SEVEN DEADLY SINS OF STARTUPS

When I was young, I always wondered why there was so much talk about leadership.  I tried to read as much of it as I could and then look for signs of it in organizations.  After many years of working inside other people’s organizations, the light was turned on in my brain as to why Leadership is such a hot topic.  When you look at companies that are in existence today, you don’t really think about how poorly they are run.  Mostly because it isn’t discussed and is hidden from the public to protect stock prices.  But you can see little signs that troubles exist.  For example, big companies play around with benefits all the time.  I once thought this was done to keep the costs low but it turns out that it is usually done to help boost the bottom line.  If you’ve got parents that retired from major corporations, they’ll tell you that their benefits are constantly declining.  Running a big business is difficult but they can adjust things to account for mistakes.  However, these little mistakes can grow and turn into major disasters that destroy the whole economy. When you’re in startup mode, failures come with a much higher cost since you don’t have much cash flow and you can’t afford to delay it any.

Combining all of the things I’ve seen from companies in the past, I’ve tried to outline the seven key failures that leadership engages in that results in either the destruction of the company or a massive decline in their earnings.  Here’s what I’ve seen.

MYOPIA.  This shortsightedness often results from a failure to plan your startup.  The most common example is running out of money because the startup took longer than you had expected.   When you’re engaging in business areas you have no experience with, it’s always best to find someone who can help you identify and plan for common risks.  A good planning template will go a long way to improve your vision.  See Robert Donnelly’s Plan-for-Planning Process.

SLOTH.  Laziness is a common characteristic for those entrepreneurs that try to startup their business while working a regular job.  Well, maybe they aren’t so lazy but they fail to put sufficient energy into the business to drive the startup.  It’s the same thing I hear from MBA graduates who can’t figure out why their career didn’t take off after they earned their MBA.  The MBA degree is a piece of paper (i.e. diploma), just like you’re FEIN is a piece of paper.  It guarantees nothing with regards to your success.

PRIDE.  No matter how smart you are or how great your business idea is, you will always need to be thinking about ways to transform your company to remain competitive and relevant.  I’ve seen way too many companies fail to adapt to changing customer demands. Every generation is different.  Only 71 of the original 1955 Fortune 500 companies are in existence today.  Here are some notable flops:  Blockbuster Video, Kodak, Borders Books, Sears, Pan-Am, US Postal Service, Hummer and Blackberry.  If the big guys can fail from this, so can you.  Jeff Stibel, cognitive scientist and serial entrepreneur, says that once the human mind sets out to do something, it will do it.  If you’ve ever worked for a company on the downslide, you probably noticed that leadership did very little to stop the disaster.  Maybe they thought they had all the answers.

MISANTHROPE.  When I started my first business, I wanted to do everything so I would understand all aspects of the business.  Hey, I went to college for 14 years.  I’m a smart boy.  Well, I learned the hard way that you have to bring people on board to help you achieve great things (which usually takes great effort).  Oh, my first business failed horribly.  What was I missing?  The customer’s perspective.  The customer holds the key to my success but I never took the time to listen deeply to what they needed.  In the book, The Cluetrain Manifesto, the authors share a key piece of wisdom; that is, markets are conversations.  If you want to be successful in your startup, you have to engage in conversation and trust what you hear.

GLUTTONY. This little terror wreaks havoc on you in multiple ways.  First, new entrepreneurs are often chock full of ideas.  All of them are brilliant and destined to be a huge success.  Trying to implement too many of them leads to a quick lesson; that is, they aren’t all brilliant and you’ve just wasted valuable time and resources.  When in startupville, keep your focus on the main idea behind the business.  Get it up and running before diving off into other ideas.  Second, once success begins to roll in, it’s tempting to build your own palace to work in every day.  Early success can lead to lavish spending and the creation of an unsustainable burn rate of income.

OPAGUENESS.  Those ideas that make us gluttons can also cause us to spin our wheels for years without developing our product or service.  My close friend, Mike, has been working on his startup for 7 years and has yet to develop a product for his international market.  While he has managed to capture some investments, he has isolated his own workforce because they can’t seem to understand what the company is trying to accomplish.  Once the money from investors came in, Mike seemed to lose focus of his original dream.  Corporate death is only a short time away, as the confusion is causing his workforce to seek employment elsewhere.  Your workforce needs clarity and focus.

AVARICE.  A new startup surely induces visions of extreme wealth, leisure and control over one’s life.  It’s fun to think about, I’ll admit.  However, allowing the desire for wealth to overcome you and drive you to engage in risk that is unhealthy for the business.  There are way too many examples of these types of failures, where are often brought upon by too much funding.  My favorite picture of this problem is Enron.  There level of greed was unprecedented and led to numerous convictions of fraud and conspiracy.  I know what you’re thinking….too much money is a bad thing?  I don’t think it is but allowing the desire for money to drive your actions in an unethical direction is not healthy.  As a entrepreneur, your business is who you are.  Don’t allow the business to change who you are.

If you’ve seen some other things that we all need to know, please share your story.  Starting a company is hard enough all by itself and we need every lesson we can get.

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