Knowledge
Business f*ckups: lessons from failures
Failure, a slip-up, sometimes even a disaster accompany us in private life as well as in business. Sometimes they cannot be avoided, but often they are the result of a mistake or a series of errors, oversights and bad decisions. The last TechMine Coffee was devoted to presenting such situations that happened to the participants, but its main purpose was to consider how to reduce the probability of such events in the future.
Comparing the causes of a dozen business slip-ups discussed at the meeting allowed us to reflect on a catalogue of methods and principles of action that help limit (avoiding is unlikely to succeed) the risk of failure.
Several of the cases discussed concerned the fact that you can recognize pioneers by the arrows in their backs. Visionary ideas for which the market is not yet ready, combined with the stubbornness flowing from a justified conviction that the idea is right, often lead to the budget being exhausted before the expected revenue arrives. This can be counteracted by confronting the idea with the market as soon as possible; confirmation of the concept should be the condition for further consumption of resources. It is also important, especially in small companies, to stand on several legs. When implementing a brilliant idea, you cannot, in order to dedicate resources to one innovative product, give up the core business that provides revenue and profit.
The second group of projects discussed involved problems related to partners. Often, when setting up a company, friends or good acquaintances become partners, similar in their way of thinking and experience. Meanwhile, it is much better when decisions are born in discussion, even in dispute. Partners are better chosen on the principle of complementing qualifications rather than duplicating them. It is very important to draw up the articles of association well, giving all partners real influence over its activities, in proportion to their contribution. Agreements are written for bad times, so the euphoria associated with setting up a company should not hold you back from drawing up a precise one that balances the power and duties of the partners. A good lawyer is even more important here than a good partner.
Another field in which a mass of mistakes is made is the lack of contact with the community, with people in general. Especially start-up companies have a tendency to “keep their cards close to their chest”, i.e. to start any conversation by having the other party sign a non-disclosure agreement. Apart from the great difficulty of enforcing NDA provisions, such a policy is in most cases an expression of the entrepreneur’s excessive conviction of their own genius. Pricking the balloon often allows you to look at your actions from a different, often wiser side and verify your approach, which can help avoid failure. You should talk about your business with as many people as are willing to listen to us. Even if they do not advise us how to live, maybe they will tell others about us?
One of the examples given was the failure of implementing a so-called teal organization in a company. The problem is broader: it concerns implementing the management paradigms fashionable in a given season just because something needs to be improved. Consultants of the most fashionable method willingly take action, rarely stating that a specific method does not apply to a specific organization. There are known cases of many companies operating “teal” and achieving considerable success, but its implementation makes no sense without making yourself and the employees aware that the core here is responsibility, and not even delegating it, but unconditionally sharing it. Organizational changes are always a very delicate topic and should be undertaken only when you are sure of the essence of the problem and the adequacy of the medicine applied.
A few recommendations can be formulated from the discussion: projects that do not yield a profit in the planned time must be closed without exception; the approach “one more quarter and it will catch on” is a big mistake, as it generally does not catch on. You should not be alone in running your business; it is worth having either valuable partners or good managers, remembering lawyers in particular. Do not overuse NDAs, talk to people. Changes to the company’s organization should be implemented as it grows, but to the rhythm of real needs, not fashion.
A common conviction was expressed that failure is an important and essentially indispensable event for an entrepreneur’s development. It teaches caution for the future and helps avoid falling into even bigger problems.
