Why do so many small businesses fail? Learn to succeed by doing these 3 things

Why do so many startups fail? Surely it’s not because they aren’t innovative!

We assume startups are born innovative. Founders identify a product or service they think customers need or want and set up a company to deliver it. If a startup fails we don’t automatically think it’s for lack of innovation – but is it?

Yes! Most start-ups focus solely on product innovation. But sometimes companies with a similar product do more innovative marketing, get to customers faster, and your start-up becomes an “also ran”. Sometimes startups don’t use the right channels to market, and no one buys the product because they don’t even know it exists. Other start-ups have a great product but haven’t figured out an innovative pricing strategy, so customers don’t buy. And some start-ups don’t comprehend that it’s not the product, but their lack of customer service that leads to a fall-off in sales and company failure.

So even for startups, just having an innovative product is not enough to guarantee company success. But an innovative product that’s first to market, that uses novel ways to reach customers, with a unique pricing strategy that disrupts competitors, and great customer service will almost always be successful.

Here are three ways for businesses to maintain an innovative “edge”:

1. Define innovation and develop innovations all along the value chain.

Innovation is defined as introducing something new or making a significant improvement in business processes, products and services, organisational structure, and marketing practices.

I believe there are 12 ways that companies can innovate. The bottom line is that product innovation is not king. Successful companies innovate all along the value chain.

2. Create a culture that fosters innovation.

Great employees are attracted to a company that has a clear mission, a set of values, a vision of where it wants to go and a plan to get there. Employees want to have fun but be challenged, to learn, and have a say in how they will achieve their goals. They want opportunities to try new things, and if they fail, to be able to learn from that failure and not be fired.

Building a culture that supports and encourages innovation is both an art and a science.

It requires the CEO to be thoughtful about what he or she does and says. If you operate as if you are the “genius with a thousand helpers”, it will be difficult to keep good people, and the whole responsibility for innovation will depend on you – which is not sustainable.

3. Be the role model of innovation

As CEO you need to keep reminding employees that “the reason we are in business is to serve customers,” and they need to do a better job, every single day. Jeff Bezos keeps an empty chair at the Amazon management meetings to remind everyone that the customer is the only one not there, but should always be front of mind.  CEOs can develop innovation prowess by insisting that employees bring three solutions to every problem they identify, by saying, “I don’t know, what do you think?” when employees ask them for answers, and by pressing employees to be more innovative when solving problems.

Be the role model of innovation by doing creative things. Take a different route to work every so often, challenge yourself with a visit to a foreign country, learn a new language. Most importantly, keep trying to improve your processes – as well as your products – and challenge your employees to maintain an innovative edge.