Fifty percent of the Fortune 500 companies that existed 20 years ago are gone today. Learn the most common reasons companies fail and what you can do to avoid these mistakes.
Unfortunately, business failures are not uncommon — and it’s not just startups and small businesses that fail each year. Fifty percent of the Fortune 500 companies that existed 20 years ago are gone, and the life expectancy of multinational corporations is finite and shrinking.
Let’s look at the top ten reasons why companies fail – plus one important aspect as a bonus.
1. Complacency
Arrogance is a corporate killer. Once executives become complacent, their companies fall behind. To be successful, companies need humble people Leaders who still retain a touch of fear that motivates them to act. Leaders should realize that they cannot afford to cling to past or current successes because if they sit back, their companies will fall behind.
2. No prioritization of sustainability
The most important task of every company is to help make our world a better, fairer place. Every business faces the most pressing sustainability challenges. Consumers and investors are already demanding more responsibility from companies when it comes to sustainability, equality and inclusion – and this trend will continue to grow as they increasingly vote with their wallets.
3. The customer does not come first
Everything a company offers must be useful for the customer and make their life better and easier. Putting the customer first also means not being afraid to part with existing products and services and getting rid of anything that doesn’t add value to customers.
4. Don’t innovate relentlessly
Our world is evolving incredibly fast, and new and innovative ways to offer products and services are emerging every day. Businesses must relentlessly innovate to maintain their competitive advantage. Many companies are reluctant to change established products, services or processes – but if they don’t, there will be many innovators who are more willing to change. These companies will take the lead.
5. They don’t see themselves as a technology company
We have never lived in a time when there was so much transformative technology. Technology trends like AI, robotics, blockchain and the metaverse are transforming every business and industry. Due to the rapid pace of change – and the fact that technology is paramount in the business world – every company needs to see itself as a technology company and the focus on digital transformation place.
6. Data is not treated as an important company asset
Data is the lifeblood of successful companies. They use data to make better business decisions, understand customers and market trends, build smarter products and services, and improve their business processes. But all these Data also comes with great responsibility. Businesses must keep their data safe and comply with all applicable security regulations. The companies that will be successful in the future must have a solid strategy that makes the most of their data while protecting partners and customers.
7. Failure to attract and retain talent
Attracting and retaining top talent is a challenge for today’s companies – but it has always been the case that people are the heart of every company. Companies that are successful work to develop the right culture and value diversity. They also introduce flatter, more agile hierarchies and management structures in which employees feel comfortable and can best develop themselves.
8. No development of future skills
The skills needed for career success are developing faster than ever, and the half-life of today’s skills is rapidly declining. Every company needs to ensure that their people are continually developing the right skills or they will simply be left behind.
9. Failure to build strong partnerships and integrate with others
No business can operate in isolation, and in today’s world it is more important than ever to Build strong and resilient partner relationships and supply chains. For business leaders, this can mean teaming up with traditional competitors — a type of cooperative competition known as “coopetition” — to solve their industry’s biggest challenges.
10. Lack of authenticity and transparency
To build and maintain a successful business, you must have the trust of your stakeholders and customers. Gaining that trust requires transparency, authenticity, and honesty—even when things go wrong. Businesses need to communicate their purpose and mission and be transparent about the business processes that affect customers. A good example of this topic is transparency regarding a company’s use of data. Companies that try to hide how they use data (or exploit users’ data for nefarious purposes) will fail, while companies that are completely transparent about how, when, and why data is used will thrive by gain consumer trust.
Bonus mistake: no (business) plan
Many companies fail because there is a lack of short and long-term planning. Your business plan should include where your company will be in the coming months to the next few years. Add measurable goals and results, and specific to-do lists with dates and deadlines.
In my work with a variety of organizations, I help them prepare for the future and translate their goals into a very simple plan and strategy that anyone can understand and implement.
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Learn more about trends shaping our world in my book Business Trends in Praxis: The 25 Trends That Are Redefining Organizationsawarded Best Business Book of the Year 2022. If you want to keep up to date with the latest business and tech trends, subscribe too my newsletter and follow me here on XING Twitter, LinkedIn and YouTube.
