As it appeared in the Daily Nation on December 17th 2019
Dr. Lucy Kiruthu
In life, there is success and failure in almost equal measure. Sometimes, we experience good times and other times, life is not very smooth. The good news is that we can learn from success and even from failure. Life experiences, both good and not so good teach us what to do, how to do it and even what not to do in future. As is life, the world of businesses is characterized by success and failure. While success is often considered good, the same viewpoint is not always held for failure. I believe that failure is not always entirely bad if we choose to learn from it. The lessons from business failures might even exceed those from business successes. Learning from our failures and those of others has the potential to lead a business to future success. This is only possible if businesses start viewing failure differently. Have you experienced business failures in the past? What have you learnt from the failures?
There are many kinds of business failures. Some failures in business are mild and short-lived while others are catastrophic and lead to business closure either voluntary or involuntary. We can easily point out a business that has experienced a minor or major failure. These failures originate from different sources and affect businesses differently. Start-ups and business in early-stage growth are most at risk of going out of business because of a major failure. Even profitable businesses experience failure especially when they are unable to generate adequate cash flow. Some of the main causes of business failure include poor leadership, lack of a viable business model, inadequate capital, being out of touch with customers’ needs, poor understanding of the industry, lack of compliance, lack of a financial plan, poor management decisions such as over expansion. The list of the causes of business failures is endless. Fortunately, most of these failures can be averted.
Amy Edmondson a professor of leadership and management at Harvard business school looks at business failures from a different perspective. She looks at what can go wrong in any business. In a Harvard Business Review article, Amy shares the three categories of business failures namely preventable, unavoidable and intelligent. Preventable failures she says are those resulting from a deviation from the norm; unavoidable failures she says result from the complexity and uncertainty of the marketplace while intelligent failures result from experimentation and provide new knowledge. Businesses can pick lessons from all these kinds of failures.
To keep your business on track and minimize failures, it is crucial to have a long-term vision for your business. Such a vision needs to be supported by clear objectives, a strong financial plan and specific actions. In addition, to spot potential failures, smart companies need to keep detailed records of the business activities and their overall performance. When a business faces any kind of failure, it is important to find out what went wrong by conducting a root cause analysis. This helps the business and even other businesses to learn from the failure. Unfortunately, most business leaders are quick to point fingers instead of looking for the lessons from failure. Every smart business should seek to learn from its past failures and the failures of others.
Dr. Lucy Kiruthu is a Management Consultant and Trainer. Connect via twitter @KiruthuLucy