THE RISE OF ENTREPRENEURS THAT ARE “BORN GLOBAL”.

THE RISE OF ENTREPRENEURS THAT ARE “BORN GLOBAL”.

Innovation clearly is critical to entrepreneurs’ ability to grow and create jobs. Many of these entrepreneurs see opportunities to bring innovation to customers outside of their home markets and these individuals expect their firms to grow even faster and create more jobs than those whose sights are set primarily on their local market.

Yet firms, especially small ones, face considerable barriers to expanding abroad—barriers that bridgemakers can help entrepreneurs overcome. International expansion is on the minds of most entrepreneurs Overall, six in 10 entrepreneurs surveyed indicated international expansion is a key priority for their business (Figure 4). One might expect larger firms to be likely to hold that view and that is indeed what Accenture found in its survey: more than 75 percent of larger firms (those with 100 to 250 employees) considered international expansion important to growing their business and creating jobs. What was remarkable was that a similar percentage (76 percent) of smaller firms (with 10 to 99 employees) had the same aspirations.

While smaller firms certainly face more challenges in expanding outside their home markets than their larger counterparts do, it is worth noting that smaller firms are thinking seriously about targeting overseas markets. One of the reasons so many entrepreneurial firms of all sizes are looking outside their home markets is better revenue growth opportunities: firms that considered international expansion a priority expect faster revenue growth than their locally focused peers. Accenture’s survey showed that of the entrepreneurs who expected hyper revenue growth in 2014 (that is, greater than 15 percent), a vast majority (73 percent) also considered international expansion as either critical or important to growing their business.

On the contrary, the majority of firms (66 percent) that expected revenues in 2014 to decrease or remain stable considered international expansion as not very important or not important at all.

Interestingly, the tenure of the firm—how long it had been in business before deciding to expand outside its home markets—is not directly correlated to a desire for global expansion. In fact, surprisingly, a very high proportion (70 percent) of younger firms—those launched in the past 12 months—are already thinking of international expansion. These are the “born global” entrepreneurs. Conversely, a smaller percentage (only 49 percent) of firms that are more than 10 years old considered international expansion as important to growing their business (Figure 5)

These results indicate that the new generation of entrepreneurs thinks much more globally than their predecessors. This is especially true for entrepreneurs in the sharing economy, where achieving critical mass and being the first entrant is a primary criteria of success and viability (as is the case in similar “winner take all” markets, where the value of the network is a predominant value creation factor). Internationalization increases the size of their addressable market, reduces revenue source risks and increases the value of their firms.20

Accenture’s survey also revealed that going global can have a huge impact on a firm’s job-creation potential. Firms with international activity were more likely to expect to create jobs than firms that were primarily locally focused. Importantly, international expansion does not mean jobs will be created only in overseas markets. On the contrary, more of these new jobs would be created at home: more than 80 percent of these firms expected to increase the workforce in their home country at a faster

ARE ENTREPRENEURS BECOMING “SOCIAL ENTREPRENEURS”?

ARE ENTREPRENEURS BECOMING “SOCIAL ENTREPRENEURS”?

 

The relationship between entrepreneurs and the ecosystem in which they operate is a complex, multifaceted relationship, as companies can only thrive in the long run if their ecosystem is flourishing, and the development of the ecosystem depends to a large extent of the way companies contribute to an inclusive, environmentally and socially responsible growth.

Interestingly, 70 percent of surveyed entrepreneurs (Figure 12a) consider themselves as “social entrepreneurs” either because they have a direct impact on their local community or because in their company profits are reinvested in the business itself (Figure 12b). In other words, many entrepreneurs who manage “for profit” businesses believe their mission goes beyond generating profits for shareholders.

