Using Data Analysis to Avoid 4 Common Causes of Business Failure
Although figures vary, it’s estimated that between half and 75% of businesses are destined to fail within the first three years. One of the startling things about the sheer number of businesses that go under in the first few years, is the fact that it’s often for entirely avoidable reasons.
All CEOs and business owners are susceptible to the same mistakes and blind spots, irrespective of the size of the business, geographical location or industry. So whether you run a local car rental business or a world-leading telecoms company, if you repeat these common mistakes your business is doomed to fail.
1. Poor Market Research
Too many businesses dive into new markets, introduce new product lines or acquire new businesses without carrying out the necessary market research or due diligence. The failure to conduct proper market analysis is a common oversight and as a result business owners and CEOs are often blindsided by their lack of preparedness in dealing with unanticipated events.
To avoid this potentially ruinous scenario, companies should carry out a full-scale market analysis by setting up a web monitoring system that will surface any information relating to their target market: who are the main players? what is the price comparison and market performance of each competitor? In addition, companies should conduct customer sentiment analysis to discover reactions to competitor brands and to determine if there is sufficient demand for your product or service. Based on all of this data, you should have a clear idea of what level of market penetration can be achieved with your proposed new offering. The most important reason for carrying out a thorough market analysis is to avoid any major surprises which can derail your business early on.
2. Failure to Listen to Customers
Ignore your customers at your peril. It’s a fairly basic piece of business advice and, one would think, an easy one to remember. But there are so many instances where customer needs are not given the priority they deserve, that it’s still one of the number one reasons that businesses go to the wall each year. Getting a business off the ground takes a lot of focus and determination, along the way business owners and CEOs get distracted by other issues and customer needs start to slip down the list of priorities.
One of the best ways to stay informed about your customer needs is to listen and learn about their purchasing habits, find out what trends they are following and get plugged in to the challenges they face in their daily lives. By tracking what your customers are saying about your company or brand on social media, web forums and discussion groups you have a clear idea about where to position your brand and how to anticipate evolving consumer trends.
3. Lack of Innovation
New technologies are emerging all the time and the companies who take advantage of the latest innovations are the ones who manage to stay ahead of the curve and achieve growth. Companies such as Kodak, Nokia and RIM have been severely penalized for neglecting to fight off the threat from breakthrough technologies and new innovations.
By monitoring the latest technologies available in your market or scanning technology patents to see what’s coming on stream in the future, your business will have more than a fighting chance of surviving the next wave of innovation. Forward thinking business should set up an automated technology watch to provide answers to the following questions:
- What are the emerging technologies in our sector?
- Which technologies used in other areas or sectors could benefit us by replacing our current technologies ?
- Which technologies could be used to design new products, new packaging, new production or distribution methods?
- Could any technologies be combined to improve our products?
- How might emerging technologies affect our competitors or the arrival of new players?
- Which companies master the key technologies we have identified and could we envisage an alliance or acquisition in the future?
4. Poor Sales
Nowadays companies need to look beyond traditional sales channels to generate new customers. If your sales pipeline is running low you cannot possibly sustain your business into the future. Your growth potential is dependent on broadening and diversifying your customer base and that requires a steady stream of new sales prospects.
There is a wealth of information on the web which can be used to identify new sales opportunities. Once companies learn to harness this information correctly, the insight it will provide to front line sales teams will reap huge rewards.
To immediately start growing the number of sales opportunities at their disposal, businesses should set up a 360 degree monitoring system which will notify sales teams of the following events:
- New investments in plants/facilities: this means the customer will be in a position to purchase new equipment.
- New products launches: this may lead to the setting up of new production lines.
- New acquisitions: will the customer modernize its acquisitions’ existing machines/equipment?
- New contracts: Will there be a subsequent increase in production?
- Personnel changes: Should you get in touch with the new R&D director that has just been appointed?
While there are no guarantees in business, companies who manage to avoid the pitfalls above can at least ensure that their business has the best fighting chance of making it in today’s turbulent economy.
This post originally appeared on Digimind's Market Intelligence Hub.