Home Lightbox Why Start-ups Fail

Why Start-ups Fail

by Asad Rezzvi

File photo

By focusing on servicing the emotional needs of customers, businesses can avoid ending up on the graveyard of start-ups

Whatever business you are in is articulated most accurately by your customers.

If they know, emotionally, the experience you provide that keeps them hooked to—or better yet raving about—your company and product, you’re on track. However, I’ve noticed that most companies, especially startups, appear more vested in the service they’re providing, rather than catering to the needs of their consumers.

Ground realities cannot be argued with: The single most critical difference between successful and failed startups is clarity of knowing the customer: emotionally and experientially (not only through facts and figures). Having studied the marketplace, most startups or established companies execute their business plan in one of two ways these days:

  1. Study the market and gather relevant data. Create a solution and fall in love with your service/product. Mechanically follow a preset game plan to rollout your business. Create a pyramid shaped, silo-divided, machine like organization.
  2. Having already done the above, follow it up with a study of the market and human behavior that governs the marketplace: what business are we in? Comprehend—emotionally, viscerally and factually—the most significant factors that will drive the new service/product adoption. Create an agile, flexible and evolving organization (not pyramid) to support the new solution.

The first method is the 20th century model of business. It’s a hit-or-miss approach based on linear and factual data. It has a 90 percent failure rate for new businesses. Unfortunately, it’s a model that lags and serves merely to react to changes in market forces, especially the vagaries of human behavior. In this scenario, it is difficult to adapt because the central focus is on the solution instead of market/human dynamics.

The second method—prior to product launch—focuses on answering ONE question: “what business are we in?” Meaning, what business does the customer FEEL we are in! Since human behavior drives success or failure of any new venture in today’s socially hyper-connected economy, it pays to focus on the human factor in addition to required solutions.

The difference between the two models is vast. The second method anticipates needs (not wants or desires but the often unconscious needs of the customer) and builds a service or an organization, with marketing, human resource and tech serving those needs. The massive advantage of this method lies in the power of anticipation and predictive analysis, which coupled with agility, creates an evolving and improving service and company that responds, adapts and evolves organically with its uptake in the market, rather than lagging and reacting.

The customer in turn loves a solution/company that operates in this manner and affords it more room to make mistakes because, like a friend, it loves you for trying to solve a much needed problem and wants to support you in getting it right. The vast difference in customer response is due to ONE single factor: the first approach is FOCUSED on the solution/company; the second is focused on the human, experiential reality.

Almost all companies that dominate globally today (Facebook, Uber, AirBnB, Spotify, Amazon, Netflix, Apple) started with the question: “What business are we in?” That’s what allowed them a massive advantage over rivals, because the customer was rooting for them to succeed even when they made mistakes.

Understanding the real world emotional/spiritual data points that drive human behavior in context to your product is the leeway needed for failing forward, iterating and evolving. The emotive data is unconscious—not bound by wants and desires—with one specific need, data point, becoming paramount in allowing a company to make its competition irrelevant and create a near-monopoly.

Data points are a singular dial that can tune up the revenue or—in case of problems or failure—refocus and diagnose in a single direction by refining the customer emotive data to raise the revenue again. It also allows you to setup an organization that’s aligned, united, agile and focused towards the specific experiential data points that drive the success of the product.

Becoming an agile and customer focused company is a deliberate decision, requiring meticulously designing every aspect of the organization in a singular direction; from the processes and systems, to the human resource to the marketing and branding, and even the employee experience and organizational structure in the company.

If a company wants to deliver a safe, friendly and dynamic experience to the customer but the organizational culture is generic, hierarchical and similar to every other average company—that is a disconnect and incongruence that will not allow the creation of a truly authentic customer experience—employees, who can only provide the input they receive, set the tone of customer experience. If the internal and external experience is in sync, the company and the customer become a seamless unit, enabling rapid maneuvering to stay far ahead of the curve!

Thoroughly knowing the data, facts, figures and relevant market conditions in context to your product is the price of admission to the game. But it only gets you in the door!

Comprehending what business you’re in; knowing the ground realities and the emotive experience of the customer is the preparation necessary to reach the playing field and achieve a viable chance of success. Without this advantage to steer your company clear of pitfalls and blind corners, there’s minimal chance of discerning the ephemeral forces of human behavior that can make the difference between success and failure.

Like it or not we live in an increasingly socially hyper connected world and bad news proliferates and influences us 15x faster than no news or even good news. Therefore, knowing what business you’re in SPECIFICALLY is critical to advance beyond initial success and gain mass-market adoption.

Unless a company is clear on its customer’s needs, and has made it a mission to fulfill those requirements, tumultuous, rapid, unexpected upheavals in market conditions would be unanticipated and the company would therefore react, at best, or be relegated to the graveyard of startups.

The business landscape is littered with companies and ideas that were either DOA or died a slow, agonizing death (TiVo, Kodak, Blackberry, Jawbone etc.). Even once successful companies succumb to this mistake; profitability is a lagging indicator, not a leading one. They were so enamored with their own product that they didn’t have a pulse on the emotive data points of the human factor that may have created market appeal.

What business does your customer FEEL you’re in? Why will they rave about you? If you can create an experience that people love, crave and want more of, you’ve got a significant shot at long term, mass-market success. If you’re in a crowded marketplace shouting to be heard, bribing your customer to do business with you and scratching your head at limited response, you need to switch your view from your product to the human experience!

Rezzvi is a seasoned Agile Transformation expert, having turned around multiple failing and stagnating companies to market leaders. He’s a veteran of Silicon Valley and has built a significant and strategic competitive advantage to catapult customer acquisition using evidence based validated research methods. He has a degree from the University of California, Berkeley.

Related Articles

Leave a Comment