Setting a vision lets everyone know what direction they're going, even in small teams. It helps you understand what activities are beneficial and which ones are valueless distractions. It tells you when to say no, and when to say Hell Yeah. As Michael Porter wrote in "What is Strategy", "Overall advantage or disadvantage results from all a company's activities, not only a few.". A vision let's you define those activities.
When you see all activities as being useful, no activities are useful. The problem with a plan like "Let's keep adding good features", is that it's hard for people to agree what's a useful thing to spend time on. This is fine during exploratory days when you're fishing around for a niche or an angle, but when you're specifically trying to achieve something you need a common vision to help you define what you should be doing. When you don't know where you're going, any road looks good.
This matches with my experience working with a fair number of technology companies over the last year at GrantTree. Once you're past the initial phase where you're figuring out whether you have a business that can make money, vision really ties things together. My observation is that there seem to be two types of business out there: those with vision and those without.
Those with vision seem to move deliberately and aggressively towards and objective, and their progress is often very impressive. Those without just react to opportunities that come their way and plod along. One could say that the true definition of a "lifestyle business" is that it lacks vision.
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