck in your experiments …

And one more thing ... Certainly, you'll not be disappointed. The Lean Plan would help you to faster recognize dead and unproductive ends, that is, fail faster especially with regard to validating customer demand. And who knows, after several rapid iterations, you may just end up building an insanely great product, for which customers are dying to pay.

Experiment with the Lean Plan and do share your experiences.

We look forward to hearing from you. And once again, good luck …

***PS.: You can download a PDF document of the Lean Plan from here:

http://www.slideshare.net/RodKing/a-new-way-of-looking-at-eric-ries...

Note: The above article is the tip of the iceberg on the Lean Plan (LP) which includes ideas on the Vision-Strategy-Product (VSP) Pyramid and Business Model Engine. For more information, register at Visionaryd.com

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