Why Startups Fail & what you can do to prevent it

ihindeu001p1Winning is simple, but it isn’t easy! Disclaimer: while focused on Startups, the content of this post is relevant to most (if not all) organizations.

Startup company (Wikipedia): A startup company or startup is a company, a partnership or temporary organization designed to search for a repeatable and scalable business model.

I’ve highlighted the terms repeatable & scalable, because of the millions of startups worldwide every year, unfortunately too few can claim repeatable and scalable business models.

Some estimates put the failure rate at 90%, with companies typically dying around 20 months after their last financing round and after having raised $1.3m (source). Under the heading of “failure”, I’m also including the walking dead. Failure is difficult to quantify because it does not necessarily mean liquidation. Many startups limp on for years, ignored by the market but sustained by founders’ savings or investors. “We call them the walking dead” (source).

How NOT to die

In general terms, companies fail because they don’t succeed at one of the following:

  • Cash
  • MVP (minimal viable product)
  • Building vs Architecting their Business Model
  • Company Culture
  • Customer Success focused Organizational Dynamics
  • Reflection & rhythm and or cadence

Cash

Cash is king, without it you can’t survive. Call it bootstrapping or any other form of funding, without cash you won’t be able to pay the bills, employees or for any other resources required for repeatability & scale. Cash, other than budget efficiency, is outside of my realm of expertise and there’s enough information already circulating on this topic, so I’ll leave it at that.

MVP

Lean Startup is the best methodology to nail MVP.

Business Model

The Business Model Canvas is the best tool to not only nail your business model, but to keep it fresh & relevant through frequently revisiting it (at least once per year). You will be surprised how many key learnings you’ll take-away if you involve the right people / layer or organizational structure in revisiting your business model time-to-time with the Business Model Canvas exercise. Every time I do one of these revisits, I find golden nuggets around providing greater Customer Success & new (including pivoted) product offerings.

With the urgency to get products to market, not enough entrepreneurs architect their business models, including the foundations of their future organizational structures. Like building a house without a proper foundation, the organization first tilts & ultimately crumbles when the architectural design isn’t properly addressed. It the case of too many builders & not enough architects at the early stage of any venture. The secret is to have the right mix & the ability to keep that versatility agile while you grow.

Company Culture

I’m not talking ping pong tables, desk side massages or in house chefs, although I’m also not casting aside the value those things can contribute. I’m talking about the right company culture that’s going to foster the right level of performance your company needs to succeed. Simple, but loaded, that’s a powerful statement that shouldn’t be taken lightly! The right level of performance your company needs to succeed. An effective company culture doesn’t have to look like Zappos, it can look like Apple, where both functional & dysfunctional cohabitate to produce results. The I.N.V.E.S.T. model in Executing Your Strategy is the foundation every company needs to follow if you want repeatability & scale.

Customer Success focused Organizational Dynamics

I’ll elaborate more on this topic in a subsequent post next week, but it basically boils down to applying the Business Model Canvas & Lean Startup, with a critical eye on an agile engagement practice modeled after I.N.V.E.S.T. from Executing Your Strategy. When you think of Customer Success, think of how you internal & external supply chain (resources) serve the core attributes of retention, repeatability (including upsell) & referral (word of mouth). If you can nail those 3, you’ve got an effective & efficient Customer Success strategy / model.

Reflection & rhythm and or cadence

This too will be subsequently expanded upon in an upcoming post, but it fundamentally follows the guidelines of the agile manifesto (and you can replace “software” with whatever term is relevant to your business model) along with the Balanced Scorecard practice of breaking down ambition to executable tasks.

bsc1

Summary

Nail these six practices, and success is guaranteed!

  • Cash
  • MVP (minimal viable product)
  • Building vs Architecting their Business Model
  • Company Culture
  • Customer Success focused Organizational Dynamics
  • Reflection & rhythm and or cadence

Stay tuned, over the course of November I will write three specific & practical posts expanding upon Company Culture, Customer Success focused Organizational Dynamics & Reflection, rhythm and or cadence.

Winning IS simple, but it ISN’T easy!

Related Posts with Thumbnails
en.pdf24.org    Send article as PDF   

Tags: , , , , , , , , ,

Leave a Comment

You must be logged in to post a comment.