 

This applies to a large extent regardless of the location of entrepreneurs. Except in the US, UK, Australia and Germany, a large majority of entrepreneurs, whether based in mature markets or emerging markets, consider themselves social entrepreneurs. Such a finding is contrary to the conventional wisdom that entrepreneurs collaborating for the good of their country or society are much more prevalent in emerging markets than in mature ones. Given the size of the challenges, especially related to youth unemployment, most entrepreneurs are willing to contribute to the development of their local community beyond their traditional commitment to grow their business and create jobs.

 

Can entrepreneurs create more jobs? Skills shortage and lack of labor market flexibility are particularly important barriers to creating more youth jobs. Several barriers prevent entrepreneurs from doing more to spur youth employment across the G20 countries. Barriers differ across countries due to the unique characteristics of local labor markets

The lack of labor market flexibility is also a significant barrier to hiring more young employees, especially for entrepreneurs in countries such as France, India, China or Italy. Entrepreneurs sometimes feel that the investment in training young people and building their business skills is too high given the lack of senior employees’ time to train and coach new recruits in small firms. One entrepreneur succinctly described the challenge: “People who have just arrived on the job market after graduating are usually skilled enough. What they lack is experience, which is part and parcel of the business acumen. They have to build their communication and business skills alongside their different work experience or temp positions.” To help them compensate for some of the specific investment required to give young people the required skills to be productive, a large number of entrepreneurs would appreciate incentives and a direct role in youth education Entrepreneurs could create 10 million new youth jobs A large majority of surveyed entrepreneurs are confident that they could create more jobs in the future than they are already doing. This would require a new paradigm described by the “3+1” formula: an active and sustained collaboration among entrepreneurs, large companies and bridgemakers, enabled by government through relevant public policies. Collaboration among these parties can take different forms, depending on the characteristics and most pressing issues of the local ecosystems (such as open innovation, globalization, education or more general technology development priorities). A large majority of entrepreneurs want more support from governments, large businesses and bridgemakers to help them sustain their contribution to economic growth and job creation.

 

In fact, entrepreneurs view collaboration across the public and private sectors as a potential game changer that may trigger a new wave of competitiveness and sustainable growth. Digital technologies make this game change possible, especially given the substantial possibilities offered by technology-enabled, open innovation. But for this to happen, adequate policy frameworks must be implemented and the necessary technology investment must be deployed at speed and scale (which we discuss in more detail in chapter 4). In this context—assuming entrepreneurs’ expectations are met—entrepreneurs’ job creation potential would be unleashed, resulting in 10 million new youth jobs potentially created across the G20 countries, according to an Accenture estimate (Figure 14)34. This would help drive the reduction of youth unemployment from 13 percent to 10 percent35. (See page 36 for details on Accenture’s job creation model.)

 

POLICY EXPECTATIONS TO FOSTER ACCESS TO TALENT AND CREATION OF JOBS.

POLICY EXPECTATIONS TO FOSTER ACCESS TO TALENT AND CREATION OF JOBS.

Entrepreneurs face many challenges in creating jobs. Often, these challenges can be unique to a specific country or region due to prevailing public policies and regulations. However, entrepreneurs and local experts agreed on six broad policy themes that could help entrepreneurs find and hire talent and, in the process, significantly boost the number of jobs they create (Figure 18).

