According to data published by Forbes, 90% of startups eventually fail. Although businesses fail due to various reasons, perhaps the most common reason is lack of a solid business strategy. With this in mind, here are four keys to developing a business strategy that will enhance your business’s chances of success.
Research carried out by CB Insights in 2015 found that 42% of businesses fail due to low product/service demand. In other words, almost half of all entrepreneurs fail to identify and solve a real market need. This could also mean that four out of every ten fledgling entrepreneurs in America fail to carry out proper market research or they interpret the available data and research material incorrectly. An effective way of resolving this problem is by carrying out extensive market research and correctly analyzing the data gathered. If you lack the necessary expertise to do this, you should hire market research and data analytics experts for this task. This is particularly important because, if you fail to define your brand’s product/market fit properly, it will fail irrespective of the talent, financial resources, or marketing expertise at your disposal.
To stay ahead of your competitors in today’s winner-takes-all environment, you should aim for fast growth. Thankfully, ICT technologies such as cloud-computing technologies including SaaS (Software-as-a-Service), IaaS (infrastructure-as-a-Service), and PaaS (Platform-as-a-Service) have abstracted highly technical processes and bottlenecks that stymied many entrepreneurs as recently as a decade ago. As a result, these technologies have made it relatively easier for non-techies to start and shepherd their businesses through hyper-growth phases without having to worry about infrastructural aspects such as computing power and storage capacity. Growth is important because it plays a key role in accessing capital from traditional financiers such as banks as well as from venture capitalists and angel investors.
In the corporate world, versatility refers to the ability to abandon a failing business model and rebuild from the ground up or, in other words, the tenacity to pivot to a more profitable niche or product/service line. Versatility is a critical aspect because business plans rarely pan out as originally envisaged. In fact, according to data published by a University of Chicago Graduate School of Business researcher, 50% of businesses broaden their product/service offerings at some point in the future, 40% maintain the status quo, while 10% narrow down their focus. In addition, 7.5% of companies pivot from their original business model to a completely different product/service line. Biotech companies are more likely to narrow their operational focus more than any other business category. Slack is a good case study in versatility because it emerged from a failed entrepreneurial initiative.
The aforementioned University of Chicago Graduate School of Business researcher also found that entrepreneurs tend to underestimate the importance of non-human assets such as intellectual property (IP) during the early days. For instance, up to 50% of entrepreneurs cite human talent/expertise as a key brand pillar at the business plan stage. Surprisingly, non-human assets including capital and IP take center stage during IPOs, earnings calls, and in annual reports. For this reason, it is sensible to develop a business strategy that incorporates non-human assets like a mobile app, cloud-based data storage, software containerization, artificial intelligence (AI), data encryption, and data-driven decision-making. This will make your business appealing to tech-savvy millennials who are shaping up to be the most dominant consumer demographic in the near-to-long-term future, according to an eMarketer report.
A good business plan should help a business attain its objectives. For this reason, you should develop and implement a business strategy that incorporates versatility, fast growth, proper product-market fit, and non-human assets. While this approach does not guarantee success, it will lower the likelihood of failure and enable you to resolve issues before they balloon into financially unsustainable challenges.