Building Blocks Planning

This is an outline of a simple tool for planning innovative technology businesses which helps consider sequences and consequences.

This method uses the metaphor of building blocks to plan the major steps from now to your big goal. The principle is that each block builds on the block under it and must be a logical extension forward. It stops ‘hope’ as a strategy or ‘dreams’ without structure. It gets you to ask the question, what foundation am I building and, when it is finished and strong, what can I build on that base to grow towards my vision.

It’s useful for the management of tech businesses who are trying to plan when there are complex interactions between parts and many paths to take.

Planning is significantly harder with innovations because there are a number of large unknowns or, at best, hypotheses, including;

  • Who are we building this for?
  • What problem are we solving?
  • What is it we are building?
  • How should we build it?
  • What resources will it take to build?
  • How long will it take to build?
  • How much will it cost?
  • Will the customers want/like/use it?
  • Will the customers pay for it and how much?

Triangulating all these points is hard as they all influence each other. Your resources impacts what you can produce which impacts what revenue you can make or capital you can raise, which then impacts what resources you can deploy. Rinse, repeat….

No amount of research can give you the right answer let alone all of them. Only implementation to real customers. This is why I advocate many small test laps rather than long, big, ‘perfect’ laps. You may run out of resources before you do enough laps.

It’s tempting with all these unknowns to do no planning at all. That can work, but you can also paint yourself into a corner by taking a path which will have consequences that blocks your progress. One of the benefits of second time entrepreneurs is their ability to anticipate these consequences and plan for or avoid them. The building blocks approach can help you at least understand the possible paths and do some scenario work on possible outcomes. If this is your first tech business, I suggest doing this exercise with someone with experience in your area or your possible paths, just be aware of the biases they will have to ‘paths’ they have taken.

How To Do Building Blocks Planning

The basic setup looks like this:

  1. Take a whiteboard or a piece of paper. (Here is a spreadsheet version with examples)
  2. Draw a big rectangle, taking up most of the page.
  3. Draw about nine lines to create ten rows in the rectangle. Each path will need a different amount of blocks and you can experiment with big steps or smaller steps.

Bottom to Top

To start, do bottom up planning. First, summarize where you are now in the bottom block. Just high level on the key resources you have to produce something.

Some examples:

Team of 3 + $15k + 6 months of time.

IP + 10 hours a week

Team of 2 + $1k + Mailing list of 3,500 possible customers

The bottom block is your base foundation. It’s what you start with to build along the journey. You’re the founders, so you make up a big part of the foundation yourselves.

For now, skip the middle eight blocks and go right to the top. What is the rough goal of this business? Or what is the most important big milestone you’re building towards over the next 5–10 years. This is not about short term planning, it’s a much more long term tool.

What goal to pick is up to you and your team, but you should all be aligned, otherwise you run the risk of either pursuing different goals or someone being horribly disappointed. Don’t worry about being exact, it’s more about the scale of the goal — $1, $10m, $100m or $1b.

OK, so let’s go back to the first block. What do you have now and how can that logically build you towards your goal. If you think about it like building a building, this is your foundation. The rest is build on top of it. What you build next enables you to build what comes after that. You look at where you are, gaze up at the goal and then take one big step toward it.

The resources you have now can’t put a rocket in space or launch a data centre. They can create a prototype, talk to 100 customers, apply to an accelerator, create a pitch deck, do some research. Don’t worry about feeling like it seems like a massive gap and woefully under resourced. There is a famous saying that entrepreneurs are people who pursue opportunities outside their CURRENT level of resources. As you build up, you will acquire more resources.

Key is knowing that what you decide to build has implications down the line. If you focus now on sales, then you may either be enabling cash flow break even and no need for capital, but it also might mean slower scaling and not being venture fundable. If you focus on capital raising but don’t have the sales to earn it, then you might not get the money. Or you may raise the money but then swing so hard for being a massive company that you fail or you may not keep control of your company.

Now go block by block in big steps forward towards your goal.

Bottom Up Example (read it from bottom to top)

10. Goal: $1b business

9. Get to $100m ARR

8. Launch channel distribution strategy

7. Get to $10m ARR

6. Launch second product

5. Get to $2m ARR

4. Hire sales team get & launch into new segment

3. Build V2 and get to $50k a month revenue

2. Build V1 and get 10 happy customers

  1. Now: Team of 3 + $15k + 6 months of time.

Another Bottom Up Example

With the same start and same goal, there are other block stacks you can build; (read bottom to top)

10. Goal: $1b business

9. Get to $100m ARR

8. Take product international

7. Get to $10m ARR

6. Raise $10m A round

5. Hire sales team and get to $5m ARR

4. Raise $1.5m seed round

3. Build V2 and get to $50k a month revenue

2. Build V1 and get 10 happy customers

  1. Now: Team of 3 + $15k + 6 months of time.

There are unlimited possible stacks — that’s the challenge. Many paths, lots of dead ends and incomplete information. But playing out a stack can help you see the impact of different decisions.

Here is a spreadsheet version with examples

Top to Bottom

Top to bottom planning begins with the end in mind and works back to where you are now via logical steps.

From your top goal, work out what would need to be done to then achieve that. Then what has to be done to achieve that second top block. Then keep going down, outlining the work needs to be done to make the next block possible.

Try and take big enough steps so you end up where you are today. It is not about every detail, it’s about what makes it possible to build that next block.

Example

Let’s say you want to build a $1B technology business.

Working down the blocks:

10. To do that, you need to be doing $100m in revenue per year. So that’s the second block.

9 .How many customers do you need to achieve $100m? If your an enterprise product which costs $1m, then you need 100 customers. If you are a consumer app that makes $1 per user per year, then you need 100m paying customers.

8. How many sales people, partners or trial customers do you need for to get those customers?

7. How much free cash flow or venture capital do you need to get do those activities?

6. How much traction do you need to achieve that free cash flow or to raise that much venture capital?

5. What do you need to do to get that much traction? How do you acquire the customers?

4. How good does a product have to be to get that much traction?

3. How much seed capital do you need to build that product and ensure you get that traction?

2. What do you need to do with what you have now to get that seed capital?

  1. To where you are now (see above)

When you look back at the whole picture, the stack of blocks should make some sort of logical sense as you read back up. There should be no crazy leaps of faith and no underpants gnome question marks;

Multiple Block Stacks

I suggest that you at least try 5 different stacks to challenge your thinking. Going with the first plan is typically either going to miss a big opportunity or ignore a significant issue. Each block stack has it’s own pros and cons which should be obvious to you.

Different stacks can be generated by thinking about major different options.

  • What if we went after a different market?
  • What if we don’t raise money and aimed for break even?
  • What if we gave away the product for free to build data?
  • What if we acquired another company?
  • What would we do if we had to go really slow?
  • What would we do if we had to go really fast?
  • Work up or work down?

Block Stack Review

I would suggest doing this exercise whenever you get a fundamental shift in your business. A major learning, a major inflection point or anything significant which would change the way you think about your stack. This will probably be at least every 3–6 months.

Here is a spreadsheet version with examples

Here is the presentation I did at Launch Scale Conference;


I hope you’ve found this useful. Feel free to send me your stacks or tell me how this exercise can be improved.

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