Instant MBA: Business plans, e-tailing

(Illustration: Emma Kelly)

Time to ditch your business plan?
Your business plan may not be as useful as you think. In a recent study, researchers Benson Honig of McMaster University and Mikael Samuelsson of the Stockholm School of Economics tracked the progress of 623 nascent ventures over a 10-year period. They found that those entrepreneurs who engaged in rigorous business planning activities saw no measurable advantage in their firms' profits, sales or returns on equity. This, the researchers argue, is because creating and constantly revising business plans chews up scarce management resources in exchange for only symbolic value to the organization. At the same time, the authors recognize that business plans are often needed to secure financing or investors. So, what's a cash-hungry firm to do? The researchers advise startups to create a plan based on clear financial goals in order to get money. Beyond that, there is no need to build and maintain an elaborate schematic of a firm's overall operational structure and goals, since these change so often in fast-growing companies that they render comprehensive business plans ineffectual.

Get ready for your close-up
By now, most savvy e-commerce firms have created websites that mimic the in-store "touch and feel" experience by allowing customers to view images of products up close and from different angles. But not all e-tail features are created equal. Mohammad Rahman of the Haskayne School of Business in Calgary and Prabuddha De and Yu Hu of Purdue University recently measured online consumers' behaviour to determine which attributes of online-shopping sites increase customer satisfaction. The big winner? Zoom technology. According to the researchers, the ability to get a close-up look leads to fewer product returns. A close look at an item gives buyers more factual information about the item, thereby increasing their comfort with the purchase. Conversely, they found alternative product photos—such as those featuring a beautiful model using a product—not only increased the likelihood of returns, they also had a negative long-term effect on net sales. Such photos created unrealistic impressions and expectations in the buyer's mind, leading to higher rates of disappointment upon receipt.