The 5 killer myths for any business OR how to fail successfully in business...
The era of Globalization is penetrating every nook and corner of the world. The warfront of today is the marketplace wherein people buy or sell products or services. Everybody wants to achieve the highest volume of customers and the largest market share. However, the same phenomenon is now making the ride rough for entrepreneurs across the world.
With my numerous interactions with entrepreneurs from South Asia, Europe and North Africa as an academic, researcher, trainer and consultant, I have been able to observe some deep rooted problems associated with failing businesses. Most times such failures are blamed on market, competition, and several other external characteristics. When I started researching about the same phenomenon in India in late 90s I found some interesting psychological barriers within entrepreneurs' minds which I call 'the 5 killer myths for any business'. Recently, in a similar study in the UK we found similar myths prevailing within the entrepreneurial community. Interesting enough, the Indian entrepreneurs were largely goods oriented manufacturing unit owners and the UK entrepreneurs were service oriented organizations. Here are those 5 myths as I have observed across the board:
1. The Product Growth Myth: The belief that as our product is doing well in the market regularly for some years, there will not be any problem for the coming years.
2. The No Alternative Myth: The substitute of our product has such features that the market will not accept.
3. The quality myth: The market accepts quality first and cheap products will not be accepted by the market.
4. The no change myth: The growth would continue even if we don’t change as the market has accepted the product.
5. The Friendly Environment Myth: The environmental factors will not affect us much.
Let's look at them in little in-depth with some examples.
1. The Product Growth Myth: While working on an EU funded project I came across this industrial cluster called 'Rajkot Diesel Engine Industry Cluster'. The cluster had observed phenomenal growth since 70s and it started losing out in early 90s due to Chinese and Korean competition in the market. However, it took the cluster 10 years to realise the same mistake and guess what, it is still struggling to catch up to earlier levels of growth. Will it ever get it back is the question and we all know the answer. When the entrepreneurs start getting complacent about innovation, we know the cycle of decay (or sure fire failure) is not far away.
2. The No Alternative Myth: In Egypt, in the period of Eid, children use Fanoos (lantern), made up of paper and it is attached with a stick. They go to the houses in neighbourhood and ask for sweets and stuff. This kind of celebration is also observed in other parts of world at different times such as Diwali times in India or for that matter the 'trick or treat' at Halloween. Well, till 2003-04 these Fanoos were made in Egypt only by local craftsman. However, as the Business with China grew a Chinese businessman saw the opportunity and did some changes to the concept of Fanoos. He used a small battery powered light instead of the candle and change the paper Fanoos to a plastic Fanoos. Result, as one can imagine, a durable, safe and easy to handle Fanoos which is far better than its earlier incarnation that was used for centuries. The local industry is nearly wiped out within 2 years time. If you think market will not accept your substitute, it is one of the best ways to fail.
3. The quality myth: This myth is so omnipresent that at times it is easy to overlook. Every entrepreneur I have met has talked to me about how their product is a great quality product and what great care they take in production processes. My only question to them is, does your customer really care about it? And every time the answer has been a big YES. Somehow I rarely get the same answer from their customers. If customers really cared for quality, why M&S in UK was struggling as a retailer while Tesco and ASDA were growing like never before. How come Primark (low end clothes retailer) is one of the most successful retailers in the UK? How come George (another low end clothes retailer) became the fastest selling apparel brand in the UK? Consumers don't understand an entrepreneur's obsession with quality. They want VALUE FOR MONEY. As Wal-Mart does that day-in and day-out it is now world's largest company and bigger than all its competitors combined in the US. How could have one imagined this just 40 years ago when Sam Walton started in Bentonville, Arkansas. Remember, quality lies in customers' minds and however good or bad you are is decided by them in their minds. In fact, discrepancies between company’s perceptions and customers would not be at all unusual. However, even if the company is working itself to the proverbial bone on the quality regime, if customers view it as cheap, then it is cheap — in their eyes and that matters the most.
4. The no change myth: This is another classic myth. I call it the bread-winner symbol. Once a product or service has become a bread-winner for more than two year, entrepreneurs become obsessed with it. Buddha said 2500 years ago 'change is the only permanent constant' and this statement is truer today than ever before. All the examples, I have quoted above fit in this area. Furthermore, while talking to some service firms in the Essex area of the UK, I asked the entrepreneurs when was the last time s/he or their employees had been to some kind of training to improve their skills. The answer was shocking. In 90% of the case it was never. In the other 10% of the cases it was more than a year. In today's world, if we don't update ourselves not even God can save us.
5. The Friendly Environment Myth: I have observed this myth mostly in developing countries like India, Egypt and such others where entrepreneurs are quite dependent on local, state and national government for subsidies and protection. As the waves of globalization has hit the shores across the world, there is very little the local, state or national governments can do to avoid the global competition and if entrepreneurs are not prepared for it, their fate is already known to us. This myth also is observed in other parts of the world very much through market phenomenon. It was in late 2005 or so I saw an interesting concept pet shop in Brighton, UK. All pink décor an it looked lovely from outside, however, the first questions which came in my mind after seeing that shop in the town centre that how long will it survive? The logic of the entrepreneur behind it was quite sound, as 7 out of 10 British pets get presents just in Christmas itself. However, within two years time the shop has been shifted for many environmental reasons as one would imagine. Another programme on BBC called Dragon's Den really captures this phenomenon to the core.
Well, when considered these myths may seem a product of environment however the starting point may be different than what seems obvious. Most times when the environment is blamed for failure, it is actually the person behind the business who fails to observe such changes. My suggestion would be for every entrepreneur to take a 'thinking vacation' and observe as to is any of these myths is present in their minds or business? If so, the time to act is sooner rather than later.