By Bryan Knipe, founder of TriPinnacle Advisors
Most new business lines fail in one of two places. Either they were never properly tested, a good idea that got funded on enthusiasm, or they were tested well and then handed to people who were not given what they needed to build them. The work that matters spans both: deciding well and then building what you decided.
For several years at Optum I did this as my job. On a special initiatives team reporting to the COO of Optum Analytics, I evaluated new opportunities and wrote the full business plan for each: go-to-market, operating model, financial and pricing models, marketing plan. Then I led the teams that executed the ones that went forward, and built divisions around them. The biggest was Optum's managed analytics business, which I built from the business plan to a large operating business and then ran as COO/CFO. Others included evaluating whether to buy a provider's cost-accounting intellectual property to add financial data to Optum's analytics, and planning how to take the analytics platforms into a new international market.
Not every opportunity went forward. That is what the evaluation is for. Here is the process I use.
1. Say what it is in one sentence
Who is the customer, what problem do they pay to solve, and why would they buy it from you? If the team cannot agree on one sentence, the opportunity isn't ready to evaluate. Most of the confusion that sinks new businesses later starts as an unclear definition here.
2. Size it honestly
Start from the customers you could actually reach in the first two to three years, what they spend on the problem today and what share you could realistically win. A top-down market number is useful context and nearly useless for the decision. The question is not whether the market is big, but whether you can build a business of the size that justifies the investment.
3. Find the reason you win
Every serious opportunity has competitors, including the customer doing nothing. The reason you win has to be something you have that others don't: a platform, data, relationships, a cost position, a team. Managed analytics worked because it combined things Optum already had, analytics platforms, a care coordination platform and consulting staff of actuaries, clinicians, nurses and operations experts, into a service no competitor could easily assemble.
4. Write the plan that decides it
The business plan is a decision tool, not a sales document. Mine always covered the same parts:
- Go-to-market: who buys, how they find you, how the sale is made and how long it takes.
- Operating model: who delivers it, with what systems, and what it takes to deliver the hundredth customer, not just the first.
- Financial and pricing models: driver-based, with the price, the cost to deliver, the investment needed and the point it pays back, in scenarios.
- Marketing plan: the message, the channels and what the first year of demand generation costs.
- Risks and kill criteria: what would have to be true, and what result would make us stop.
5. Make the decision, and make it stick
The plan goes to the people who own the money, with a recommendation. A good process turns down most opportunities, and the ones it approves come with the investment, the owner and the milestones written down, so the team building it is not renegotiating its budget every quarter.
6. Sell the first customers yourself
The person who wrote the plan should be in the room for the first sales. You learn more about the business in the first five customer conversations than in the whole planning process. When I built managed analytics, I built and led its sales team and ran the sales process personally: working the conferences and closing the first large deals, including one in which a large health system outsourced its entire analytics organization to us.
7. Build the operation behind the sale
A deal that cannot be delivered is worse than no deal. Building the division means the delivery team, the processes, the systems and the finance and reporting to run it as a business: a P&L someone owns, a monthly rhythm and the measures that say whether customers are getting what they bought. In that first large deal, it also meant leading the transition of an entire existing organization onto our platforms without breaking the work it supported.
8. Know when to change course
The kill criteria in the plan are there to be used. Review the business against its plan every quarter in its first two years. If the reason you win turns out not to be real, change the plan or stop, early, before the sunk cost makes the decision for you.
Where I help
I do this for companies evaluating a new product line, market or service: writing the plan that decides it, and then, as an interim or fractional COO, building the operation that runs it.