  1. Support vocational training and apprenticeship. Vocational training and apprenticeships are now recognized as critical to helping develop new skills in existing talent pools. However, entrepreneurs believe current programs must be amplified, except in a few countries where they are either recognized as well developed (such as Germany) or as being developed at scale (in the UK, for instance).
  2. Develop STEM graduates. Entrepreneurs need access to a greater talent pool for STEM graduates; hence, the expressed need for the development of STEM graduates at an accelerated pace in the G20 countries. The gap between supply of and demand for STEM is widening and impeding the development of entrepreneurs’ businesses—whether focused specifically on digital goods and services or not.
  3. Increase labor market flexibility. Greater policy attention to the cost of labor and labor market flexibility is particularly important to entrepreneurs, who seek to boost youth employment but have no guarantee that their business will succeed. Italy, for instance, recently adopted new legislation that recognizes, for the first time, the unique needs of the start-up ecosystem by allowing flexible labor contracts (fixed terms lasting six to 36 months), specific variable pay packages, and tax benefits. Thus, a better match between skills supply and demand for skills is wanted by many entrepreneurs.4
  4. Encourage entrepreneurship culture through new methods of education/learning. Many entrepreneurs are looking for new approaches to education, and learning can be developed at scale to further enhance an entrepreneurial culture throughout G20 countries. Examples include dedicated Massive Online Open Courses (MOOCs); specific university programs, such as the EXIST program in Germany (which facilitates the development of new businesses through financial grants for tech infrastructures created for startups by universities); and courses given by entrepreneurs in universities to encourage potential young entrepreneurs to create their own businesses.

ACCESS TO FINANCE FOR YOUNG INNOVATIVE FIRMS

ACCESS TO FINANCE FOR YOUNG INNOVATIVE FIRMS

Young innovative firms face many difficulties accessing seed and early-stage finance and these difficulties have increased over the past several years. Banks have been reluctant to provide loans to start-ups as a result of the financial crisis. Meanwhile, venture capital firms have become more risk averse and, in many cases, have focused on later-stage investments.

Angel investors have become more visible and active through groups, syndicates and networks and increasingly are playing an important role in seed and early-stage finance.37 There has been increasing concern from policymakers around the world about the growing financing gap for high-growth firms, particularly in the seed and early stage.

As a result, governments in many countries have sought to address the financing gap and perceived market failures by supporting the seed and early-stage market.38 However, the objectives behind these interventions often go beyond addressing financing gaps.

Many countries recognize the critical role that young, innovative firms play in creating jobs and economic growth and are seeking ways to facilitate the creation and growth of these firms.39 Many policy measures have been on the supply side, ranging from grants, loans and guarantee programs to tax incentives and equity instruments.

Support for all of these programs increased from 2007 to 2012 as a result of the financial crisis. However, in equity instruments, there has been a shift in focus in OECD countries from government equity funds that invest directly in start-ups to more indirect models such as co-investment funds and fund-of-funds. These later approaches seek to leverage private investment through various incentive structures.

The demand side is critical to success of seed and early-stage financing; however, it is often overlooked in favor of supply-side actions. For firms to launch and grow successfully, human capital development is important. This could be in the form of education, training and/or on-the-job experience.

 

Many successful entrepreneurs are serial entrepreneurs, starting more than one company. As they start new companies, they share their experience, knowledge and networks with others. There is increasing evidence of the importance of social capital, both local and global, as high-growth firms need to grow beyond national borders. International expansion and investment can be critical to the success of these firms.

The framework conditions in a country can perhaps have the most impact on the provision of seed and early-stage finance. The development of financial markets and exit opportunities, whether through IPOs on a stock exchange or mergers and acquisitions by other firms, directly influences the availability of seed and earlystage financing. Bankruptcy regulations, labor market restrictions and other framework conditions also impact the creation and growth of innovative firms.

Regulatory barriers and administrative burdens on institutional investors, venture capital funds, angel investors and high-growth firms can have a direct result on the provision of seed and early-stage finance. In particular, securities legislation and more stringent capital requirements on institutional investors could reduce the supply of investment in venture capital from banks, pension funds and insurance companies, traditionally three of the largest types of private institutional investors.

Financing for innovative start-ups is complex, as different financing instruments are needed for various stages of a firm’s development. Policymakers in a number of countries have sought to address the prevailing seed and early-stage financing gaps by intervening in multiple areas simultaneously. Therefore, policy interventions should not be seen in isolation, but as a set of interacting policies. A systems approach is needed that covers both supply-and demand-side intervention as well as framework conditions. Evaluation and periodic adjustment of the specific policy instruments as well as the full policy mix is important, although it can be challenging in practice.

