Why good business fail, and smart businesses live on.
Why do once successful business fail? In my experience most business fail when the market changes and they fail to make any adjustments. In almost every directly competitive sport (figure skating, diving etc, excluded), a team or individual must make adjustments based on their opponents strategy, newly available equipment, advances overall understanding of the sport, the age and makeup of their team and many other reasons. Yet in business many people continue to operate the same way every year and expect to achieve the same or better results.
When Walmart moved into town, a lot of small businesses on Main Street America went under. They failed because they were in direct competition with a business that was better run, had a wider selection and sold at a cheaper price. Many complained that this was unfair competition. In a way it was, these business owners weren’t adaptable enough to change their models. They were selling the world’s best buggies next to a Ford Dealership selling the Model T.
Most family businesses fail in the second or third generation. Is it because the generations after the founder aren’t as smart or gritty as the founder? That might be, but it also might be that the found saw a gap in the market and filled it, out maneuvered competitors, changed and evolved to create a successful business. If the subsequent generations are trying to run the business like their parents and grandparents did, they may be missing out on changes in the market, in technology and the available workforce.
It’s not just family businesses that miss these changes. Any business which fears failure more than then they value success will change too slowly. Betting on new opportunities, product lines, technology, markets, strategies result in many failures and those failures can be painful. Smart businesses don’t look at taking chances as potential failures. Smart businesses look at what the competition is doing, where the market is moving and make bets based on their predictions of the future. These businesses understand that these bets that often result in failures are investments in the future of their company.
Place your bets wisely.