Sunday, December 9, 2012

MBA and Start-up Businesses. How much does an MBA help you start your own business? Some help, but not 100% help.

From the link:

Reproduced exactly as in the original article (these are not my words or thoughts):

In entrepreneurship, an MBA will only get you so far. Now that one has his MBA, he knows how to run a business once it’s up and running, but he has no clue how to start one from scratch. So in other words, he can execute a business plan, but he isn’t equipped to turn an idea into an actual functioning business - the core activity of an early-stage startup and one that requires a fundamentally different mindset and set of skills than execution

There are two stages in entrepreneurship:
  • Discovery and
  • Execution. 
MBAs take a course on how to write a business plan, of course. But even the professor teaching the class may agree that the business plan, as a document, is pretty much outdated as soon as it’s finished. The problem is that business plans should be drafted and executed in relatively predictable environments.

A business model has so many unproven assumptions - customers, prices they’d pay, level of demand for our products/service - that it may be hard to verify market size. By the time a 31-page business plan is ready, it may be a house of cards that may get a good grade, but probably wouldn’t work in the real world.

Frustratingly, it is not easy to find a business model that will work. The MBA education may teach you how to execute an existing business model (cost accounting, strategy, marketing, economics), but where do you learn how to search for the business model at the first stages of a startup’s life cycle? You may not always find the answers in the MBA courses.

Good books to read:
The MBA program will allow you to create an independent study course on business model discovery and development based around many of the materials mentioned above.

After exploring and testing several business models, your new plan may totally change from what it was eight months ago. With time, a business may find itself in a much healthier place. Every day, more and more of the business model will transforms from assumptions to facts, and you get closer to the execution stage, you can really start to scale and flex those MBA muscles.

If you’re considering pursuing an MBA before starting up, here are three important things to remember:
  1. Startups are not the same thing as existing or established businesses. They require a much different approach. So think creatively.
  2. Standard business skills and education are extremely important for the execution stage of business. Yet, they are of limited use in the discovery stage of startups.
  3. For early-stage ventures, ask yourself: “What is the right business model and how can I prove it?”

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