 

SIX GUIDING PRINPICLES TO SUCCESSFUL DIGITAL INNOVATION STRATEGIES

SIX GUIDING PRINPICLES TO SUCCESSFUL DIGITAL INNOVATION STRATEGIES

Through our work with and observations of companies of all sizes around the world – as well as our own ecosystem and our own innovation programs – we have developed six guiding principles for companies seeking to gain market share through innovation, generally and through digital innovation in particular.

For these principles to work, companies must have certain digital building blocks in place. Social, analytics, mobile, cloud and the Internet of Things have become the fundamental tools for driving innovation in the digital age. These represent significant investments and can take time to establish; but once the basic building blocks are in place, new possibilities for innovation open up.

The guiding principles are:

  1. Focus on Customers Establish an innovation agenda that is defined in terms of the value it brings to the end customer. Tactical Considerations 5. Parallel Processes and Metrics A set of business processes, decision-making criteria and performance metrics – different from those used within the core business – is set up to explore and develop innovative ideas. Tactical Considerations • Special processes are set up to consistently capture, vet and incubate new ideas. • Funding decision criteria are clearly defined, reflecting long-term potential in addition to shortterm ROI, and allowing for a higher degree of experimentation than might be accepted within the established core business processes. • The role of the innovation team is recognized as non-traditional and is measured against a balanced set of leading indicators of innovation, rewarding experimentation and evidence of long-term vision.• The underlying theme – from top-level executive meetings all the way down to department meetings – should be the need for everyone in the organization to put themselves in their customers’ shoes and look at things from their perspective. • The organization should be challenged to think about how services in and around the core business might provide extra value to the customer. Amazon’s Jeff Bezos has been known to leave a seat open during key meetings to make sure the customer is represented in the room.
  2. Pervasive Leadership Commitment The leadership – usually represented by the CEO – elevates the innovation agenda to a strategic priority and pushes the commitment to exploring new ideas to drive new value throughout the organization. Tactical Considerations • The metrics by which the performance of leadership is evaluated include leading indicators of innovation, such as number of new ideas explored, touch points with the innovation ecosystem and collaborative ideation sessions attended and/or orchestrated. • Awards, incentives and performance management criteria are developed to encourage innovation-driving behaviors among employees at all levels.
  3. Empowered Facilitation Team An innovation leader or leadership team is set up to facilitate a collaborative approach to innovation across the organization, encouraging a holistic consideration of the customer experience. Tactical Considerations • A CEO-endorsed governance structure is set up to establish a dedicated (and funded) innovation team, along with named innovation champions from each business unit and an executive steering committee. • Innovation leaders are trained in breakthrough thinking facilitation techniques as well as idea crowdsourcing techniques. • The Innovation Team includes a dedicated research function focused on collecting and disseminating interesting examples of what other companies, other industries and other countries are doing in terms of innovation.
  4. Embrace of Openness – Inside and Out In innovative organizations, employees (and sometimes even customers) are seen as a source of value-creating ideas. Tactical Considerations • Ideation campaigns – whether ongoing or periodic – are held to tap into employees’ (and sometimes customers’) ideas. These campaigns are clearly focused on well-defined strategic imperatives. Some solicit short, individually submitted ideas upon which others can comment and build. Others require thorough submissions that adhere to guidelines from either employee teams or external audiences. Many companies hold idea “jams” that bring together diverse perspectives for an intense, dedicated day of coming up with new ideas for clearly defined challenges.
  5. Platforms such as Procter and Gamble’s “Connect and Develop” program can be created to tap into other companies, individuals or service providers that can enhance the overall customer value proposition. AT&T has a robust innovation program and strongly embraces open innovation. It set up The Innovation Pipeline (TIP), an employee crowdsourcing platform soliciting ideas from over 130,000 active members from across 54 countries. Top ideas are pitched to executive sponsors and some move on to prototyping through the AT&T Foundry innovation centers and AT&T Advanced Technology Labs. The AT&T Foundry also holds “FutureCast” sessions to engage with enterprise executives, startup founders, academics, journalists and public officials to spark new ideas. The AT&T Foundry, set up in 2011 and representing over $100 million in investment from a number of strategic partners, has “started more than 200 projects and deployed dozens of new products and services”. It explores ideas coming in from The Innovation Pipeline as well as from external sources. It was set up precisely to achieve faster commercialization times than could be achieved within the core AT&T business.
  6. Ecosystem Building Investing in collaborative and strategic partnerships with third parties to enhance value propositions. Tactical Considerations • Partnerships with university research centers that combine the company’s industry expertise with the university’s prowess in scientific research. • Working with the startup community through ventures, partnerships with incubators or even starting up a company-funded accelerator program as Disney has done in recent years. • Alliances with partners or other organizations that bring new value to the company’s offering. Philips is teaming with Salesforce to build a platform to reshape and optimize the way healthcare is delivered. Philips’ HealthSuite Digital Platform is creating an ecosystem of developers building healthcare applications to enable collaboration and workflow between doctors and patients across the entire spectrum of care.
  7. In today’s digital age, meeting customer needs is necessary, but not sufficient, for profitable growth. Companies need to go the extra mile – to surprise customers with new value and even anticipate their needs before the customers know what they want. Pursuing digitally based innovative growth is good for business, but it requires an appetite for experimentation and a commitment to disrupt the status quo that does not necessarily conform to the traditional operating models and structures of most companies. It also requires a significant investment in the foundational building blocks of digital upon which to drive innovation. The good news is that a recipe for successful innovation exists. The key is a strong focus on the customer as well as leadership commitment to the innovation agenda. Also important are a distinct set of people and processes to facilitate collaborative ideation and experimentation across the organization as well as a willingness to look for new ideas from the outside. By adapting these elements in ways that make sense for their own organization, companies can pursue innovative growth and open doors to new and potentially market-differentiating opportunities.

