Getting to Plan B - A Book Recap

This is a recap of the excellent book - Getting to Plan B (by John Mullins and Randy Komisar) that I read recently. It is an excellent companion book to the Star Principle by Richard Ko. There are many ideas that I can apply for my own business - www.bookbuzzr.com:

• Most businesses need to change directions midway in order to survive. You need to move from Plan A to Plan B, C, D or even Z before you find success. This book shows you how.
• The idea is to iterate relentlessly but systematically and to keep iterating till you succeed big time and continue doing so thereafter.
• The day you stop systematically iterating is the day that your competitors will begin catching up with you.
• You can tinker with 5 parts of your business model. These are the revenue model, the gross margin model, the operating model, the working capital model and the investment model.
• The revenue model asks the questions as to who your customers are, how much they'll pay, how often, when will they pay etc.
• The gross margin model refers to the cost of goods sold (i.e. the direct costs of the service or product that you're selling.)
• The operating model refers to the other costs such as administrative and general expenses.
  
• The working capital model refers to how early you can get customers to pay and how late can you pay your vendors.
• The investment model refers to how much cash you must spend at the beginning before enough customers give you enough business to cover your costs.
  
• Dashboards are a systematic way to test your assumptions. On a a dashboard, you would record relevant analogs (i.e. indicative numbers from other businesses in the same industry or other industries), antilogs (i.e. things that you want to do differently from other businesses in the same industry or other industry), leaps of faith (the unknowns which you will systematically test) and your hypotheses that will prove or refute your leaps of faith.
• Less capital or later capital can be better for a business.
• Don't create business plans, create learning plans.
• Don't try to create a plan B when you are creating plan A as it could be as flawed as your plan A. It is better to give all of your resources and energy to Plan A without trying to second guess yourself.
  
• A particularly important part of the book is the prototype dashboard for testing hypotheses under each leap of Faith. This is reproduced below as it is probably the most critical part of the book:

Leap of Faith - Commuters will stop and buy a refreshing drink

1. [hypotheses] - Ex: "at least 10 customers per day"
   
2. [metrics] - Ex: "Customer count"
   
3. [actual period 1] - Ex: "2 customers"
   
4. [actual period 2] - Ex: "0 customers; rainy day"
   
5. [actual period 3] - Ex: "3 customers"
   
6. [insights obtained, course corrections needed] - Ex: no point in setting up if it rains; demand lower than predicted

• While this is an excellent way to think there is one to be aware of with dashboarding. This is the classical "correlation is not causation" issue. In other words, just because you observe something during a particular period, you cannot make a particular conclusion ... there may be other causes or it may just be plain randomness. And often entrepreneurs struggle with very small sample sizes to actual derive any kind of signal and separate it from the noise (anybody who has set up an A/B test on a web-page that has just a few hundred visitors a day probably knows this.)
  
• In spite of the above problem, the idea of dashboarding is worth it for every start-up out there.