Top 10 reasons why businesses fail:
1. Lack of an adequate, viable business plan
2. Insufficient sales to sustain business
3. Poor marketing plan: unappealing product, poor customer identification, incorrect pricing and lackluster promotion
4. Inadequate capital, misuse of capital and poor cost control
5. Poor management skills: lack of delegation, leadership and/or control
6. Lack of experience and knowledge
7. Lack of managerial focus/commitment
8. Poor customer service
9. Inadequate human resource management
10. Failure to properly use professional advice: i.e. accounting, legal, financial, etc.
Lack of a viable business plan is an act of negligence where research, scenarios, and assumptions have not been tested. Market ignorance is not an excuse nor is the failure to know one’s customer. Death by poor marketing plan is knowledge deficiency related to product appeal, customer identification, pricing structure, and lackluster promotion. Obviously, one needs to know how to manage a company in order to be focused, let alone correctly estimate capital needs. Lack of customer service knowledge is deadly in the age of social media. Inadequate HR is an oxymoron – if it’s inadequate, it’s not a resource – human or otherwise. Finally, failure to listen to knowledgeable people is ego driven irrationality.
The financial system is not the only problem; the innovation system is a crucial element. Information, knowledge and innovation, by any definition, are profoundly and inseparably connected. A failure in one kills the other two. So, just because an entrepreneur does not have the knowledge, does not mean it the ‘knowledge’ fails to exist – it simply means that entrepreneur failed to find it.
So where is the knowledge? Unfortunately, there is no public knowledge inventory – people do not know what each other knows. There is no website where that people can go search for all 90th percentile social media experts living in zip code 06776, let alone build a dedicated local management team. There is no way that anyone can assemble the knowledge needed to execute a business plan with a known probability of success given the information available. As such, there is no way to finance public innovation.
Insurance companies can tell you the probability that you will die exactly on your 80th birthday, but we cannot estimate the probability that a business will be successful. Nothing has more variables that human physiology, yet it is predictable and business success probability is not. Why can’t this be fixed?
If we could identify, integrate, and predict public information, knowledge and innovation, we could diversify risk exposures away. With risk exposures managed, we could insure start-ups risks. With start-up risk eliminated, we can sell innovation bonds at, say, 6% to fund the extraordinary rate of public innovation that we need to support our debt and pressing social liabilities. If the innovation bond returns a modest 20%, human productivity, by definition, has increased by 20%. A 20% growth in human productivity is a 20% growth in an economy. Again, financial system is not the only problem; the innovation system – or lack of an innovation system – is the problem. Perhaps oversimplified, but this is an astonishing omission from the national dialog on the financial crisis.
The emergence of Social Media technology presents an extraordinary opportunity to organize a knowledge inventory outside the construct of a corporation and marry it to the financial system, much like a corporation. Knowledge tangibility must be the most important “innovation” in the pipeline today if we expect to meet the crushing challenges that await us. Just because we cannot predict innovation does not mean it cannot be done – it just means that we do not know how… yet. This is not about inventing a new currency, it is about the public taking control of the old one. We, the people, don’t deserve to lose this game; join The Ingenesist Project and help build a sustainable Innovation Economy.