Not too long ago, I spoke with a social geographer who is an expert in doing field research. He said that in social geographical research (e.g. research into questions like “What are the current needs of citizens in a specific district of a city?”), there’s a problem with most people with a university education. Specifically, these people, who often work for the university or local government, prefer to stay behind their computer. They want to send out an online survey to citizens, get the answers, and then get into the nitty-gritty details of analyzing those answers. The goal is to write up a report, hand it over to a colleague, and then do it all over again.
The issue, you may see, is that these researchers never come face-to-face with the citizens themselves. They never really talk to the people who they write their reports about. And this conversation made me think of startup founders and entrepreneurs, who often face the exact same issue. Startups fail. And startup founders fail a lot. And although there is a variety of frameworks to mitigate this, one main reason why startups fail is exactly why social geographical research often does not work: just like researchers, startup founders do not speak to their customers; not often enough or not in the right way.
The Problem Statement: Failing Startups
So the problem is clear: Startups fail. Generally, between 80% and 90% of startups do not exist anymore 20 years after their founding. This is not necessarily limited to new businesses alone. Whether it’s startups created by larger companies (intrapreneurship) or startups created by new entrepreneurs, they all often fail. Note that we could discuss what it means to fail, but here we will take failure simply as not reaching a state of profitability.
And you could say that so much failure is not that big of an issue. After all, entrepreneurs know they face significant risks, and still there seem to be plenty of entrepreneurs willing to take such risks. Although there could be even more entrepreneurs (and we could promote entrepreneurship in Europe particularly), innovation is thriving.
Yet, there could be even more innovation. We could have more innovative new companies disrupting markets and offering new and exciting products. We could have more technologies, more ways to connect, improve our lives and the lives of others and those in need.
And if we focus not just on promoting entrepreneurship, but rather on making sure that those who do take the entrepreneurial plunge fail less often, the result should be exactly that. Very generally, the more we can ensure that startups do not fail, the better it is for society at large.
Why Startups Fail
Although I started this article with pointing to a main reason why startups fail, at first sight it isn’t easy to make this conclusion. After all, there are many varied reasons why startups fail: A company hasn’t figured out the problem space and solution space; it hasn’t found the right market for its product; it runs out of ways to finance itself; the founders can’t decide how to divide the pie; or there’s an entirely different factor at play.
The point is, there are millions of reasons and factors that cause startups to fail. And certainly, many of those factors are outside of the control of policy makers, the founders themselves, or people like myself who try to do a little bit of educating.
But we can make some generalizations. While there are often factors that are outside of the control of a founder, there are also factors that are inside their control and yet cause their startup to fail. So whether it’s the failure of finding the right market — not offering the right product to the right people, or not doing what your customers want, these things all come down to one thing: not talking to customers, and/or not doing so in the right way.
The Build Trap
A lot has been said and written about talking to customers. And it makes sense; just like the social geographer, if we’re trying to improve the lives of a specific group of people — we first need to talk to them. We have to understand their needs, wishes, hopes, dreams, habits, connections, and really get to know who they are.
But it’s so easy to fall in what Melissa Perri calls The Build Trap. Many starting entrepreneurs I speak, don’t start with the customer in mind. Rather, they start with an idea of a product or service. For them (and I’ve also belonged to this group), it’s easy to simply ‘start building’.
Once you have an idea, why not make it true? But before you know it, you’re a year down the road and still haven’t showed your product to anyone who wasn’t a direct friend or relative.
In other words, it’s very easy to get into a working process where you’re focussing on the product: you’re building, building, building — instead of showing, showing, showing (or in Lean Startup lingo: testing, measuring, validating).
Escaping The Build Trap
So how do you escape the Build Trap? Melissa Perri recommends a few different ways in her book. But as stated, there are many frameworks and methodologies to build startups the right way. The Lean Startup is one, working agile is another. By repeated sprints, the idea is that you get more feedback and improve the product over time on the basis of direct feedback rather than delivering everything at the end.
But regardless of what framework you choose, it really comes down to this: Talking to customers. For example, there are plenty of companies who work agile, but still fall into a build trap. They use sprints, review the product every week (at the Sprint Review), and feel that they’re on the right track. But as long as you don’t speak to customers regularly, and speak to customers in the right way*, you could well deliver an expensive product after a year of building agile, and still have no customers to speak of.
So the point is: escaping the Build Trap requires a shift in thinking — and thinking more about your customers. And even though many people (like myself) indeed like to sit in front of their computer, it’s incredibly important to not only start talk to customers at the beginning, but to keep speaking to customers every step of the way.
* Note that there’s much more to say about talking to customers in the right way. If you want a quick pointer, I recommend reading The Mom Test, which shows exactly what questions to (not) ask potential customers.
One Main Reason Why Startups Fail: Not Speaking to Customers
If you ever participate in a Startup Weekend (which I definitely recommend you do), there’s one sentence that gets thrown around a lot. It is this: Get Out of the Building.
The idea is that you have to get out of the building to validate your business idea, product or service. You can’t make sure that people want to buy it by not interacting with potential customers and simply sitting in front of your computer. This is particularly true when working with such a short timeframe as a Startup Weekend, but it holds true for any startup. As founders, we have to get out of the building, and we have to do it regularly.
So if you already have a startup, let this serve as a reminder. Make sure to book those ‘talk-to-customer sessions’ on your agenda. Alternatively, if you’re just starting a business, think about how to best approach your customers, and talk to them regularly. As a result, I’m sure your chance of failure will significantly diminish.
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