Why do businesses fail? If you strip away all the excuses, rationalizations, and other justifications and drill down you may find the major reason for failure is poor leadership.
Here are a few reasons businesses fail and how leadership failure is key.
1. Lack of Vision
It is the role of the CEO to clearly define and communicate the corporate vision. If there is no vision, a flawed vision, or a poorly communicated vision, the responsibility falls squarely in the lap of executive leadership.
2. Poor Branding
A poor brand generally means leadership has failed. Brands fall into decline for only one reason – leaders have abdicated their responsibility. They have allowed their brand equity to erode, and failed to deliver on the brand promise. Leaders who don’t steward their brand as one of the greatest corporate assets deserve the fate that awaits them.
3. Flawed Strategy
A flawed strategy simply reveals weak leadership. While there are exceptions to every rule, companies tend to succeed by design and fail by default. Show me a company with a flawed strategy and I’ll show you an inept leader.
4. Lack of Capital
Sometimes well capitalized ventures fail miserably, and severely under-capitalized ventures eventually grow. Raising, deploying, and managing capital is ultimately the responsibility of leadership. The amount of capital required to run a business is based upon how the business is operated. If leadership operates the business without consideration for capital constraints, or irrespective of capital formation issues, then the blame should fall squarely on the shoulders of leadership.
5. Isolation from Advice
Nobody has cornered the market on knowledge and wisdom. If leadership doesn’t seek out the best quality advice available to them, they will likely not make the best decisions. All CEOs and entrepreneurs need top quality professional advisers. When a leader has a “miss” or a blind-spot, he or she is simply showing the arrogance of operating within the limitations of their own thinking and poor results may follow.
6. Failure to Act
Failure to anticipate or react to competition, technology, or marketplace changes can lead a business into the danger zone. Staying innovative and aware is a key responsibility of the business leadership.
There are many other reasons for business failure and I hope this stimulates thoughts that may prevent your business from failing. Let me know your thoughts.
gerry@polarisgroupmc.com
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