No business plan survives first contact with customers
Blank's line treats a plan as a list of guesses. The first month of conversations can break some of them, and a few it cannot reach at all.
No business plan survives first contact with a customer.
Blank borrowed the shape of the sentence from Helmuth von Moltke, the Prussian field marshal, who wrote in 1871 that no plan of operations holds with any certainty beyond the first meeting with the enemy’s main force. Blank put a customer where the enemy had been and used the line as a heading in a November 2010 post about Iridium’s $5.2 billion mistake. It has followed his teaching ever since.
Iridium is a hard case to forget. Motorola conceived it in 1987 and spun it out in 1990 to sell phone service anywhere on earth through a constellation of 72 satellites. The plan assumed the mobile market of 1990. By the time the first call went through in 1998, ordinary coverage had spread, handsets fit in a pocket, and an Iridium call cost about $7 a minute on a $3,000 phone that worked only outdoors. Nine months later the company was in Chapter 11.
What the line asks of a founder in the first month is mostly a change in where the work happens. In an April 2010 post Blank describes a business plan as something entrepreneurs treat as settled fact once it is written, and a business model as a set of guesses built to change when evidence comes in. Getting out of the building means testing those guesses one at a time with people who might buy: who has the problem, how badly, how they cope with it now, what they would pay to stop coping. A founder can hold a few dozen of those conversations in a month, and some guesses will not last the first week.
Conversations have limits, though. They describe the market as it stands, and Iridium’s trouble was the market a decade later. They cannot say whether the thing can be built at the cost the plan depends on. And a first month’s interviews come mostly from people the founder can reach, who are rarely a fair sample of everyone who might buy.
Iridium’s story has a second act that fits the line better than the bankruptcy does. In late 2000 a group of investors bought the satellite network out of bankruptcy for $25 million, and the US Defense Department signed on as a customer within weeks. Ships and remote work sites followed. The customers existed all along. They were a far smaller group than the 42 million subscribers the consultants had forecast for 2002, and no amount of planning in 1990 had found out who they were.
A plan written before that contact still earns its keep as an inventory of the guesses the first month should try hardest to break.