 

 

 

WHY DO SO MANY GOOD COMPANIES STRUGGLE WITH INNOVATIONS?

WHY DO SO MANY GOOD COMPANIES STRUGGLE WITH INNOVATIONS?

A consistent approach to innovation does not come easily for most enterprises. Successful organizations are, of course, geared toward efficiency and productivity – often to the detriment of innovation. A number of factors can get in the way of a structured, focused innovation strategy, including:

  1. Complacency
  2. Hierarchical
  3. Operational structure

1.Complacency

Large enterprises tend to play by established rules. It is difficult for such companies to foresee where disruptive new competitors might arise, and equally difficult for them to think about becoming disruptors themselves. The return on experimentation, with digital technologies or with other forms of innovation, may seem to be too distant to merit consideration. Many of these organizations must answer to shareholders on a quarterly basis, and nearly all face intense price competition in an increasingly connected and globalized world. For such companies, risk-taking, experimentation and efforts to harness employee creativity can be seen as luxuries or distractions from the “core business.”

2.Hierarchical

organizations Large enterprises typically have a hierarchical structure, with a top-down approach to management. Employee ideas may be tapped for initiatives related to continuous improvement, but less frequently for bigger and more strategic undertakings. While one might argue that pioneering innovation is what made most companies successful to begin with, it is because they have grown so large that many enterprises need to establish a deliberate focus on driving innovation or risk inevitable disruption by others.

3.Operational structure

Large companies tend to operate with a businessunit-centric mentality, with each organization and sub-organization primarily concerned with its own performance. Even large business units with digitalsavvy leadership can only take the innovation agenda so far within the confines of their own operations; some of the most high-impact ideas actually come from collaborative thinking across different business units. The larger the organization, the more barriers to communication there are, and the costs of coordinating time, effort and energy may seem to outweigh the perceived benefits of sharing ideas outside one’s own sphere of daily activities.

WHAT DO WE MEAN BY INNOVATION IN THE DIGITAL AGE?

WHAT DO WE MEAN BY INNOVATION IN THE DIGITAL AGE?

Innovative companies are defined by the organization’s willingness to consistently identify, explore, develop and bring to scale new ideas that help drive new value. While innovation can involve large or small projects, it is the ability to consistently bring big ideas to scale that differentiates the most innovative enterprises from the rest. Gains in operational efficiency are always welcome, but in the long run, real competitive differentiation is provided by big, customer-facing, market-reshaping ideas.

Digital technologies provide great opportunities to achieve this differentiation. Leading organizations are investing in and leveraging digital technologies such as social, mobile, analytics and the connected Internet of Things to better engage with customers, build out new services in and around their core businesses, and even build ecosystems connecting multiple players to help enhance their value proposition.

Companies with strong digital innovation strategies put themselves in position to grow market share and differentiate themselves from competitors, while those lacking such strategies risk losing market share to more innovative disruptors inside or outside their industries.

DRIVING GROWTH THROUGH ENTERPRISE INNOVATION STRATEGIES IN THE DIGITAL AGE

DRIVING GROWTH THROUGH ENTERPRISE INNOVATION STRATEGIES IN THE DIGITAL AGE

In an age of digital disruption, most big companies talk about the need for innovation. In our experience, however, very few large companies have established successful innovation strategies.

Nowadays, innovation often revolves around digital technologies, and innovative companies are using digital to enter new businesses, offer new products and reach new customers. As Accenture’s Technology Vision 2015 pointed out, these companies are essentially digitizing every employee, process, product and service.

More and more, these companies seek to keep pace with (and eventually surpass) ever greater customer expectations – expectations that have been referred to as bordering the realm of the magical, where companies can anticipate customers’ intentions, provide the most enticing and convenient end- to- end experiences and deliver value-added services in and around their core offering.

93% of enterprise-level executives said they think innovation is critical to their business, but only, 34% said they believe they have a well-defined innovation strategy in place.

52% of corporate employees surveyed said they had pursued what they thought to be an innovative and/or entrepreneurial idea, but only.

20% said they believed that management was supportive of such new ideas.2 Many characteristics – including sheer size, organizational hierarchies, aversion to risk, and the need to report results to shareholders on a quarterly basis – prevent large companies from being successful innovators.

THE IMPORTANCE OF DIGITALLY ENABLED COLLABORATION

THE IMPORTANCE OF DIGITALLY ENABLED COLLABORATION

Digital innovation is at the heart of improving companies’ performance. Based on our survey of 1,000 large companies and 1,000 entrepreneurs (generally, smaller startups), 97 percent of large companies and 82 percent of entrepreneurs believe that digital innovation is critical or important to their future performance. Collaboration is and will be the engine to accelerate digital innovation—collaboration both inside and outside the “four walls” of a company. The good news is that, as demonstrated by Figure 1, there is a healthy appreciation for working with multiple partners of different kinds.

The promise of collaboration is indeed appealing. According to Figure 2, large companies see collaboration with entrepreneurs as a way to inject new approaches, including technology and talent, into their innovation processes; entrepreneurs see the promise of accelerated commercialization of their products and services through collaboration with large companies. Although the difference between those expectations creates potential misalignments in strategic objectives, our research indicates that 82 percent of large companies admit they can learn from startups/entrepreneurs about how to become a digital business. And half of the large companies feel that they need to work with entrepreneurs to be sufficiently innovative.

For their part, entrepreneurs value collaboration with large companies for several reasons. Foremost is gaining access to a large company’s distribution network and customer base and becoming a supplier. Also important, however, are the opportunities of tapping into market knowledge and securing investment from corporate venture funds. (See Figure 2.)

