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The real reason startups fail right now

One of the age-old questions in entrepreneurship is why so many startups fail. Is that a bad idea, poor execution, or many people who don’t want to be their own boss?

On Small business radio program this week, Tom Eisenmann, Professor of Business Administration at Harvard Business School discusses the real reasons in his new book, “Why startups fail.” He has interviewed more than 470 entrepreneurs and has case studies that include an ice cream maker, a dog walk service and a sophisticated social robot.

Interview with Tom Eisenmann

Tom believes that too many experts focus on success rather than failure examples. He explained that we can learn more from the many companies there are failure rather than mocking them. Tom says knowing what these patterns are can save future startups.

Tom points out six main types of failure:

  1. Bad Bedfellows. The success of a startup is believed to largely depend on the talents, experience and common instincts of the founder. But the wrong team, investor or partner can sink a business project very quickly. Tom says that startups need “people of the Swiss army” who can perform many different functions.
  2. Wrong Start. Following the typical advice of “fail quickly” and “start before you’re ready,” founders risk wasting time and capital on wrong solutions early on. Tom believes that you have to do research first and experiment with customers and stop just “promoting your product”. Perfectionists, on the other hand, want to continue to “polish the product” and never “expose the product to the customer.”
  3. Wrong promise. Success with early adopters can be misleading and give founders improper confidence to expand. Early adopters are just that and may not represent the needs of a client’s broader main market.
  4. Speed ‚Äč‚Äčtrap. Despite the pressure to “grow fast,” rapid growth can cause disaster for even the most promising projects. Not every business has the leadership, money, market, or infrastructure to expand rapidly.
  5. Need help. Fast-scaling startups need a lot of capital and talent, but they can make a mistake that suddenly leaves them behind.
  6. Cascading miracles. Silicon Valley advises entrepreneurs to dream big. But the bigger the vision, the more things can go wrong quickly. In fact, Tom says, the success stories of big entrepreneurs like Facebook and Tesla must have a million things right to be successful.

Returning after failure according to Tom requires three steps:

  1. Recovery: Find new distractions and rebuild forgotten relationships in your life.
  2. Ponder: Understand what happened a few months later and what can be learned.
  3. Rebound: Find out what your role is and what you will do differently next time.

Tom also talked about 100 Harvard Business School case studies in which he authored.

Listen to the entire interview on The Small Business Radio Show.

Picture: hbs



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