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One Reason Why Companies Fail

March 10th, 2010 · 19 Comments

I was thinking about this the other day, as I was chatting to a friend about my experiences as an entrepreneur and investing in early-stage companies.

I mentioned to him that one of the reasons companies fail (and I have also gone through my share of failures) is that we do not reset starting assumptions against the market realities. Let me explain.

We start off with some ideas, and assumptions about the market. Once we take the product out into the market, we get feedback – about customers’ expectations and market size. It is at that time that we need to think about some course alteration – in case there is a mismatch. Many times, we don’t do that – working under the principle that our efforts will accelerate the market’s response towards our product. That rarely happens. What follows is disappointment.

It is never easy changing one’s assumptions quickly, especially when one has been thinking about them for a long time. But they should be exactly that – just starting assumptions.

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19 responses so far ↓

  • 1 Rama Vadakattu // Mar 10, 2010 at 12:22 pm

    Yeah the same thing steve blank calls (and popularly know as) it as customer development. Get of out of your building and validate your hypothesis (these are just your opinions) with your customers.
    Most companies are failing due to lack of customer not due to lack of technology.

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  • 2 kasi // Mar 10, 2010 at 12:36 pm

    That is more true with Technoprenuers.

    Some people even argue that we stick to our Original Business Plan… I can’t understand that.

    If there is no Business then what we do with the Original and the Plan?

    People are not ready to accept that their assumptions about the market is wrong…and start quoting companies which waited …look at electric cars…it took them 20-years…look at cellphone market it took them 10-years bla..bla..bla..


  • 3 Delphin Palace // Oct 6, 2010 at 10:02 pm

    Agree with Kasi, the plan is the backbone to a company. If it has holes, stop it.

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