Who Dares Wins – The 2nd Annual International Business Model Competition

Alexander Osterwalder and I spent last week in Salt Lake City, Utah as judges at the 2nd Annual International Business Model Competition, hosted by Professor Nathan Furr, and his team at the BYU Center for Entrepreneurship.

The idea of a Business Model competition first emerged when I realized that Business Plan writing ought to be taught in English Departments – as they’re the best example of creative writing entrepreneurs will ever do.

The Business Plan 
- a roadmap for execution
When venture capital teamed up with technology entrepreneurs in the 1960’s they brought with them the canonical MBA planning tool – the business plan.

The business plan is a wonderful document for organizing and planning for existing companies to launch follow-on products. In an existing corporation, the business plan is the execution document for sustaining innovation.

The problem is that once a plan is written it’s static and assumes minimal new learning. This makes sense in a company where your customers, channel and competition are known. And your revenue plan is something more than a hallucination.  But for startups, business plans fail to match the chaotic reality they encounter in the real world. Yet year after year, decade after decade, VC’s would watch as no startup business plan survived first contact with customers. So what did the venture industry do? They kept insisting startups write business plans as the price of entry to venture funding.

Why?

VC’s thought of startups as smaller versions of large companies.  Large companies wrote business plans, so VC’s made startups write business plans.  Large companies had VP’s of Sales and Marketing, so VC’s made startups organize that way as well. Large companies executed plans well and when they didn’t work, they fired the executives who screwed up.  So VC’s assumed that startups should equally unfold per the plan – firing executives when reality intruded.

The reality is that startups needed a new class of management tools. Tools to help them manage the search for a repeatable and scalable business model. Startups needed tools to help them organize their hypotheses, and then needed a process to rapidly test those hypotheses. And they needed tools that recognized that most startups go from failure to failure as they searched for, and discovered, product/market fit. And that instead of firing executives to match a plan, it was the plan itself that needed to rapidly iterate.

Business Plan vs. Business Model + Customer Development
The term business model first appeared ~50 years ago, but the concept didn’t catch on until the 1990’s. It wasn’t until 2010 when Alexander Osterwalder published his book Business Model Generation that it became clear that this was the tool to organize startup hypotheses.

It wasn’t long before Alexander and I realized that organizing hypotheses with his canvas was just the first step in building a business. The next step was getting out of the building and testing the business model in a formal process – and that process is Customer Development.

We’ve blogged about the combined methodologies here and here.  Our Lean LaunchPad class at Stanford, Berkeley, Columbia and the National Science Foundation teach the combined Business Model Canvas + Customer Development tools.  My new book, The Startup Owners Manual integrates the two.

Three years ago, after watching my nth business plan competition I realized this was simply wrong.  Rather than having students invest months writing a 100-page tome and polishing slides that taught them almost nothing about what it was really like to build a company, I thought there had to be a better way.

I suggested that we hold competitions that actually emulated the real world (rather than what’s easy to grade) and hold competitions that emulate what entrepreneurs actually encounter – chaos, uncertainty and unknowns. A business model competition would emulate the “out of the building” experience of real entrepreneurs executing the customer development / business model / agile development stack.

You can write a business plan slide deck in your dorm or library.  But you can’t fake a business model/customer development presentation. It takes a ton of face-face customer interactions.

The International Business Model Competition
From the seed of this initial idea Professor Nathan Furr at BYU did the hard work and created a global business model competition, this year receiving over 100 submissions. The finals were held in the packed 1,000 seat BYU auditorium with lines of students outside unable to get in.

(I love walking around the BYU campus. It feels like being at a giant Eagle Scout convention.)

It was an eye-opener to see each of the teams take the stage to describe their journey in trying to validate each of the 9 parts of a business model, rather than the static theory of a business plan.

Each team used the business model canvas and customer development stack to go from initial hypotheses, getting outside the building to validate their ideas with customers, and going through multiple pivots to find a validated business model.

All of the Business Model finalists were pretty amazing.   Each one of these presentations moved the teams closer to building a real company.

