A good many entrepreneurial ventures are born on a napkin, built on sand, and grown through a series of flips and flops that would make even the most seasoned stunt pilot nauseous. It should not surprise then that longitudinal studies show that a little over 20% of new startups fail within the first year; the startup survival rate falls to roughly one-half around their fifth anniversary (Bureau of Labor Statistics Staff, 2016). Thinking more broadly and implementing effective organizational systems (i.e., planning, processes, procedures) may be the key to building, scaling, and sustaining a startup long-term.
Some researchers suggest the most common cause of small business failure is the lack of senior management focus on matters of strategy within the organization (Jennings & Beaver, 1995). At the most basic level, this falls to the focus on tactical challenges of the business, rather than broader strategic issues. More specifically, for example, it is firing a salesperson who did not achieve the stated sales goals or meeting quotas for the year while ignoring marketplace and demographic changes that render the product being sold increasingly meaningless, or at the very least, price-noncompetitive to the company’s customers. A more strategic approach could allow the company to look long-term at the marketplace, and using systems and processes that engage the market, the customer, and the sales team, create a plan for more stable and predictable long-term growth. This approach may seem difficult for entrepreneurs who are forced to live with the reality of today’s environment. In fact, some of this difficulty may be deeply rooted in the factors surrounding the startup itself.
There are two theories of startups. The Push Theory suggests that some form of hardship – unemployment, dissatisfaction with a current position, few employment options due to skills, abilities or education—“pushes” the entrepreneur into action to generate a stream of personal income (Islam, 2012). Entrepreneurs who might open retail stores, services business (e.g., cleaning, computer services, mechanics), or tackle similar ventures where specific skills and abilities become the fastest way to generate income, are likely to be driven by push factors. Conversely, those entrepreneurs driven by ambition—financial freedom, higher cultural or social standing, or “to change the world” with an idea or invention—are driven by pull factors (Islam). The fundamental difference here is the motivation: Is the entrepreneur being pushed into a venture due in large part to external circumstance, or pulled into the venture by his or her passion or ambition?
The “pull” entrepreneur is likely to have a formal plan, while the “push” entrepreneur may not. Not having a plan does not necessarily mean a startup is doomed to failure, but it does suggest a focus on the tactical, rather than the strategic matters of the venture. This is not to suggest a plan is something set in stone. To the contrary. A plan must regularly be revisited, fed new information, refined and retooled--blown-up if necessary—to allow for the “radical innovation” that is always needed for an entrepreneurial venture to survive (Peters, 1994). A plan is necessary for success, but it takes the entrepreneur's deliberate desire to test the plan to make the business successful over time.
It would seem to have long-term sustainable growth an entrepreneurial venture must first establish a more solid foundation that allows it to produce for its target audience a desired product or service. The next steps are perhaps the most difficult: Make the desired product or service at an acceptable price and consistently deliver it at the time and place the customer desires. Successful entrepreneurship is not necessarily about creativity or invention; it is about process—getting from an idea to the hands of the customer. Not only that, but getting into the hands of the customer in some way that outshines the competition and gives the venture unparalleled top-of-mind awareness for whatever that product or service may be. That “delivery process” to the customer is just as important, if not more so than the product or service itself. Still, it cannot go unchecked if the business is to grow. One might argue, then, that the best reason to innovate—to continually review and improve—the process of getting the product or service into the hands of the customer is to ensure long-term business survival.
How can you innovate to get your product or service into the hands of your customers in a more meaningful way?
Bureau of Labor Statistics Staff. (2016, April 28). Entrepreneurship and the U.S. Economy. Retrieved January 28, 2017, from bls.gov: https://www.bls.gov/bdm/entrepreneurship/bdm_chart3.htm
Islam, S. (2012, March). Pull and push factors toward small entrepreneurship development in Bangladesh. Journal of International Business Management, 2(3), 65-72.
Jennings, P. L., & Beaver, G. (1995). The managerial dimension of small business failure. Journal of Strategic Change, 4, 185-200.
Peters, T. (1994). The Pursuit of Wow! Every Person's Guide to Topsy-Turvy Times (1st ed.). New York: Vintage Books.
Image Source: Getty Images, Thomas Barwick
David Harkins is a serial entrepreneur with significant experience in branding, strategy, licensing and marketing.
In his spare time, he consults, coaches, speaks, writes, hikes, explores, and creates art. Although, not necessarily in that order.
Connect with him on social media below: