Why do businesses fail?
The industry continues to see businesses fail, zombie businesses multiply and new candidates for acquisition emerge due to declining values – Maplin being a recent casualty on the High Street and Misco in the channel. At the same time, other players are succeeding and expanding through acquisition, diversification or disruption. One industry, with one group struggling as others prosper – a dichotomy of sorts.
In How the Mighty Fall, which I read recently and highly recommend, the excellent Jim Collins and his researchers analysed why previously successful businesses fail and distilled their findings down to what the author describes as ‘The five stages of decline’, namely Hubris born from success; Undisciplined pursuit of more; Denial of risk and peril; Grasping for salvation; and Capitulation to Irrelevance.
What this tells us, more than anything, is that it is vital to regularly ‘zoom out’ of your daily business activities to review how you are doing things, why you are doing things and whether they continue to contribute to your direction of travel. You could be working hard at something that is no longer working or recklessly pursuing a pathway of expansion, regardless of practical considerations like cash?ow, systems or employee integration.
With the volume, variety and velocity of change seeming to pull us in all directions, generating clarity, nurturing adaptability and staying relevant matters massively. This takes effort, discipline, good management practice, excellent strategy, committed people and high levels of customer intimacy and market knowledge. The most successful businesses have a ‘productive paranoia’ about their circumstances (another great quote from Jim Collins) and are always looking over their shoulder.
See you out there.
Phil Jones MBE, Managing Director,