Digital collaboration boosts economic growth

Large companies in our survey expect to generate 28 percent of total revenues from digital technologies, products and services in the next three years, up from 16 percent today. And collaboration is expected to be a critical way to increase digital revenues. Today, the proportion of revenues generated by collaboration with startups/entrepreneurs on innovation already represents a significant nine percent of large companies’ total revenues. In three years this proportion of collaborative revenues is expected to rise to 12 percent; in five years, as collaboration accelerates, that number is expected to more than double, to 20 percent.

Our economic modeling suggests that the more that companies collaborate in their ecosystem, the more they innovate and grow their revenue. There is a strong correlation between the attitudes that enterprises have about collaboration and the likely levels of innovation, revenue and economic growth. Accenture calculated the Digital Collaboration Index of economies and industrial sectors based on the expected impact of innovation on business performance and investment, the degree of collaboration companies wish to commit to, and the support they feel they get from governments and the broader ecosystem. We found a statistically significant correlation between collaboration, innovation and growth—among both large companies and startups—in all the G20 countries that we analyzed. A generalized increase in digital collaboration to high performance levels in G20 countries could also raise global GDP by almost US$1.5 trillion or 2.2% of world output. This calculation includes the direct impact on GDP of company revenue growth and the indirect gained through broader value chain effects. This is based on the assumption that all entrepreneurs and large companies performed at the same level as today’s top 20 performers in terms of their digital collaboration. Caution: Challenges on the journey to more open innovation Collaboration that brings together very different types of companies with different cultures and organizational structures is not always easy. “Large companies want to work with startups but do not know how,” said the vice president of a Silicon Valley technology campus. An executive from a leading European bank admitted to “lengthy and bureaucratic procedures at large companies” that can inhibit effective collaboration with smaller, nimbler partners. Large companies often do not know how to integrate their walled-off research and operations into a collaborative economy. Three-fourths of large companies feel that their employees are sufficiently entrepreneurial; yet, of all the entrepreneurs who worked in a large company previously, 75 percent left because they felt that they could not be entrepreneurial within the corporate setting. Our research points to three primary challenges large companies and entrepreneurs alike face as they attempt to increase their collaborative work.

8 MAJOR REASONS WHY NEW BUSINESSES FAIL IN NIGERIA

8 MAJOR REASONS WHY NEW BUSINESSES FAIL IN NIGERIA

  • Mismanagement of Capital
  • Lack of Focus
  • Failure to Brand
  • Poor Customer Service
  • Poor Online Presence
  • Failure to Network
  • Poor Marketing
  • Failure to have Long Term Goals

 

Since the industrialization era, there has been a boom of businesses all around the world. Many companies have grown from just being a startup to being a global brand. In Nigeria, startups are emerging everywhere, with Abuja and Lagos being notable entrepreneurial hubs.
Though many businesses start up every day in Nigeria, not all rise up to become successful.

Many of these businesses fail due to certain decisions and mistakes. It’s vital to mention that most of the causes of business failure are things we ignore and do nothing about. It’s so serious that 80% of new businesses fail within the initial three years of starting. Most times, these businesses fail in such a way that the owner is unaware of the looming failure until it’s too late.

To help our esteemed readers know these causes of business failure and develop ways to counter them, we developed this piece on eight major reasons why new businesses fail in Nigeria.

Mismanagement of Capital

Raising capital to start a business in Nigeria is difficult because of the unavailability of required structures that’ll help small and medium scale businesses start up. This has made the proper management of capital a big reason why businesses fail.

Most business owners make the mistake of mixing personal and business funds thereby leading to inability to track gain or loss in the business. From another angle, some business owners allow sentiment to take over them, and they give too much credit to customers. When these sentimental behaviors set in, the business starts owing a lot of money. The higher the debt incurred by the business, the higher the chances of the business failing.

To tackle this, it’s vital business owners adopt proper money management systems like putting a credit limit for customers and segregating between the business and personal accounts. It’s also necessary to identify and state where business cash needs lie and when and how to use cash. With this, you’ll eliminate unnecessary expenses and deliver valuable products and services.

