Discovery Driven Planning: Getting started and a dog-walking example
To develop a discovery driven plan, you’ll proceed through five interlinked steps. These are:
- Start with a compelling outcome – meaning, know what would make the investment worthwhile
- Benchmark your ideas against market demand and competitive offers
- Define the operational specifications for how the business will work, operationally, including defining your unit of business
- Describe and document your assumptions
- Identify the key milestones that will be useful to you as the business unfolds
You can download a worksheet that walks you through the steps from here:
Read the rest of the entry for a detailed example.
So if I were to use an example from a previous post (the dog-walking case), let’s see how that might play out with Discovery Driven Planning principles in mind. So here you are, a Columbia Business School MBA, thinking about going into the dog walking business. The first question you’d need to ask yourself is “what would make it worthwhile for me to start this business?” Our typical MBA’s graduate with the expectation of earning very nice (indeed, very very nice) starting salaries, mostly in the worlds of consulting or finance. So at a minimum, if you were going to start an entrepreneurial business, you’d want to have the potential to earn at least what you’d earn by getting on the #1 train and getting off at the Merrill Lynch stop, right? So let’s say our aspiring entrepreneur would set that desire at $120,000 per year before taxes.
You’d then have to think about costs, which in the case of a dog walking business shouldn’t be all that substantial, so let’s say that an additional $30,000/year would cover insurance in the event a pooch has a mishap, advertising, booking costs and administrative overhead. So that means the required revenue for our aspiring dog-walking business is $150,000/year.
The next question to consider is what the ‘unit of business’ is for this business. By unit of business, we mean literally what you are selling. At this point, you can start to get creative. You can get paid for dog-walking any number of ways. You could charge a retainer that covers all dog walking necessary in a given period of time (say, weekly). You could charge by the walk itself. You could charge a retainer plus a usage fee—you get the idea. We strongly encourage people to think broadly about their unit of business before they jump into a new venture – often, that’s where the most creative ideas are to be found.
To keep the example simple, let’s say that you are going to charge prospective cllients a flat fee for an hour walk. How much will they pay? No idea. So I’m going to make an assumption (which will be wrong, and we all know it, so it doesn’t matter at this stage). The easiest thing to do is hunt up comparables. In this case, I found the web site for Peggie’s Pet Service out in California, who offer a whole range of doggie-related services. Peggy will charge you $340/month (as of this writing) for a daily walk, which translates into roughly $11.33 per walk for one dog.
So does that idea work? Let’s run the numbers. At $340/month, annual revenue per dog would be $4,080. If we divide this into our required revenue of $150,000, we’d need about 37 contracted customers for daily walks to hit the revenue number. But whoa – if each walk takes an hour, either we have to walk a rather large number of dogs at a time, or somehow suspend the laws of time to expand the hours available in a day. Even if you double the charges (which is probably more than the market will bear), you’d still need 18 dogs per day to hit the revenue number. You’d have to double the charges and walk 3 dogs at a time to get anywhere close to our desired revenue number.
At this stage the point is not that the business is a bad business – just that it isn’t profitable enough given the assumptions that we’ve made to justify it as a career choice for Columbia MBA’s. That doesn’t mean you should necessarily give up. If you’re committed to the idea, there isn’t any reason you can’t think of a different business model to try, just as our friends with O’Hare pet-hotel business have attemped.
Should you come up with a model that’s viable, and benchmarked against prevailing norms or existing competition (as we did with Peggy), the next step is to think through operationally how to get the business going. For a dog-walking business, you’d definitely need to think about how to market, first customers, building a web site and so on. As you do that, you’ll be making assumptions about timing, cost, difficulty and so forth. The critical thing is to write them down! It’s all too easy to overlook them later on.
The final step is to think through the major checkpoints (or milestones as we referred to it in earlier writings) in the business. For this rather simple business, representative milestones would include:
- Create company, brand, and advertising message
- Contract with first customer
- First service for customer
And so on. At each of these checkpoints, you’ll be able to test more and more assumptions. The key is to go back and re-plan. Don’t be afraid to change direction as you learn, and try to put the least expensive milestones in early, leaving the more expensive or risky ones for later.
Feel free to email me if you have questions.
You can download the original article Discovery Driven Planning here.
Filed In: Discovery Driven Planning