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Business plan competitions undermine entrepreneurship

posted by Joshua on October 29, 2015 in Education, Entrepreneurship, Inc.com
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Years ago no schools taught entrepreneurship. Some enterprising people had the idea to create business plan competitions to motivate entrepreneurially-minded people to create business plans. I applaud their idea and its implementation at the time. Business plan competitions filled a gap in academia by promoting action and learning by doing.

That was generations ago. The academic gap no longer exists.

Today business plan competitions are an academic distraction from business and entrepreneurship that undermine them. They distract the people they are supposed to help the most—those who know least about entrepreneurship.

No customer bought a product because the company founder won a competition

Entrepreneurship is about customers, profit, and other business fundamentals.

Competitions skew students’ perspective in many ways. They

  • Focus students on judges instead of customers
  • Focus the students on credentials and awards instead of performance
  • Make students’ competitors other contestants instead of their business competition
  • Focus students on making the plan instead of implementing it
  • Distort students’ schedules from the market and customers’ to the competitions, which is for the school or sponsor, which is generally irrelevant to the market

Competitions also distort the schools and organizations that hold them. They

  • Institutionalize a process unrelated to the organization
  • Lead people who want to help to judge and evaluate
  • Focus on themselves instead of students and their customers
  • Lead administrators to raise funds for more distraction
  • Create unnecessary legal hurdles

I could go on.

The main point is that the competition puts the competition itself, the institutions organizing it (they want some return on investment), and its judges first, not business, customers, and student learning.

What business plan competitions create today

I’ve taught and coached entrepreneurship for years. I see students spend semesters working on business plan competitions miss opportunities to act in the market and satisfy actual customer needs while jumping through hoops for a competition.

I see professors and administrators guide students toward competitions and their one-time grants instead of customers and business operations.

Business plan competitions fail Peter Drucker’s five questions

Drucker isn’t the final word on business or entrepreneurship, but his five questions are at least a reasonable start for considering business issues. As Inc Magazine wrote in “5 Essential Questions for Entrepreneurs“:

As every entrepreneur knows, there are plenty of ideas and opinions — good and bad — about how best to focus your organization’s resources and efforts for success. Some years ago, management guru Peter Drucker wrote an intriguing little book titled The Five Most Important Questions You Will Ever Ask About Your Organization. In just under 100 pages, Drucker tells you everything you’ll ever need to know about where to focus your organization and how to do it.

Let’s look at the questions and how business plan competitions distract from each.

  1. What is your mission?
  2. Who is your customer?
  3. What does your customer value?
  4. What are your results?
  5. What is your plan?

Business plan competitions purport to have competitors write answers to these questions for their planned business, but only an academic would ignore the behavior the plans motivate in favor of their written presentations.

Business plan competitions motivate behavior with the following answers:

  1. My mission is to win the business plan competition
  2. My customer is the competition judge
  3. My customer values a comprehensive plan, a one-time prize, and their credential, which they believe will help me
  4. My results are a plan and a presentation
  5. My plan is to present to the judges

If you value teaching entrepreneurship, I recommend stopping business plan competitions.

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