Top 4 Steps to Building a Master Plan
How to Create a Startup Master Plan
Jacob Jolibois is the co-founder and CPO of Check and writes a free, weekly newsletter on how to build industry leading products. Jolibois is a 2020 VILLAGEx alumni.
Every good idea-stage founder needs a Master Plan. Perhaps not a "take over the world" type of plan (though don't rule that out!), but some sort of back-of-the-napkin sketch that gives their team, their investors, and themselves a sense of direction and confidence in their idea.
Speaking of confidence, if there's one thing I can confidently say, it's that you can't plan for the future when building a startup. Lord knows I've tried. But even if the details change along the way, a Master Plan gives you some semblance of destination.
A Master Plan is NOT a business plan. Or even a product roadmap. It's more like an impassioned speech by a general that rallies and unifies the troops before heading into what will no doubt be a grueling battle with your fair share of casualties. It instills hope and gives you something to fight for.
Perhaps you've seen Walt Disney's sketch of the legendary Disney ecosystem...
Or Christopher Nolan’s sketch for the plot of his film, Inception.
Notice that neither of these plans give you the details — the “HOW.” But they very clearly show:
WHAT they’re building.
WHERE they’re going.
Some might argue that Master Plans aren’t necessary for building out a business idea since they are meant to be held loosely. But that doesn't mean you shouldn't have one.
Master Plans are unique to each company and flexible enough to change with new information. It’s a foundational part of building out ideas.
Are you ready to create a Master Plan? Grab a napkin and let’s get started!
4 Steps to Building a Master Plan
Along the way, I'll provide concrete examples from Tesla and Netflix, two wildly successful companies, to illustrate how each step plays out in real life.
Step 1: Define Where You Are Heading (Vision)
This is either the easiest or the most difficult part of the Master Plan to nail down because you can come at it from different directions.
Some founders start with a vision to be realized and others start with a problem to be solved.
Tesla
Founders like Elon Musk, Martin Eberhard, and Marc Tarpenning have a vision of the way they believe the world should be. The companies and the products they build are just a vehicle (pun intended) to get there.
Elon Musk falls into this category with all of the companies and industries he's involved in, from Tesla (sustainable energy economy) and SpaceX (colonize Mars) to The Boring Company (transform cities) and Neuralink (expand human ability).
Tesla's mission is to "to accelerate the world's transition to sustainable energy" – a seemingly impossible goal affecting billions of people, the global economy, and the environment. It's so large and grandiose that an electric car feels disconnected from that vision of the future. But they have a game plan to connect the dots. We'll explore that in Step 3.
Netflix
Founders like Marc Randolph and Reed Hastings see something broken in the world today, and the companies and the products they build are meant to provide a solution. Typically, for these founders, the bigger vision comes later. And that's okay!
Marc came up with the idea for Netflix while sitting at a cafe in downtown Santa Cruz with his boss at the time, Reed. Marc had been furiously trying to come up with a startup idea he wanted to work on, and the first time he mentioned the "movie in the mail" model, Reed dismissed it. At that time, the standard movie format was VHS so, naturally, it felt like an idea that just wouldn't work.
But the DVD format had just come out and was light and thin enough to ship by mail for the price of a stamp. When Marc and Reed had this realization, they walked down the street to a used record store to pick up a CD which they figured would be close enough to a DVD to at least test the idea.
They immediately stuck it in an envelope and shipped it to Reed's house. Less than 24 hours later, Reed showed Marc the envelope with an unscathed CD inside.
Today, Netflix's mission is "to entertain the world." A bold, audacious vision that has led to incredible new movies and shows, powered by ground-breaking technological innovations. But that wasn't the original vision. That vision came years later as they scaled into streaming and, eventually, into original content.
Whether you have a vision from the get-go or you expand your ideas to encompass a larger vision later, it's important that you have a clear picture of where you're heading. A shared vision will help you get through the really hard times that inevitably come when starting a new company. Creating a vision will help clarify the decisions you make by giving you a filter. It will help you inspire and embolden your team to tackle hard challenges, and it will help investors confidently take a bet on your idea.
Step 2: Where Are You Starting? (Beachhead)
Step 2 is the inverse of Step 1. Once you know where you’re heading, you have to decide what your first step will be. If you're a founder with a vision, unraveling that future vision will give you a starting point for today. But of course, if you're a founder trying to solve a problem, you've got Step 2 already figured out.
Tesla
After selling PayPal to eBay and walking away with $165M, Elon Musk knew that he wanted to work toward a future with sustainable energy. With a $6M investment into Tesla Motors, he began to take practical steps toward that future vision.
Since the technology and infrastructure needed to build electric vehicles wasn't incredibly advanced, the first car that Tesla produced was bound to be an expensive one. But to scale a single car into the vision they had in mind, they had to start somewhere.
So they started with a low-volume, high-margin electric sports car.
It took them 4.5 years to deliver on that first vehicle.
Netflix
When Marc and Reed started Netflix, did they imagine they would be spending $30M per episode to produce a hit show called Stranger Things? I doubt it. But seeing that CD arrive by mail for the first time proved one thing. The "DVD by mail" model could work.
Did they have to accumulate a massive library of movies in a brand new format that hardly anyone knew about? Sure. Did they have to figure out how to manage the ordering online? You bet. But the idea was sound.
It was a good Step 2, to begin making Step 1 a reality.
I want to pause after telling these two stories because there's a bit of survivorship bias baked in here. Tesla was working on solving an incredibly difficult problem: building a car. And it's only by a series of miracles and an immense amount of hard work that they're so successful today; working on something for 4.5 years before it sees the light of day is a risky way to start.
The answer to "Where are you starting?" determines how the rubber meets the road. And for most companies, the sooner the better. Marc Randolph has a great quote about this in his book:
“The truth is that no business plan survives a collision with a real customer. So the trick is to take your idea and set it on a collision course with reality as soon as possible.” —Marc Randolph, That Will Never Work
So as you ask yourself - "Where are we starting?" - don't be afraid to start small. What can you get out into the world as quickly as possible?
Step 3: What's in Between? (Roadmap)
In the context of your Master Plan, a roadmap is less about the individual features and a rigid timeline and more about identifying mile markers along the journey.
If you're taking a road trip, you won't make a list of every gas station or fast food chain you'll stop at along the way but you may make a list of the sights you want to see. This is what we want to do in Step 3. We want to connect the dots from where you’re starting in Step 2 to where you’re ending in Step 1.
Don't be afraid to paint with broad strokes.
Tesla
Elon introduced his now-famous "Tesla Motors Master Plan" in August of 2006. In it, he laid out the exact plan for how Tesla would succeed. And now, 16 years later, we can look back in hindsight and marvel at just how perfectly they executed on that plan.
Here it is, recapped in four succinct steps at the bottom of his blog post:
Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
"The second model will be a sporty four door family car at roughly half the $89k price point of the Tesla Roadster and the third model will be even more affordable. In keeping with a fast growing technology company, all free cash flow is plowed back into R&D to drive down the costs and bring the follow on products to market as fast as possible. When someone buys the Tesla Roadster sports car, they are actually helping pay for development of the low cost family car." —Elon Musk
You'll notice that there are a lot of assumptions being made in this strategy.
That they could design an electric car that looked as good as modern sports cars
That they could create new battery technology that was lightyears ahead of other EV batteries at the time
That they could convince enough wealthy car enthusiasts to go against the social consensus that electric cars were nerdy, impractical and uncool and actually buy one.
Those are just some of the big ones - there are hundreds of other small assumptions baked into them. But that's okay! A product Master Plan isn't meant to be a roadmap. It's meant to be a compass.
Netflix
Gibson Biddle came up with his GLEe model as a way to align product teams who are often in the weeds with the investors who often operate more high-level. GLEe stood for:
Get big on…
Lead…
Expand...
Here is Netflix's execution against this model:
Get big on DVDs.
"The first phase, 'Get big on DVDs,' corresponded with both the launch of DVD players and the growth of e-commerce — two significant trends to 'surf.'" —Gibson Biddle
Lead streaming.
"The second phase, 'Lead streaming,' began in January of 2007. During the streaming chapter of Netflix’s life, the company also expanded its device partnerships to nearly every TV, game system, DVD/Blu-Ray player, and mobile device in the world. By 2012, Netflix finally established a hard to copy network effect through its device ecosystem." —Gibson Biddle
Expand worldwide.
