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  • The common theme between why companies fail and why companies don’t grow

  • I was doing some research recently on why companies fail, as well as why companies don’t grow.  It struck me after reading a number of opinions and viewpoints that there were indeed some common themes between these two situations.  While that did not surprise me, the common themes were quite striking, as was the one factor that applied to non-growing companies only.

    Success and failure have some common themes

    Success and failure have some common themes

    5 common factors why companies fail and why companies don’t grow

    Here are the 5 common factors why companies fail and why companies don’t grow (you can also see the list in table form below that clearly shows the connectivity):

    1. Customer focus and orientation was missing in some form.  After all they are your lifeblood, without which you do not have a business.  It seems strange that people would take their customers for granted or not see the opportunity in dealing with them in specific ways, yet that lack of clear focus seems to have been the #1 issue.
    2. Differentiation was not important to both groups of companies, and many people didn’t even worry about differing their product/service offering because they felt that just having a product is enough.  In a competitive market this is a sure road to failure, particularly if you don’t focus on building that differentiation into a meaningful and relevant value proposition.
    3. The communication of this value proposition is what you have to offer the prospective customer.  It is not only about the product or the price.  Think service, think convenience, think competition, think awareness etc etc.  Many factors can go into a value proposition that makes your company desirable as a supplier to a customer.  If you are only single-minded in your offering (example: product only), you will inevitably miss the boat.
    4. Leadership failure is common because ownership or management often do not wish to change (too comfortable, mistakenly?) or they expect others to change.  This also leads to a lack of strategic focus, a lack of commitment to implement, and a lack of resources.  If it does not happen at the top, fully and openly (full communication is critical), it will not happen further down the line.  Leaders need to look in the mirror before they look at their people.
    5. The business model and the need for profitable and repeatable sales is another prerequisite for both survival and growth.  Without it you are doomed.  And the four previous factors will need to be built upon that business model for you to survive and thrive.

    Ultimately, it is clear that a combination of the above factors are likely to be present in any failing or non-growing business.  Why companies fail and why companies don’t grow is not too difficult to understand.  Correcting these factors and turning companies into healthy entities requires skill and commitment which requires an attitude of openness and fortitude that a leadership group needs to exhibit.  Any lack of real leadership will prevent corrective action from being taken, and prevent a changed outcome – which is necessary if the company is to continue in a healthy manner. (Read the following articles on change to get an additional perspective: Creating a growth-orented culture, and Embrace change or become a casualty)

    So what is the one factor that is not obviously common in the top 5 list?

    It is “Searching for the silver bullet” – that one thing that we all imagine but instinctively know does not exist.  Some leaders in some organizations that are not growing continue with their insane pursuit of the “holy grail”, rather than spend time looking to find solutions that can and do work.  This pursuit is often draining and deflects the team from finding real solutions.  It is also a clear indication of a lack of real leadership and a false hope of redemption that drops from the sky unnerringly into the laps of the team.  It also represents a lack of strategy and a lack of patience in seeing the strategy through to the end.  Our instant gratification (that has become the cornerstone of decision-making of late) mindset and attitude often drives these feelings.  Changing that attitude is key to making the difference.

    This is a summary of my findings:

    Companies that Fail Companies that Don’t Grow The Common Theme
    Don’t have Customer focus Don’t concentrate on Customer Retention Do I have the right customers?  Who are your most valuable customers (and which are the most costly)? Consider lifetime value.
    Lack of Differentiation See Product is everything What differentiates your product from the competitors’?  In a competitive world, unless your product is totally unique, one needs to show it off in a differentiated and relevant manner. Otherwise, why would I buy it?
    Failure to communicate Value Propositions in clear, concise and compelling fashion. Search for silver bullet. The quick fix. The easy solution.  There isn’t one. Get over it. What is your value proposition? And positioning your offering so that it is relevant to customers.  Customers look to maximize the value of what they are getting.  It’s your job to show them why your offering is the most valuable, to them.
    Leadership breakdown at top Don’t focus – try too many things. Don’t change and adapt. Don’t dedicate the right resources towards growth. How committed is leadership to making this happen?  If leadership doesn’t show the way, the rest of the team will not care. If leadership doesn’t change, they can’t expect their team to.
    Inability to nail a Profitable Business Model with proven revenue streams. Not enough data and analytics. Don’t test sufficiently. Don’t dig in and learn. Don’t double down on successes. Repeatable, profitable sales. Does the business scale?  What price will your customers pay? If you don’t make money you cannot sustain your business.

    Do you need help in addressing these kinds of issues in your business?  Contact me by completing the form on this page and I will be happy to arrange a free chat.  You will see exactly how we can help you.

    Article by Neville Pokroy