Failure Flashcards
Why might a business or innovation project fail?
Poor consumer response. Lack of funding. Struggle to get funding. Poor management. Legislation.
Give some failure statistics:
20% of SMEs fail in their first year.
30% fail in their second year.
50% fail after 5 years in business.
40% of new products fail (Google+ was shutdown after 7 years due to poor growth and low usage).
Why are large companies failing despite all their resources?
Charles O’Reilly believes successful companies fail because they hang on too much to the past (failure to innovate e.g. blockbuster).
For large companies to succeed they have to keep current customers happy whilst also exploring new markets (hard to do).
List the top 5 reasons startups fail:
CBinsights.
- No market need.
- Funding.
- Not the right team.
- Outcompeted.
- Pricing/cost issues.
What did Gilman and Raby find (2012)?
Over 65% had not conceptualised a vision or strategy.
Lack of management skills.
60% don’t network.
SMEs do not engage with staff.
Unofficial and inadequate competitor benchmarking.
What are the 3 reason for failure criteria?
External Macro environment.
External micro environment.
Internal environment.
Why might a company fail internally?
No appetite to do anything new (risk). Failure to spot opportunities. Failure to implement new products. Poor management. Poor communication.
What is governance and why is it significant?
Governance is how an organisation is run including the systems and controls used to safeguard and grow assets.
Governance is the management of risk management.
Can governance stifle innovation?
Explain Deloitte’s risk appetite figure:
Companies have a set capacity and appetite for risk.
They also have a current risk profile which varies.
The appetite is a range in which profile should operate.
Profile should be between the upper and lower ‘triggers’.
Outside this range but still within appetite is okay but corrective action should be considered.
Outside the profile a companies objectives are under threat.
Outside of capacity the firm is unviable.
How might an entrepreneur control their internal environment?
Recognise their strengths and weaknesses.
Know your resources and capabilities.
Understand and set your risk appetite.
Create a diverse team.
What are external micro reasons for failure?
Stakeholders (internal and external). e.g. employees, managers, suppliers, customers, financiers, government.
How can a company decide how to manage stakeholders?
Prioritise them using the chart: Power vs Interest. high power and interest = manage closely low power and interest = monitor (minimum effort) Keep the rest satisfied or informed.
What are external macro reasons for failure?
Forces beyond your control.
PESTLE.
How may a company avoid micro and macro threats?
Be alert.
Spot opportunity (the most favourable set of circumstances).
Take action.
Implement creativity and resources.
Should failure be encouraged?
Open innovation encourages multiple fast failures and the iteration of ideas.
Google expects an 80% failure rate on new product development.
P&G aims for a 50% success rate.