"Last, by 2010, Netflix started its international expansion with a streaming-only service in Canada. Global expansion required a digital-only service as it would have been too challenging for Netflix to integrate its DVD-by-mail service with postal services around the world." —Gibson Biddle
When Gibson introduced this structured plan, investors were able to clearly see where the team was heading but it allowed the core team building the product to know exactly what they should be focused on today.
Step 4: Why Will You Succeed? (Insight)
Every company has their own unique ideas about what will give them an advantage against the competition. For some, it's aligning with a mission or a cause. For others, it's cutting-edge technology. And for some, it's strategic partnerships.
Key insights are the truths that no one else seems to have picked up on yet. Secret treasure maps that inform your strategy and get you to the buried treasure faster than your competition.
That sounds daunting, but don't worry. You don't have to come up with a key insight that's totally revolutionary. Sometimes, it's a sequence of small improvements that, when combined into a single company or product, adds up to a big improvement.
Jim McKelvey, the co-founder of Square, called it the “innovation stack.”Here's an example from Square's innovation stack:
Flat-rate Fee: A known, simple transaction fee. Nothing hidden or complicated
Free Sign Up: The flat-rate fee only worked with critical mass so they need to incentivize users to sign up
Cheap Hardware: Small businesses can't afford anything expensive
No Contracts: Lowers users' risk, builds trust, reduces complaints
Beautiful Hardware: Though cheap to make, the Square reader was beautiful and caught people's eye
New Fraud Modeling: In order to reduce fraud with a small team, they had to model it out with software.
If you don't already have a key insight, think about the traditional way products in your industry work. Ask yourself if the traditional way feels clunky, burdensome, or illogical. How can you improve that experience for your users?
Tesla
Tesla’s insight was that, in order to grow, electric cars had to go mainstream. This meant not only incredible performance against a gasoline engine, but also an attractive package to put it in. Up to this point in history, electric cars were less than desirable.
So naturally, they decided to start with a sports car.
The Tesla Roadster was designed to beat a gasoline sports car like a Porsche or Ferrari in a head-to-head showdown AND have twice the energy efficiency of a Prius. Not to mention, a super sporty body style.
If they could sell a premium priced sports car, they could fund their next gen car. But the uphill fight to bring electric cars mainstream was not over. So once again, they brought style and performance together in the Tesla Model S, moving a skeptical world toward a future full of electric cars.
Tesla Model S
Netflix
Source: Business Insider
Gibson Biddle introduced another framework called the DHM model which asked: “How will your product delight customers, in hard to copy, margin-enhancing ways?” "Delight" is that layer of fairy dust that covers whatever you're working on. It's what helps your users fall in love with your productPursuing an initiative that is "hard to copy" creates a moat around your business that makes it difficult for competitors to swoop in and steal market share. And finally, "margin-enhancing" is simply Gibson's way of saying "money making" because, at the end of the day, a business has to make money to survive.
During his tenure at Netflix, Gibson used these three filters as a tool to focus their efforts on initiatives that were most likely to succeed. Mission accomplished.
When Netflix first started with the now-defunct DVD by mail model, it was competing against the existing Blockbuster movie rental model which was notorious for its late fees.
But despite the late fees, there was something thrilling about going into a Blockbuster, walking up and down the aisles, looking for the perfect movie to watch with your family or girlfriend.
And the idea of DVD by mail, while convenient, just didn't have the same charm. Netflix experimented with a variety of tactics to grow their early user base, but what finally did the trick was removing those pesky late fees.
They counter-positioned against the behemoth at the time, Blockbuster. And because Blockbuster's business model was integrally tied to late fees, this new model delighted customers, made it incredibly difficult for Blockbuster to fight back and, ultimately, helped Netflix make money as it drove subscriptions.
How’s That Napkin Looking?
Hopefully your Master Plan is coming together! If you're crazy enough to start a company, this is probably less daunting than it is exciting for you. And now... well, it's time to start building.
To quote Nolan Bushnell, founder of Atari, “Everyone who has taken a shower has had an idea. But it’s the people who get out of the shower, towel off, and do something about it that makes the difference.”
So here's to the crazy ones. *cheers*
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