This years winner were:

1. XoomPark, BYU

The XoomPark team spoke to over 300 people (customers and channel partners,) ended up with 2 partners, 30 parking lot customers, a working website and a validated revenue model.
If you can’t see the slide deck above, click here.
.

3. AutoBid, BYU

AutoBid’s pivots were pure artistry.

If you can’t see the slide deck above, click here.

4. FlexLeg, BYU 

FlexLeg got to experience first-hand the complexity of a multi-sided market – something the Business Model Canvas illustrates with startling clarity.

If you can’t see the slide deck above, click here.

Business Plan competitions are for those want to write PowerPoint slides. Business Model competitions are for entrepreneurs who want to learn how to build companies. Harvard will be hosting the 2013 International Business Model Competition and Stanford in 2014.

Come join us.

Lessons Learned

  • Business Plan competitions offer VC’s a PowerPoint beauty contest.
  • They teach entrepreneurs little about how to build a company.
  • You can’t fake a Business Model/Customer Development presentation.
  • It tough, grueling and relentless, requiring a ton of face-face customer interactions.
  • It what winners do.

Listen to the post here:


Download the Podcast here

12 Responses

  1. [...] Bonus Points >> Once you have your idea, enter the 2nd Annual International Business Model Competition. [...]

  2. This is indeed a very important point that you have made – “Business Plan competitions offer VC’s a PowerPoint beauty contest.”

  3. More universities and especially B-Schools need to become aware of the out dated nature of business plans in entrepreneurship. I attend the Kelley School of Business at IU with the #1 public entrepreneurship program in the nation four years in a row according to US News & World Report but our capstone class is still a business plan writing class. Excuse my language but WTF! Are they serious? They aren’t leading the way in entrepreneurship at all! So this is my plea “please help change the entrepreneurial curriculum at these so called “leading” universities!”

  4. What do you recommend for people who seek advisers, mentoring & funding, when the organizations available locally are asking for the traditional business plan? Especially when you know that your startup is definitely searching for a repeatable business model, making assumptions on customer, product and model.

  5. I have recently come across a research which is very similar in nature on entrepreneurship. It’s website is http://www.effectuation.org and it talks how entrepreneurs create the best around them and are action oriented. Your video’s on Entrepreneurship corner has inspired me so much. I have been working on my own small startup idea. Till now managed to only earn $ 20 as revenues. My business model is changing and hope someday I will make it. Thanks Steve.

    I am a student at Indian Institute of Technology, Kanpur , India and your videos and ideas inspire me and a lot of my friends here.

  6. Hi Mr. Blank,

    I apologize for writing this in the comments section, but couldn’t find your email anywhere. I am currently a senior at UCSB, and have been reading your book the past month at the recommendation by one of the engineering professors down here. (He swore by it, so I had to check it out).

    Anyways, I have just stumbled across your blog doing a little research for work (I’m interning at a startup down here), and just wanted to take the opportunity to say that you have written a GREAT book, and I am thoroughly enjoying your insight. Thank you so much, its definitely one that I’ll keep on my desk and refer back to in the future.

    Best,

    Noah

    • Noah,

      Thanks!

      As it happens, just as you finish reading the first book, I go and write a better one!

      Check out the new book here.

      best,

      steve

  7. I need help drafting a business model canvas and slideshow for a new concept. is there any source that charges for this service?

    Regards,

    Dana

  8. [...] help teach this process, just this past month Steve Blank and Alex Osterwalder joined me at the International Business Model Competition which we created. We [...]

  9. My name is Ken Frei, and I am the CEO of XoomPark. I just wanted to thank you again for coming to BYU for the competition and for doing this write-up on the competition and our company. It was a pleasure to meet you and I look forward to talking with you again soon with more success stories from our company!

  10. [...] Blank captures my thoughts about this well in a recent post. The business plan is a wonderful document for organizing and planning for existing companies to [...]

  11. [...] help teach this process, just this past month Steve Blank and Alex Osterwalder joined me at the International Business Model Competition which we created. We [...]

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