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Why do businesses fail?

The 3 differences between those that succeed and those that fail

posted by Team Tony

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Did you know that a staggering 96% of businesses will fail over a 10-year period of time? And as for the remaining 4%, it does not necessarily mean they succeed, it means that they’ve survived.

So what causes a business to fail? What makes someone succeed? What makes the difference? Peter Drucker, one of the greatest business minds of our time, maintained that it all starts with two key factors: innovation and marketing.

INNOVATION

Innovation means finding a better way to meet your clients’ needs than anybody else. Anybody can make some money for some amount of time. But if you want to become successful and sustain that success over years and over decades — if you want to build a brand — then you have to find a way to add more value than anybody else in the game. And that comes from constantly innovating.

Too often, a business will fall in love with their product or service and neglect the need for innovation. This can pose very real problems, as the economy, technology, the culture and competition are constantly evolving. It’s a different world we live in today, where the only constant is change. And if you aren’t staying ahead, you’re falling behind.

Consider the technology industry today. Do you know what the life cycle is on an average product today in the technology business? About six months. And in some sectors, like the app business, it’s just a month. People expect continual innovation and improvement, and if you don’t take deliver that to them, someone else will.

So rather than falling in love with your product, fall in love with your client and figure out every single way you can meet their needs. Anticipate what they want, what they need, and when possible, try to determine what they might not even know they need yet. Turn your customer into a raving fan — somebody who will tell everybody about your product or service or company. Because when you create that sort of impact, you’ll start to build a brand.

MARKETING

Marketing is the next critical step. If you cannot find a way to market your product or service, then your business will have a hard time getting off the ground. Because the truth is, you could have the most innovative product or service, but the best product doesn’t always win. Do you think McDonald’s has the best burger? Probably not. But their marketing strategies are top-notch.

To market effectively, you have to understand what your “X-factor” is. You have to know what your added value is. What is it that you are here to deliver and how can you improve your customer’s lives?

To help discover what your true value is as a business, you must ask yourself core questions like: What does the marketplace need? Who is my customer? What can I do to make my offer irresistible? And perhaps one of the most important questions you can ask yourself is, “What business am I really in?”

WHAT BUSINESS ARE YOU REALLY IN?

Apple is one of the most valuable companies of our time, with a market cap of $600 billion and a stock that is soaring above its competitors. But it wasn’t always that way. In 1997, the company was near bankruptcy, and Michael Dell was advising Steve Jobs to shut Apple down and give its shareholders their money back. But Apple persisted, and Steve Jobs asked himself one of the most critical questions in his lifetime: “What business are we really in?”

At first, the answer was simple — Apple was in the computer business. But how were they supposed to win back customers when 97% of all computers across the United States were run by Microsoft? That’s when they realized that no matter how good their product was, Microsoft was embedded and entrenched in the masses. After all, it was one of the main reasons Apple found itself in bankruptcy.

So Jobs asked, “What business do we need to be in?” And Apple decided that it needed to be in the business of connecting people to their passions — to their photographs, their music, to each other.

CHANGE YOUR OFFER, CHANGE YOUR LIFE

Answering this question created one of the most life-altering shifts for Apple. And the company transitioned into building simple, cool technology that connects people to what they love. Before long came the iPod and iTunes, then the iPhone and the iMac. Their net sales soared. And since that point, Apple has never stopped innovating, and their marketing campaigns have helped propel the company to an entirely new realm.

Today, is Apple really in the computer business? Only 14.7% of their business is computers. Which means 85% is not — the vast majority is made up of iPods and iPhones. So how important was it for them to answer the question of what business they are in?

If success is about innovation and marketing, then you have to decide who your customer is, what they need, what business you are in and what business you really need to be in. Answering these questions can change your entire business. Because it ultimately allows you to change your offer. As we say, change your offer, change your business. And change your business, change your life.

Header image credit ©pressmaster/shutterstock

Team Tony

Team Tony cultivates, curates and shares Tony Robbins’ stories and core principles, to help others achieve an extraordinary life.


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