In a recent article published in Harvard Business Review (HBR), author Jim Dougherty puts forward a challenging viewpoint: to truly understand a company's strategy—whether it's a startup or a Fortune 500 giant—you only need two documents:the compensation planandthe pricing plan。

This assertion overturns the traditional approach of evaluating companies based on business plans or financial forecasts. Dougherty argues that the compensation plan reveals how a company incentivizes its employees, allocates resources, and which behaviors management truly values; while the pricing plan directly reflects the company's market positioning, competitive strategy, and customer value proposition.

For those evaluating startups, these two documents often offer more insight than lengthy business plans. Business plans may be filled with vision and assumptions, but compensation and pricing are choices actually executed in daily operations, exposing the true priorities of the strategy.

Dougherty's article further points out that even for mature large corporations, these two documents hold diagnostic value. For example, if a company's compensation structure leans excessively toward short-term sales commissions, it may suggest neglect of long-term customer relationships; while a pricing strategy below cost might reflect a pursuit of market share over profit.

Of course, this viewpoint is not absolute truth; it more so provides a practical framework for a quick "health check" of a company's strategy. Evaluators still need to make comprehensive judgments by considering industry context, company stage, and external environment.

What do you think of this viewpoint? Do you agree that "compensation + pricing" is sufficient to replace traditional business plans? Feel free to share your insights in the comments section.

Original article link:Forget Business Plans; Here’s How to Really Size Up a Startup