Lack of Focus

Focus is one of the critical determinants of the success or failure of your startup. Lack of focus is usually a challenge for new businesses. This is because the startup period is full of trials and errors and changes in priorities, all in a bid to discover the business model that works best. Most times, after nailing an excellent business model, startups get swayed by another brand’s model and loses focus.

We advise you to stick to a particular business model that works for you and build on it. You might get distracted by other businesses flourishing because of their model; ignore those distractions, invest and grow your business on your chosen model. This will enable you to direct your resources to one course and see it to the end.

Once you’ve become bigger, you can choose to expand and include other business areas and features to widen your avenues of income. Besides helping you direct your resources, Staying focused will also help your customers clearly understand what you do.

Failure to Brand

In some cases, Nigeria business owners fail to brand their business. Not only do they not brand, but they fail to understand the importance of business branding to a startup like theirs. Branding makes every business stand out and shows professionalism.

If you’re a startup owner who wishes to grow your business, it’s essential you brand your business from day one. It’s the core reason why a customer would want to have a deal with you.

Poor Customer Service

Excellent Customer service is one of the major things that gives you an edge over your competitors in an industry that’s full of competition. Not only does it give you an advantage, but it also gives your customers the impression that you value them. This alone will lead to your customers going over and above to preach your business as brand ambassadors.

You can do this in many ways, maybe with a smile, a welcome greeting, a good conversational attitude, etc. whatever you do, ensure your customers are satisfied and happy with the service they receive.

Poor Online Presence

Let’s face it; we’re in the era of technology, and one of the technologies that can affect your business most is the internet. You’re able to read this on our website because of our online presence.
Don’t you think so?

Today, more people are using the internet more than the last decade, and most of these internet users search for products and services online. Businesses that have leveraged the benefits of the internet are excelling while those that are yet to adopt the internet and build an online presence are becoming extinct.

You might think, “the people around me are not using the internet.” This may be through today, but with each passing day, more people in rural and developing areas will start using the internet. Won’t you want to be online waiting for them when they do?
You can grow your online presence by getting yourself a website and social media pages where you’ll interact and engage with your customers. Through this means, you’ll also give them an exceptional customer experience they’ll remember. You can hire a digital marketer to assist with these services.

Failure to Network

Networking is essential in the modern world. It’s the situation where you collaborate with partners to grow your business more than it would have been if it’s standalone. Although it’s an excellent factor, most people venture into businesses without understanding how network and collaboration can help their business.

For instance, let’s assume you have a startup bakery, you can collaborate with a local restaurant which has existing customers to help project your services.

Poor Marketing

How you market, your product plays a crucial role in the success of your startup. You may have the right product, but without the right marketing strategy, you may not succeed. In Nigeria, most founders and startups focus more on developing their products rather than finding a way to market it. Understanding your target audience and using the best strategies to market your product will help you convert your prospective customers to customers.

Yes, you need a great product, but having an effective marketing strategy is vital.

Failure to have Long Term Goals

Building and running a credible business is difficult, and it’s not something you achieve in a day or a short period. You need to stay persistent, committed and focused on your way to success. Make both short and long term goals and work towards them with zealousness.
Most entrepreneur startup because they want to join others, make quick money or avoid working under someone. Because there is no passion and goal they’re working to achieve, they quickly lose focus when they don’t realize their short terms goals of making fast money.
But with a long term goal, you’ll remain steadfast and work towards your goal.

Conclusively, there are other reasons why a startup may fail; from inadequate research to non-mentorship and many others. If your startup has survived for up to four years, you’ve achieved a feat many don’t achieve. Continue on the lane, and your success is assured.

If you’re about to decide on starting up a business, do well to enforce yourself and understand the reasons why you may fail as a startup. Take the necessary measures and excel in your business.

By Mr Christopher Iwundu Chinaza