Not long ago I was at a meeting where someone gave an interesting definition of a business plan: “A business plan is a collection lies with the goal of making management decide on that which we want them to decide.”
Perhaps that’s going a bit too far, but in practice I notice that virtually none of the plans are fully realized. Is this a problem? Not as long as something that is of value is achieved. And yet the question remains whether we attach too much importance to beautifully detailed plans and project proposals.
I’ve evaluated a number of projects for the European Commission and honestly must say that I noticed that the best part of the project was the proposal. It is as if the bulk of the work goes into the project proposal (and hence financing) and once that is approved, it appears that implementing the project is no longer the ultimate goal but just a sideline. In the first Internet Period (around 2000) many investments were made on the basis of the business plans that were submitted.
An important lesson we learned at that time was that the author of the plan is actually more important than the plan itself. A good entrepreneur with a bad plan has a better chance than a bad entrepreneur with a good plan. For in the complex world in which we live, even the best made plans can’t be implemented without modifications.
Therefore, it is much more important that the plan’s executer is able to respond to new conditions in a timely manner, thereby adjusting the project’s activities and ambitions.
But this philosophy of navigating instead of managing and controlling is certainly not recognized by all. That said, it is recognized by social entrepreneurs who let their passion and intuition lead their choice of activities. But without having an elaborate, (quasi) substantiated and proven plan in advance they often do not get the resources needed to achieve their ambition.
Hence, reason above passion.
This is not to say that we should make resources available to everyone who enthusiastically pitches their idea.
I believe it is a defendable to make decisions more on the basis of a healthy balance between ‘hard’ and ‘persistent’ characteristics of entrepreneurs, such as: how passionate, flexible and creative they are, as well as their ability to persevere, cooperate and of course achieve results.
Certainly with social entrepreneurs the (desired) results also contain non-financial components, such as improved safety, health, social cohesion, relationships with customers, employees, a better environment, et cetera. It is therefore worthwhile to see whether business plans can be extended to include elements related to so-called Intellectual Capital. These ‘soft’ sources of value creation are generally divided into three categories: Human capital (knowledge, loyalty, relationships), Structural Capital (processes, systems, organization, name recognition) and Customer Capital (number of customers, customer profitability, customer loyalty).
While financial results say something about the current situation of an organization, the developments in relationship to Intellectual Capital say something about the organization’s future prospects. Traditional business plans which amount to nothing more than: “Money creates More Money ‘, must therefore be supplemented with components related to Intellectual Capital. This means that the investment and the yield of ‘soft ‘components are described, which better reflects the world in which we are now living. Hence, we will not be lulled into a false sense of security because we are only looking at the financial side of the equation. Indeed, in this scenario, it is accepted that other forms of value creation are important.
Perhaps this sheds light on governmental plans for cost cutting in the cultural sector, or, as Peter Bakker would say: “If you focus on costs, the quality will decrease, if you focus on quality, costs go down.” What would be your starting point?
